Speaker 1: Already and this is the Daily This is the Daily
Speaker 1: ohs oh, now it makes sense.
Speaker 2: Good morning and welcome to the Daily OS. It's Thursday,
Speaker 2: the fifth of September.
Speaker 3: I'm emma, I'm zara.
Speaker 2: The latest figures on Gross Domestic Product that's GDP show
Speaker 2: Australia's economy is growing very slowly, so slow in fact,
Speaker 2: the Australian Bureau of Statistics says it's just recorded the
Speaker 2: softest annual economic growth in over thirty years outside the pandemic.
Speaker 2: So why is that and doesn't mean Australia is heading
Speaker 2: for a recession. We've got lots of questions and unless
Speaker 2: you're an economist, these data releases can be a bit
Speaker 2: tricky to unpack. So that's why we've brought in an
Speaker 2: expert for today's episode, independent economist Nikki Hutley. We'll talk
Speaker 2: you through the latest figures in the deep Dive.
Speaker 3: The Federal government has announced a new plan to regulate
Speaker 3: the use of artificial intelligence. The ten new guard rails
Speaker 3: for organizations and businesses include cybersecurity and transparency standards based
Speaker 3: off similar overseas models like AI standards used in Japan
Speaker 3: and the EU. The strategies aimed at helping organizations, which
Speaker 3: could range from corporations to education institutions, to harness the
Speaker 3: benefits of AI and address concerns about its potential harms.
Speaker 3: The guardrails are voluntary, but Minister for Industry and Science
Speaker 3: at Husick so the Government is considering legislation to make
Speaker 3: the new AI standards mandatory.
Speaker 2: The National Fire Authority has warned large parts of the
Speaker 2: country could be in for an early start to the
Speaker 2: fire season if current dry conditions persist. It comes as
Speaker 2: parts of WA and South Australia experience record high temperatures,
Speaker 2: heightening the risk of bushfire acting in those areas. The
Speaker 2: newly released Spring Outlook from the National Council for Fire
Speaker 2: and Emergency Services said parts of South Australia, Victoria and
Speaker 2: Tasmania were most at risk of early fires heading into summer.
Speaker 2: Authorities are advising communities to stay vigilant and prepare survival plans.
Speaker 3: Shares in AI chip giant in Vidia have fallen by
Speaker 3: nearly ten percent. That's marking the biggest value loss ever
Speaker 3: recorded for a US stock. A two hundred and seventy
Speaker 3: nine billion US dollar drop in in Vidia's market value
Speaker 3: has been attributed to growing concerns from investors about emerging
Speaker 3: AI technologies. In Vidia technology is used by some of
Speaker 3: the world's biggest tech companies that includes Microsoft, Google, Meta,
Speaker 3: Tesla and Amazon to train generative AI models and to
Speaker 3: develop new software.
Speaker 2: And today's good news, Olympic gold medallists Jess and Miami
Speaker 2: Fox are being honored in their Western Sydney home town,
Speaker 2: with part of Penrith's Whitewater Stadium to be named after them.
Speaker 2: The sisters want to combine three gold medals across the
Speaker 2: kayaking and canoeing events in Paris. An artificial island in
Speaker 2: the center of the Whitewater Sporting Facility, newly dubbed Fox Island,
Speaker 2: will be on the world stage next year when the
Speaker 2: stadium hosts the Canoe and Slalem World Championships. The New
Speaker 2: South Wales Minister for Sports, Steve Campus, said there is
Speaker 2: no doubt that the Fox family are the first family
Speaker 2: of paddling in Australia. The contributions that each of them
Speaker 2: has made, he said, have lifted the sport to new heights.
Speaker 2: We'll be back with the deep dive right after this.
Speaker 2: GDP for the June twenty twenty four quarter shows a
Speaker 2: thirty year low growth rate for the economy as the
Speaker 2: government blames high inflation and high interest rates. But with
Speaker 2: both of those concerns not really expected to ease for
Speaker 2: months or even years to come, what's in store for
Speaker 2: Australia's financial future? Are we actually headed for recession this time?
Speaker 2: To answer all your questions, I'm speaking with someone who
Speaker 2: knows a lot more about what GDP means that I do,
Speaker 2: and that's independent economist Nikki Huntley.
Speaker 4: Hello, Nikki, Hello, Thank you for having me.
Speaker 2: Before we get stuck in to those latest figures, could
Speaker 2: you take us through the broader idea of GDP. What
Speaker 2: does it actually mean? Why are these numbers significant?
Speaker 5: Yeah, so GENDP interesting well, interesting to economic serves anyway,
Speaker 5: is actually a concept that's not quite one hundred years old.
Speaker 5: But it was in the dark days after the depression
Speaker 5: that we decided we had to have some way of
Speaker 5: capturing how to measure the size of the economy. How
Speaker 5: did we know whether things were getting better or getting worse?
Speaker 5: And so some writespart came up with the idea that
Speaker 5: we would measure all the money that we spend, all
Speaker 5: the money that we invest and save everything that we produce,
Speaker 5: and we have these three different measures of what we
Speaker 5: call GDP or gross domestic product. But essentially, if you
Speaker 5: think about the economy as a kind of pie where
Speaker 5: we're all contributing to it for the way we work
Speaker 5: and what we produce, is that pie getting bigger and
Speaker 5: is our individual share of that pie getting bigger as well.
