1 00:00:00,120 --> 00:00:03,120 Speaker 1: Before we jump into today's deep dive, we have a 2 00:00:03,200 --> 00:00:06,840 Speaker 1: quick ask of you to ensrol this podcast remains relevant 3 00:00:06,880 --> 00:00:10,040 Speaker 1: and useful to you. We want to learn more about you, 4 00:00:10,320 --> 00:00:13,640 Speaker 1: the listeners. We have put a short survey in today's 5 00:00:13,640 --> 00:00:16,079 Speaker 1: show notes and we would be so grateful if you 6 00:00:16,160 --> 00:00:19,440 Speaker 1: could fill it out. Thanks in advance for helping TDA. 7 00:00:19,680 --> 00:00:23,560 Speaker 1: And now on to today's episode. Already, and this is 8 00:00:24,600 --> 00:00:25,160 Speaker 1: the Daily Art. 9 00:00:25,280 --> 00:00:26,239 Speaker 2: This is the Daily. 10 00:00:26,000 --> 00:00:37,839 Speaker 1: Ohs oh now it makes sense. Good morning and welcome 11 00:00:37,840 --> 00:00:40,400 Speaker 1: to the Daily Os. It's Monday, the fourth of August. 12 00:00:40,479 --> 00:00:43,159 Speaker 1: I'm Billy fitz Simon's and no one else. It's just 13 00:00:43,280 --> 00:00:46,680 Speaker 1: me this morning, steering the ship. Now, last week the 14 00:00:46,720 --> 00:00:50,640 Speaker 1: Australian Bureau of Statistics revealed the annual inflation rate is 15 00:00:50,680 --> 00:00:54,240 Speaker 1: at its lowest level in four years. It has triggered 16 00:00:54,360 --> 00:00:57,000 Speaker 1: many economists to predict there will be a cut to 17 00:00:57,040 --> 00:00:59,560 Speaker 1: the interest rate next week when the Reserve Bank of 18 00:00:59,560 --> 00:01:02,920 Speaker 1: Australia means. If you're wondering what all of this means 19 00:01:03,000 --> 00:01:05,640 Speaker 1: and also what it means for you, you have come to 20 00:01:05,680 --> 00:01:08,840 Speaker 1: the right place. Today. I'm talking to the Australia Institute's 21 00:01:08,920 --> 00:01:15,319 Speaker 1: Chief economist Greg Jericho about what all of this means 22 00:01:16,480 --> 00:01:19,119 Speaker 1: Greg Jericho, thank you so much for joining the Daily OS. 23 00:01:19,480 --> 00:01:20,920 Speaker 2: Nowhere is Billy great to be here. 24 00:01:21,200 --> 00:01:24,240 Speaker 1: Now we are talking today because last week we got 25 00:01:24,280 --> 00:01:28,480 Speaker 1: new inflation data. For anyone who missed it, what did 26 00:01:28,480 --> 00:01:30,600 Speaker 1: those inflation numbers tell us? 27 00:01:31,040 --> 00:01:36,800 Speaker 2: What it showed was that inflation is really slow, quite dramatically. Now, inflation, 28 00:01:36,880 --> 00:01:40,720 Speaker 2: of course, is the pace of price increases. We're always 29 00:01:40,760 --> 00:01:43,840 Speaker 2: talking about prices going up. All we're worried about is 30 00:01:43,880 --> 00:01:47,080 Speaker 2: how fast are they going up? And in the year 31 00:01:47,120 --> 00:01:51,880 Speaker 2: to June this year, overall prices the consumer price Index 32 00:01:52,000 --> 00:01:55,760 Speaker 2: went up two point one percent. Now, the Reserve Bank 33 00:01:56,360 --> 00:01:59,840 Speaker 2: likes to aim for inflation being between two percent and 34 00:01:59,840 --> 00:02:02,360 Speaker 2: three percent, so if we're at two point one percent, 35 00:02:02,440 --> 00:02:05,720 Speaker 2: we're getting really close to the bottom of that range. 