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Speaker 1: My name is Lily Maddon and I'm a proud Arunda

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Speaker 1: Bunjelung Calcotin woman from Gadighal Country. The Daily oz acknowledges

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Speaker 1: that this podcast is recorded on the lands of the

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Speaker 1: Gadighl people and pays respect to all Aboriginal and Torres

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Speaker 1: Strait Island and nations. We pay our respects to the

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Speaker 1: first peoples of these countries, both past and present.

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Speaker 2: Good morning and welcome to the Daily os. It's Wednesday,

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Speaker 2: the twenty eighth of September. I'm Zara and I'm Tom.

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Speaker 2: New UK Prime Minister Liz Truss is facing an economic

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Speaker 2: crisis in just her first weeks in office. The pound

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Speaker 2: has plummeted and the Central Bank is warning of a recession.

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Speaker 2: How did this happen? We will jump into that in

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Speaker 2: today's deep Dive. But first Tom, what's making headlines this morning?

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Speaker 3: Attorney General Mark Dreyfus will introduce legislation to Parliament for

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Speaker 3: the government's new anti corruption commit today. He spoke to

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Speaker 3: the media about the model yesterday. The commission will be

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Speaker 3: able to initiate its own investigations. It'll be able to

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Speaker 3: investigate a broad range of public officials and hold public

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Speaker 3: hearings in exceptional circumstances in the public interest only.

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Speaker 2: A bill that could reduce childcare costs for over a

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Speaker 2: million Australian families has been introduced to Parliament. The legislation,

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Speaker 2: if passed, would provide childcare subsidies based on a family's

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Speaker 2: total income and, according to Education Minister Jason Clair, would

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Speaker 2: quote make it easier for lots of women to go

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Speaker 2: to work.

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Speaker 3: The New South Wales government has said it's working to

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Speaker 3: reissue identification documents to people who've been impacted by the

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Speaker 3: Optus cyber attack. Digital Minister Victor Dominello said that people

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Speaker 3: whose driver's license numbers and cards have been compromised as

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Speaker 3: strongly advised to apply it for a replacement. After last

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Speaker 3: week's hack was found to have impacted up to nine

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Speaker 3: point eight million Australians, with more than ten thousand Australians

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Speaker 3: having significant personal details, including possibly many caare details leaked.

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Speaker 2: And after that we need a bit of good news.

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Speaker 2: India has developed its first ever cervical cancer vaccine. Following

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Speaker 2: an announcement earlier this month, CEO of the Serum Institute

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Speaker 2: of India, Adara Punawala, said the JAB would make the

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Speaker 2: country quote self sufficient in curbing deaths from cervical cancer.

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Speaker 2: According to the WHO, cervical cancer was the fourth most

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Speaker 2: prevalent cancer among women in twenty twenty and accounted for

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Speaker 2: about three hundred and forty two thousand deaths. All right, now, Tom,

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Speaker 2: you were very eager to write about this story yesterday

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Speaker 2: for the Instagram and to talk about it today on

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Speaker 2: the podcast. It's really one of my favorite topics, which

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Speaker 2: is dense economics.

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Speaker 4: Do you want to start?

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Speaker 3: You always give me the best introductions, Sarah.

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Speaker 4: I'm trying to hook people at the top here.

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Speaker 3: It's not going to be that dense. I'll make it

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Speaker 3: interesting and lively exactly.

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Speaker 2: That's why you're here to explain it all to us

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Speaker 2: lay people. So Tom, can you start at the beginning

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Speaker 2: of what's actually going on in the UK at the moment?

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Speaker 3: So, something very, very bad and quite alarming is unfolding

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Speaker 3: in the UK. I feel like I often come on

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Speaker 3: to the podcast and start by saying something very bad

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Speaker 3: is happening in the world, but it's not an exaggeration here.

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Speaker 3: Of course, the UK has been the focus of our

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Speaker 3: attention over the last couple of weeks because of the

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Speaker 3: death of Queen Elizabeth and the funeral and all that

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Speaker 3: sort of thing. This week, it's a very different reason.