36 00:02:05,960 --> 00:02:10,160 Speaker 2: And even more kind of stark about that is that 37 00:02:10,240 --> 00:02:16,160 Speaker 2: in five of the capital cities inflation grew actually slower 38 00:02:16,200 --> 00:02:20,040 Speaker 2: than two percent. It was only in Brisbane and Perth 39 00:02:20,200 --> 00:02:23,680 Speaker 2: where inflation was above two percent. But if you didn't 40 00:02:23,680 --> 00:02:26,799 Speaker 2: have that, inflation would have been actually below two percent 41 00:02:26,840 --> 00:02:29,239 Speaker 2: around Australia. And that's pretty slow. 42 00:02:29,880 --> 00:02:33,280 Speaker 1: If it gets to below two percent, is that bad? 43 00:02:33,520 --> 00:02:34,840 Speaker 1: Is it bad? If it's too slow? 44 00:02:35,040 --> 00:02:38,880 Speaker 2: Yeah, it's one of these things that people are thinking, Oh, 45 00:02:38,919 --> 00:02:42,720 Speaker 2: if prices are going really slow, then that's good. You know, 46 00:02:42,840 --> 00:02:45,280 Speaker 2: the cost of me buying stuff isn't going up much. 47 00:02:45,320 --> 00:02:49,080 Speaker 2: But the problem is the reason why prices are going 48 00:02:49,160 --> 00:02:52,720 Speaker 2: up slow. If prices aren't rising fast, that means actually 49 00:02:52,760 --> 00:02:55,360 Speaker 2: people at out there shopping much. We're not buying a 50 00:02:55,360 --> 00:02:57,760 Speaker 2: lot of stuff, We're not using a lot of services. 51 00:02:57,960 --> 00:03:01,320 Speaker 2: And as a result, businesses don't feel like they can 52 00:03:01,480 --> 00:03:04,720 Speaker 2: raise their prices because they're not getting many people in 53 00:03:04,800 --> 00:03:06,840 Speaker 2: the door, and if they raise prices, they're going to 54 00:03:06,919 --> 00:03:07,639 Speaker 2: get even fewer. 55 00:03:08,800 --> 00:03:12,519 Speaker 1: When we posted about the inflation numbers on the Daily Ods, 56 00:03:12,840 --> 00:03:15,720 Speaker 1: the number one question we got from the audience is 57 00:03:16,160 --> 00:03:20,359 Speaker 1: if inflation is at this four year low, then why 58 00:03:20,680 --> 00:03:23,720 Speaker 1: is the cost of living still so high? So can 59 00:03:23,760 --> 00:03:28,720 Speaker 1: you just explain why falling inflation doesn't mean falling prices. 60 00:03:29,120 --> 00:03:32,560 Speaker 2: Yeah, it's when people talk about cost of living, they're 61 00:03:32,639 --> 00:03:36,720 Speaker 2: generally not thinking so much about prices rising. They're thinking 62 00:03:36,720 --> 00:03:40,160 Speaker 2: about how much prices have got up since, you know, 63 00:03:40,680 --> 00:03:42,760 Speaker 2: they can kind of remember, and I always think of 64 00:03:42,800 --> 00:03:45,720 Speaker 2: a good example is kind of like milk. We can 65 00:03:45,760 --> 00:03:48,240 Speaker 2: all remember the two dollars milk and we all know 66 00:03:48,400 --> 00:03:49,800 Speaker 2: milk is not two dollars. 67 00:03:49,920 --> 00:03:51,520 Speaker 1: I do not remember two dollars milk. 68 00:03:51,960 --> 00:03:55,720 Speaker 2: You can't remember. Gosh, all right, there used to be 69 00:03:55,760 --> 00:03:59,400 Speaker 2: two dollar milk because coals and woolies were basically having 70 00:03:59,440 --> 00:04:02,200 Speaker 2: this fire where they were putting two dollars milk to 71 00:04:02,280 --> 00:04:05,000 Speaker 2: try and get people in. You know, it was the thing. 