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Speaker 3: So people might remember that Boris Johnson resigned as Prime

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Speaker 3: minister recently. His replacement, Liz Trust, has only been in

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Speaker 3: the job for a couple of weeks and announced a

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Speaker 3: new budget earlier this week. And basically as soon as

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Speaker 3: that new budget was announced, Britain's economy started tanking quite dramatically,

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Speaker 3: so the value of the British pound fell to its

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Speaker 3: lowest level ever. The government's borrowing costs have surged, and

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Speaker 3: it's creating warnings that a bad economic situation that was

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Speaker 3: already brewing in the UK might get significantly worse.

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Speaker 2: Okay, I mean it's not very usual that a prime

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Speaker 2: minister announces a budget, or in this case, a mini

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Speaker 2: budget and then all hell breaks lose.

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Speaker 4: Why has this happened?

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Speaker 3: Yeah, it's certainly not usual, especially so soon into the

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Speaker 3: tenure of a prime minister. So maybe I'll just take

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Speaker 3: it back a step. The UK, like just about every

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Speaker 3: country in the world, like I was talking about last week,

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Speaker 3: is having some serious cost of living problems.

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Speaker 4: At the moment.

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Speaker 3: The UK's probably on the relatively severe end prices have

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Speaker 3: grown about ten percent in the last year, and particularly

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Speaker 3: energy costs look like they're going to go up a

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Speaker 3: huge amount over the coming winter in the UK, so

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Speaker 3: they've had it particularly bad. It also comes in the

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Speaker 3: context of an economy that has been struggling a little

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Speaker 3: bit stagnant recently, and so there have been some issues

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Speaker 3: circulating before now, just like in Australia, the UK's central bank,

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Speaker 3: the Bank of England, has been raising interest rates quite fast,

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Speaker 3: trying to clamp down on this rising price problem, and

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Speaker 3: they're warning that as a result of all of that

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Speaker 3: that a recession might be coming. So a recession is

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Speaker 3: when an economy contracts, often associated with businesses closing, jobs

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Speaker 3: being lost, quite as sort of a severe economic thing

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Speaker 3: to experience. The Bank of England, before Liz Trust came along,

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Speaker 3: you know, has been warning that a recession is likely

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Speaker 3: and may already be happening. So what's then come along

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Speaker 3: this week has, as I said, been this this new

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Speaker 3: budget and the focus of the new budget was all

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Speaker 3: about cutting taxes and the response has been quite controversial.

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Speaker 2: Okay, So the new Prime Minister has come along and

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Speaker 2: in the context of the economic.

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Speaker 4: Situation, you've just laid out, which is that the cost.

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Speaker 2: Of living is going up and that they could be

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Speaker 2: heading into a recession. The answer here has been tax cuts.

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Speaker 3: Is that right, That's right, and it's fair to say

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Speaker 3: it's it's quite an ideological response, but by which I say,

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Speaker 3: it's sort of a very strong political belief that Liz

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Speaker 3: Trust spoke about a lot when she was running for

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Speaker 3: the leadership, and that her choice for chancellor, which is

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Speaker 3: like our treasurer Quasi Qua Teng. He's also been, you know,

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Speaker 3: sort of for a long time a big fan of

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Speaker 3: low taxes. It's quite a common thing that we hear

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Speaker 3: from conservatives, low taxes. And it's this idea that the

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Speaker 3: buzz phrase is trickle down economics. The logic that both

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Speaker 3: Trusts and Qua Teng have been using is if you

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Speaker 3: cut taxes, especially for rich people and for businesses, that

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Speaker 3: they will spend in ways that grow the economy for everyone.

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Speaker 3: Basically the idea that that spending kind of trickles down

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Speaker 3: to everyone. And so they're saying what we need right

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Speaker 3: now and in Britain is to cut taxes to get

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Speaker 3: the economy growing again.

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Speaker 2: We'll be back in just a moment, but first a

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Speaker 2: message from our sponsor. So, can you talk me through

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Speaker 2: the specifics of what was actually in this mini budget?

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Speaker 3: Yeah, I can, so I won't read out a whole

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Speaker 3: big list, but basically there were forty five billion pounds

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Speaker 3: worth of tax cuts. There was sort of a change

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Speaker 3: to the rate that were the wealthiest people pay. There

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Speaker 3: was a change to kind of bonus salary arrangements for bankers.