72 00:04:05,120 --> 00:04:09,520 Speaker 2: And they stopped doing that. Prices went up and then 73 00:04:09,560 --> 00:04:13,360 Speaker 2: they kind of flatlined. And so the prices of most things, 74 00:04:13,440 --> 00:04:16,599 Speaker 2: when they go up, they stay up. They don't go down. 75 00:04:17,120 --> 00:04:19,880 Speaker 2: A few things, you know, petrovs and bounces around. You know, 76 00:04:19,920 --> 00:04:23,320 Speaker 2: you will actually see petrol prices go down. On some 77 00:04:23,400 --> 00:04:26,720 Speaker 2: things like electrical goods, you might see prices going down, 78 00:04:27,160 --> 00:04:30,280 Speaker 2: but generally on most things, once they go up, they 79 00:04:30,320 --> 00:04:35,839 Speaker 2: stay up. And so that's what really I think hits 80 00:04:35,880 --> 00:04:39,240 Speaker 2: most people, and certainly for the listeners. You know, we're 81 00:04:39,279 --> 00:04:42,039 Speaker 2: still seeing for example, you know, I'm saying two point 82 00:04:42,120 --> 00:04:46,599 Speaker 2: one percent inflation, but rent prices were about four point 83 00:04:46,680 --> 00:04:49,000 Speaker 2: eight you know, in some places even higher than that, 84 00:04:49,120 --> 00:04:52,520 Speaker 2: and so you might be thinking, oh, the overall average 85 00:04:52,520 --> 00:04:55,640 Speaker 2: of everything we buy is two point one. But on 86 00:04:55,720 --> 00:04:59,000 Speaker 2: the things that really matter, and especially for younger people 87 00:04:59,000 --> 00:05:01,800 Speaker 2: who are renting, they are still feeling that pinch, and 88 00:05:01,960 --> 00:05:05,560 Speaker 2: also on the other side of the equation their income, 89 00:05:05,600 --> 00:05:09,559 Speaker 2: their wages mightn't have been going up certainly that much, 90 00:05:09,640 --> 00:05:13,440 Speaker 2: and so you're feeling the impact of the increase in 91 00:05:13,520 --> 00:05:16,760 Speaker 2: rents increasing prices, and you're not getting the benefit so 92 00:05:16,880 --> 00:05:19,880 Speaker 2: much of the increasing wages that kind of cancel it out. 93 00:05:20,080 --> 00:05:22,960 Speaker 1: And so the big question in terms of what happens 94 00:05:23,080 --> 00:05:27,520 Speaker 1: now is whether this new inflation data will impact the 95 00:05:27,560 --> 00:05:31,159 Speaker 1: Reserve Bank of Australia's next cash rate decision. Before we 96 00:05:31,200 --> 00:05:34,680 Speaker 1: get to what these inflation numbers could mean for that decision, 97 00:05:35,080 --> 00:05:37,719 Speaker 1: can you just remind us exactly what the cash rate 98 00:05:37,960 --> 00:05:40,800 Speaker 1: is and how it's connected to inflation. 99 00:05:41,560 --> 00:05:45,880 Speaker 2: Yeah, the cash rate is basically the interest rate that 100 00:05:46,200 --> 00:05:49,400 Speaker 2: the Reserve Bank lends to banks. It's a way that 101 00:05:49,520 --> 00:05:52,760 Speaker 2: actually helps fund banks so that they can then lend 102 00:05:52,839 --> 00:05:55,919 Speaker 2: to us. And what it really does is it gives 103 00:05:56,279 --> 00:05:59,400 Speaker 2: a real indicator to the banks about what they should 104 00:05:59,400 --> 00:06:02,279 Speaker 2: be lending money out. So the cashuret at the moment 105 00:06:02,320 --> 00:06:04,719 Speaker 2: is three point eight five percent. Now that's not an 106 00:06:04,760 --> 00:06:07,960 Speaker 2: interest rate you're going to get offered anywhere by any bank. 107 00:06:08,760 --> 00:06:10,800 Speaker 2: The banks get a lot better