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Speaker 3: There were a couple of other bits and pieces housing tax.

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Speaker 3: The general effect of it, though, they were tax cuts

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Speaker 3: that overwhelmingly benefited the wealthiest people. So the wealthiest people

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Speaker 3: get a benefit of slightly more than nine thousand pounds

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Speaker 3: a year, whereas the lowest income people in Britain get

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Speaker 3: about twenty two pounds. Again, that's kind of the point

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Speaker 3: of the tax cuts in a sense, it comes back

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Speaker 3: to this sort of trickle down argument that the government

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Speaker 3: is making. Alongside that, there was then about sort of

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Speaker 3: sixty five billion pounds in new spending, so particularly the

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Speaker 3: government has made a promise to subsidize people's energy bills

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Speaker 3: over the coming winter, and this is where sort of

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Speaker 3: it started to get a bit controversial. So the trickle

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Speaker 3: down economics idea and this idea of tax cuts towards

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Speaker 3: the wealthy. That's certainly controversial, and I guess it's not

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Speaker 3: hard to imagine why that's controversial. Trickle down economics is

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Speaker 3: a concept that's been heavily debated, and a lot of people,

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Speaker 3: including leading economic institutions like the International Monetary Funds, say

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Speaker 3: that there's no evidence for that idea. But even leaving that,

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Speaker 3: it's been controversial with another group of people because the

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Speaker 3: combination of cutting taxes and increasing spending at the same

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Speaker 3: time that really significantly increases government debt. So let me

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Speaker 3: just kind of see if I can put that as

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Speaker 3: clearly as I can. The two big things we think

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Speaker 3: about in government budgets, how much are they raising how

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Speaker 3: much are they spending. Tax cuts are like an expense.

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Speaker 3: You're taking away money the government has to spend. You

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Speaker 3: do that at the same time as you're increasing spending

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Speaker 3: to HELPEP with their energy bills, and the two kind

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Speaker 3: of get even further out of whack, and that's where

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Speaker 3: it's got criticism from a lot of conservatives. Actually, members

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Speaker 3: of Liz Trust's own party have been quite critical of this,

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Speaker 3: and former members of the party have been quite critical

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Speaker 3: of this.

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Speaker 2: But tom that stands out to me, the party voted

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Speaker 2: for her to take on the leadership and she has

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Speaker 2: been talking about tax cuts this whole time.

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Speaker 4: So how does that add up.

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Speaker 3: Well, yeah, it's a good question, and I guess the

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Speaker 3: answer is the party didn't exactly vote for her. So

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Speaker 3: remember Liz Trust replaced Boris Johnson as leader of the

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Speaker 3: Conservative Party, and the Conservative members of parliament they did

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Speaker 3: get a vote, they voted for someone else. They voted

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Speaker 3: for Rishi Sunak, who was Liz's Trust's main opponent. Liz

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Speaker 3: Trust came second. Then it went to a vote of

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Speaker 3: kind of ordinary people who are members of the Conservative

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Speaker 3: Party out in the public, and they're the ones who

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Speaker 3: voted quite strongly for Liz Trust. So there are a

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Speaker 3: lot of Conservatives in the Parliament who were a bit

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Speaker 3: uncomfortable with Liz Trust's approach, and that's where some of

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Speaker 3: that criticism has come now. But equally, there's criticism from

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Speaker 3: all quarters and the fallout in a number of ways

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Speaker 3: has been quite severe.

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Speaker 2: It has been, and one of those has been the

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Speaker 2: complete drop in the value of the pound.

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Speaker 4: Talk us through that.

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Speaker 3: Yeah, so it might not immediately be obvious what that's

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Speaker 3: all about, but basically, you know, anyone who holds British pounds,

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Speaker 3: anyone who buys the British government's debt, British government bonds,

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Speaker 3: anyone who's basically got their money in Britain. You can

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Speaker 3: kind of think of that as like a vote of

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Speaker 3: confidence in their country and in its economy. When you

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Speaker 3: choose to hold its currency, it's a statement that you

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Speaker 3: think that that currency is going to still be valuable tomorrow.