rate than we do. 108 00:06:12,440 --> 00:06:17,560 Speaker 2: But generally when the Reserve Bank does increase or decrease 109 00:06:17,600 --> 00:06:21,760 Speaker 2: the cash rate, people's mortgage rates will go up or down. 110 00:06:21,800 --> 00:06:24,600 Speaker 2: And also the rates that you get charged for deposits 111 00:06:24,640 --> 00:06:27,760 Speaker 2: will you actually get given. It doesn't always go up 112 00:06:27,800 --> 00:06:30,680 Speaker 2: exactly the same amount or code down exactly the same amount, 113 00:06:30,720 --> 00:06:33,400 Speaker 2: but generally there is a pretty good link. And so 114 00:06:34,080 --> 00:06:36,119 Speaker 2: when we talk about the cash rate and the Reserve 115 00:06:36,160 --> 00:06:39,240 Speaker 2: Bank lowering the cash rate, what we're hoping is that 116 00:06:39,320 --> 00:06:43,440 Speaker 2: all the banks will follow. They will lower their mortgage rates, 117 00:06:43,440 --> 00:06:46,960 Speaker 2: they'll lower the small business loan rates, and that means 118 00:06:47,040 --> 00:06:49,360 Speaker 2: people feel more confident to be able to go out 119 00:06:49,360 --> 00:06:51,800 Speaker 2: and invest, whether that's buying a house or if you're 120 00:06:51,800 --> 00:06:55,040 Speaker 2: a small business, to be able to invest in equipment, 121 00:06:55,880 --> 00:07:00,640 Speaker 2: invest in material, and that sort of generates more economic activity. 122 00:07:00,720 --> 00:07:04,320 Speaker 2: People were buying stuff, people were investing, and it gets 123 00:07:04,360 --> 00:07:05,040 Speaker 2: money flowing. 124 00:07:05,600 --> 00:07:08,760 Speaker 1: And so we are expecting the RBA to make another 125 00:07:08,839 --> 00:07:11,520 Speaker 1: cash rate decision on the twelfth of August, well, not 126 00:07:11,560 --> 00:07:14,120 Speaker 1: expecting it will happen that they will make another decision. 127 00:07:14,600 --> 00:07:17,240 Speaker 1: What do you think that they will decide? 128 00:07:17,920 --> 00:07:21,640 Speaker 2: Oh gosh, I mean, they really threw a spanner into 129 00:07:21,720 --> 00:07:25,400 Speaker 2: the works in July when they didn't cut the cash rate, 130 00:07:25,440 --> 00:07:28,240 Speaker 2: and everyone thought they would. It was it was the market. 131 00:07:28,600 --> 00:07:31,960 Speaker 2: The market actually can basically bet in a sense on 132 00:07:32,040 --> 00:07:34,200 Speaker 2: what the cash rate is going to do by buying 133 00:07:34,240 --> 00:07:36,720 Speaker 2: and selling bonds and things, and they do on the 134 00:07:36,760 --> 00:07:39,280 Speaker 2: futures market, and everyone pretty much it was about a 135 00:07:39,360 --> 00:07:41,040 Speaker 2: ninety five per cent chance that they were going to 136 00:07:41,080 --> 00:07:44,000 Speaker 2: cut the rate, and they didn't. Now, one of the 137 00:07:44,040 --> 00:07:48,200 Speaker 2: reasons they said they didn't is they were wanting more information, 138 00:07:48,320 --> 00:07:50,120 Speaker 2: more data, and one of the big things they were 139 00:07:50,120 --> 00:07:54,080 Speaker 2: wanting was this inflation figure. So the fact that it's 140 00:07:54,120 --> 00:07:57,760 Speaker 2: coming really low, the fact that the core inflation, which 141 00:07:57,840 --> 00:08:01,800 Speaker 2: is basically inflation without the big jumps and big falls, counted, 142 00:08:01,840 --> 00:08:03,960 Speaker 2: so it kind of just gets the middle part that 143 00:08:04,080 --> 00:08:07,200 Speaker 2: also came down, So it suggests that this isn't just 144 00:08:07,240 --> 00:08:09,280 Speaker 2: a one off blip, that this is actually sort of 145 00:08:09,280 --> 00:08:12,080 Speaker 2: a long term trend. So that's a good sign. But 146 00:08:12,200 --> 00:08:15,920 Speaker 2: also since the last decision by the Reserve Bank, we 147 00:08:16,000 --> 00:08:19,440 Speaker 2: had the unemployment figures come out that showed an increase 148 00:08:19,760 --> 00:08:23,640 Speaker 2: of zero point two percent, so a real quite a 149 00:08:23,680 --> 00:08:27,120 Speaker 2: significant jump in unemployment. So it's a real sense of 150 00:08:28,360 --> 00:08:33,160 Speaker 2: we got low inflation, we've got unemployment rising, when that's happening, generally, 151 00:08:33,160 --> 00:08:35,640 Speaker 2: that's a good time for the Reserve Bank to cut rates. 152 00:08:35,960 --> 00:08:39,600 Speaker 2: I'd be shocked if they don't, but I was shocked 153 00:08:40,360 --> 00:08:41,800 Speaker 2: a month ago where they didn't. 154 00:08:42,160 --> 00:08:45,920 Speaker 1: Yep. Just lastly, the last time I spoke to you 155 00:08:46,360 --> 00:08:49,440 Speaker 1: was just after US President Donald Trump had announced the 156 00:08:49,520 --> 00:08:53,160 Speaker 1: tariffs for the first time for all countries and things 157 00:08:53,200 --> 00:08:57,080 Speaker 1: in the world economy seemed really uncertain, and I'm interested 158 00:08:57,280 --> 00:08:59,600 Speaker 1: now if you had to give a general assessment as 159 00:08:59,640 --> 00:09:03,479 Speaker 1: to how the world economy is going, what would you say. 160 00:09:03,800 --> 00:09:06,800 Speaker 2: Well, it's a little bit more certain than it was. 161 00:09:07,160 --> 00:09:10,559 Speaker 2: We've just had Trump come out with basically here's all 162 00:09:10,600 --> 00:09:14,320 Speaker 2: the new tariffs, and Australia is still at ten percent, 163 00:09:15,000 --> 00:09:19,120 Speaker 2: New Zealand's at fifteen percent, Europe's at fifteen percent, Canada 164 00:09:19,360 --> 00:09:22,320 Speaker 2: is even high. I think it's thirty five percent. It's 165 00:09:22,440 --> 00:09:27,040 Speaker 2: quite bizarre how if it was just if Trump was 166 00:09:27,320 --> 00:09:30,560 Speaker 2: just going from zero to announcing all these tariffs right now, 167 00:09:30,640 --> 00:09:36,080 Speaker 2: it would be the most absurdly large increase in tariffs 168 00:09:36,080 --> 00:09:41,120 Speaker 2: by any country for basically a century. But because we've 169 00:09:41,160 --> 00:09:44,679 Speaker 2: had the last sort of five months of Trump threatening 170 00:09:44,880 --> 00:09:48,240 Speaker 2: massively high of numbers, now the's come out of these 171 00:09:48,360 --> 00:09:51,160 Speaker 2: sort of fifteen to twenty five percent, people are oh, 172 00:09:51,200 --> 00:09:54,560 Speaker 2: that seems okay, but others are stepping back going you 173 00:09:54,679 --> 00:09:58,080 Speaker 2: do realize that this is still an incredibly big increase 174 00:09:58,160 --> 00:10:03,120 Speaker 2: on tariffs, so it's a lot less confusing and a 175 00:10:03,120 --> 00:10:07,640 Speaker 2: lot less uncertain than it was, but we still are waiting, 176 00:10:07,720 --> 00:10:10,600 Speaker 2: I think for all the flow through of the slowdown 177 00:10:11,720 --> 