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Speaker 3: If a whole bunch of people decide they want to

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Speaker 3: sell that currency, that can be a suggestion that all

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Speaker 3: of a sudden, something new has happened and they've changed

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Speaker 3: their mind about that. That is exactly what happened this week. Basically,

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Speaker 3: immediately there was this selling spree. Everyone was trying to

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Speaker 3: get out of the pound, get rid of their pounds.

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Speaker 3: It was a suggestion from investors all over the world

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Speaker 3: really that there was a lack of confidence, a lack

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Speaker 3: of trust in the government's plan to grow the economy. Basically,

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Speaker 3: it was people saying, we think this is a disaster

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Speaker 3: and we're getting out of here. And that's where at

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Speaker 3: the same time, the borrowing costs. So what it costs

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Speaker 3: for the British government to take on debt it got

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Speaker 3: more expensive for them because people said, well, you're going

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Speaker 3: to have to pay us a lot more interest for

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Speaker 3: us to want to take that on. So it was

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Speaker 3: this kind of massive vote of I guess, nervousness in

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Speaker 3: what's happening in Britain, and it resulted in the value

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Speaker 3: of the pound falling to the lowest level it's been

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Speaker 3: in a long time.

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Speaker 2: I mean that as a headline is pretty striking, but

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Speaker 2: I'm sure, like may our listeners are keen to understand

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Speaker 2: what the consequences of that actually are.

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Speaker 3: Yeah, so if you're planning a trip to the UK,

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Speaker 3: it's great news for you because it'll be really cheap

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Speaker 3: to get your hands on some pounds. But I guess,

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Speaker 3: on a more serious note, the consequences for the UK

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Speaker 3: there are many of them. Just like it's cheap for

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Speaker 3: us to get our hands on pounds, it gets more

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Speaker 3: expensive for people in the UK to buy anything from overseas.

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Speaker 3: That makes it hard to import a range of things,

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Speaker 3: ironically including energy. So we're talking about this cost of

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Speaker 3: living crisis that's happening in Britain. The plummeting value of

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Speaker 3: the pound makes it harder for them to import essentials

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Speaker 3: like energy which they rely on. So there's a sense

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Speaker 3: in which that's going to potentially make the crisis even worse.

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Speaker 3: But more broadly, it just reflects a lack of confidence

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Speaker 3: in the British economy. As I say, it's pretty alarming.

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Speaker 3: It doesn't happen very often that there is this sort

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Speaker 3: of international reaction to a budget, especially not in a

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Speaker 3: developed country. It's fair to say that the wealthier countries

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Speaker 3: tend to get a little bit of a free ride

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Speaker 3: or ride, or that there's a lot of trust placed

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Speaker 3: in them by international investors as safe places to invest,

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Speaker 3: and so for there to be such a dramatic reaction

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Speaker 3: to I guess a single budget announcement here suggests a

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Speaker 3: real shift in that and a really worrying development for

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Speaker 3: the UK. A lot of international people have been saying,

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Speaker 3: we think this makes it a lot more likely that

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Speaker 3: the UK will go into a recession. The US Central

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Speaker 3: Bank even said that, they said it even made it

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Speaker 3: more likely that it might push the whole world into

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Speaker 3: a recession. That's how significant people think this could be

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Speaker 3: in the UK. So the fallout is going to be

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Speaker 3: really significant. The government or hasn't commented in the last

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Speaker 3: couple of days on what's happened, but said when they

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Speaker 3: announced the budget that they planned further tax cuts, so

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Speaker 3: it'd be really interesting to see how this unfolds.

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Speaker 2: I think it's a fascinating story, but it's even more

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Speaker 2: interesting when you think of.

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Speaker 4: The couple of weeks that Liz Trust has had in

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Speaker 4: her prime ministership.

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Speaker 2: I mean, we've had the death of the queen and

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Speaker 2: now this what can only be described as an economic catastrophe.

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Speaker 2: So certainly a challenging start to the job, and it'll

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Speaker 2: be interesting to see what happens from here. Tom.

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Speaker 4: Thank you for joining us today on the Daily OS.

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Speaker 2: If like me, you learned something from today's episode, feel

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Speaker 2: free to send it to a friend. How other people

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Speaker 2: will learn about this podcast, and we'd love to get

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Speaker 2: the word out there.

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Speaker 4: Have a brilliant Wednesday.