00:10:14,520 Speaker 2: in America that's going to come because of this. The 178 00:10:14,559 --> 00:10:17,160 Speaker 2: good news, though, is because Australia is at ten percent, 179 00:10:17,400 --> 00:10:21,560 Speaker 2: kind of bizarrely, we're actually better off because everyone else 180 00:10:21,600 --> 00:10:23,559 Speaker 2: has got worse. Whereas before we were all on a 181 00:10:23,640 --> 00:10:26,360 Speaker 2: level playing field. You know, everyone was kind of on 182 00:10:26,440 --> 00:10:29,880 Speaker 2: the zero tariffs. Now we're on ten percent. That's not good, 183 00:10:29,920 --> 00:10:32,760 Speaker 2: but others are fifteen and twenty five thirty five. So 184 00:10:33,360 --> 00:10:36,280 Speaker 2: if you're an American importer and thinking do I buy 185 00:10:36,320 --> 00:10:40,720 Speaker 2: something from Australia or Japan or Europe, we're actually Australia's 186 00:10:40,760 --> 00:10:44,560 Speaker 2: got lowest tariff, so we're actually he's done us a favorite. 187 00:10:44,559 --> 00:10:47,800 Speaker 2: It's truly bizarre he's done us a favor. He's not 188 00:10:47,880 --> 00:10:50,600 Speaker 2: doing Americans a favor at all. He's making things more 189 00:10:50,640 --> 00:10:54,120 Speaker 2: expensive for them. But I think the scares for Australia 190 00:10:54,160 --> 00:10:57,960 Speaker 2: about what might happen. Much reduced now than they were 191 00:10:58,600 --> 00:11:01,360 Speaker 2: a few months ago. We still are worried about what 192 00:11:01,400 --> 00:11:05,600 Speaker 2: he might do about pharmaceuticals and the PBS, but we 193 00:11:05,720 --> 00:11:07,839 Speaker 2: know the government's not going to budge on the PBS, 194 00:11:07,880 --> 00:11:11,360 Speaker 2: so things kind of look okay for austraight at the moment. 195 00:11:11,679 --> 00:11:13,800 Speaker 2: But as with Trump, who knows he could wake up 196 00:11:13,840 --> 00:11:16,640 Speaker 2: and he's decided to do something completely different. 197 00:11:17,080 --> 00:11:19,839 Speaker 1: So interesting. Greg Jericho, thank you so much for coming 198 00:11:19,880 --> 00:11:23,439 Speaker 1: back on the podcast to explain all things finance to us. 199 00:11:23,520 --> 00:11:25,240 Speaker 2: Nowah, is Billy really great to be here. 200 00:11:26,280 --> 00:11:28,280 Speaker 1: That is the end of that chat. I hope we 201 00:11:28,280 --> 00:11:32,120 Speaker 1: were able to break down some of the economic jargon 202 00:11:32,280 --> 00:11:35,000 Speaker 1: that is out there. Thank you so much for listening 203 00:11:35,080 --> 00:11:37,480 Speaker 1: to this episode of The Daily Oz. We'll be back 204 00:11:37,520 --> 00:11:40,680 Speaker 1: this afternoon with some evening headlines, but until then, have 205 00:11:40,800 --> 00:11:47,120 Speaker 1: a great day. My name is Lily Maddon and I'm 206 00:11:47,120 --> 00:11:51,599 Speaker 1: a proud Arunda Bungelung Cargottin woman from gadigl Country. The 207 00:11:51,679 --> 00:11:54,760 Speaker 1: Daily oz acknowledges that this podcast is recorded on the 208 00:11:54,840 --> 00:11:57,520 Speaker 1: lands of the Gadighl people and pays respect to all 209 00:11:57,679 --> 00:11:59,920 Speaker 1: Aboriginal and Torres Strait Island and nations. 210 00:12:00,280 --> 00:12:03,200 Speaker 2: We pay our respects to the first peoples of these countries, 211 00:12:03,320 --> 00:12:04,480 Speaker 2: both past and present.