Speaker 2: Australia's economy grew by zero point two percent in the
Speaker 2: three months to June. What does that mean?
Speaker 5: That means that our economy is really weak. Now, that's
Speaker 5: kind of what you'd expect given that we've had thirteen
Speaker 5: interest rate rises over the last couple of years. The
Speaker 5: Reserve Bank of Australia wanted to slow the economy down
Speaker 5: because that's the only way that they can get in flesh.
Speaker 5: And those big price rises we've been seeing back under control.
Speaker 4: We've seen it particularly.
Speaker 5: In consumer demand, so the things that we buy, whether
Speaker 5: it's goods or services, going to the vet at the supermarket.
Speaker 5: We've been spending a lot less money, but businesses have
Speaker 5: been investing less as well.
Speaker 4: We're building fewer houses.
Speaker 5: It's basically the government spending and not just one government
Speaker 5: or governments.
Speaker 4: And also our exports that are.
Speaker 5: Kind of holding the economy in place, but also the
Speaker 5: fact that we have more people in the economy because
Speaker 5: our population through natural birth but also migration has been
Speaker 5: increasing and of course the more people you have, the
Speaker 5: more toothbrushes you need to sell.
Speaker 2: Nikki the as Head of National Accounts Catherine Keenan yesterday
Speaker 2: said the latest GDP figures were the lowest annual growth
Speaker 2: scene since nineteen ninety one ninety two outside the COVID years.
Speaker 2: So it's easier for us to understand why the economy
Speaker 2: slowed during the pandemic, But what is it about twenty
Speaker 2: twenty four, about this quarter?
Speaker 4: So there's a couple of things going on here.
Speaker 5: One is an underlying economic malaise if you like that.
Speaker 5: The Australian economy before COVID was quite stagnant. We had
Speaker 5: very low growth in incomes productivity with sluggish and we
Speaker 5: had this sense that we needed to build back better
Speaker 5: after the COVID downturn, but we didn't really put.
Speaker 4: In policies in place that allowed us to do that.
Speaker 5: Unfortunately now, of course, once we had the pandemic, we
Speaker 5: had huge amount of growth that led to very high
Speaker 5: inflation which was picked up too slowly by central bankers,
Speaker 5: and of course then they had to slam on the
Speaker 5: brakes by raising interest rates and that's brought the economy down.
Speaker 4: So there's two things.
Speaker 5: There's one is that structural weakness that we had before
Speaker 5: we even went into the pandemic. And on top of that,
Speaker 5: we've had this, you know, really really short, sharp and
Speaker 5: very strong increases in interest rates.
Speaker 4: Never had that many rate rises that quickly before the
Speaker 4: Reserve Bank.
Speaker 5: It's a slow economy because otherwise we don't get the
Speaker 5: inflation genie back in the bottle. The question then is
Speaker 5: what is Australia's future, And I think Australians have a
Speaker 5: bit of trouble thinking about what that looks like. The
Speaker 5: truth is we're actually a services based economy, you know,
Speaker 5: things like healthcare, age care, education, which is a see
Speaker 5: the export for us as well. It's not all about
Speaker 5: necessarily sexy high tech jobs where our future is. It's
Speaker 5: not just about building new renewable energy projects.
Speaker 4: We've got a shortage of lawyers who know how to
Speaker 4: do the deals.
Speaker 5: We've got a shortage of educators who can train the
Speaker 5: people who need to work on those projects. Every single
Speaker 5: area where these projects go up still needs teachers and
Speaker 5: doctors and nurses and everybody else to support the population.
Speaker 5: We do, I think can do a lot better with
Speaker 5: regional Australia really misses out at the moment, and I think,
Speaker 5: you know, we need to think more broadly how we
Speaker 5: can engage all Australians in the growth story.
Speaker 2: The language around GDP figures at the moment. You know,
Speaker 2: we've heard the treasureressay words like soft and subdued. It's
Speaker 2: a very kind of, I guess demure approach to speaking
Speaker 2: about economics. But should we be concerned when we hear
Speaker 2: the economy described as quote unquote soft.
Speaker 5: Well, we absolutely should, because when the economies, it means
Speaker 5: there's fewer jobs being created, and that means unemployment is rising.
Speaker 5: We've already seen that it means it's not only harder
Speaker 5: to find a job, but then it becomes harder to
Speaker 5: get a decent wage increase.
Speaker 4: From a financial well.
Speaker 5: Being point of view, we need economic growth to make
Speaker 5: sure that we are improving our standard of living.
Speaker 2: So there is that growth, albeit slow. What are we
Speaker 2: predicting to come next? This is sort of looking back
Speaker 2: at those months, the three months to June, where in
Speaker 2: September now, so are we heading for a recession.
Speaker 5: Yeah, look, it's way too early to say the our word.
Speaker 5: But the big question is what do the policymakers do.
Speaker 5: And there's two sets of policy makers. One's the Reserve
Speaker 5: Bank and they can use interest rates, and the other
Speaker 5: is governments, and they of course can do things like
Speaker 5: the tax cuts that we've already had, or giving people
Speaker 5: other types of incentives to help them with the cost
Speaker 5: of living and other pressures. Keep the economy. They can
Speaker 5: invest in more infrastructure, build more roads. They're already doing
Speaker 5: a lot of that. That's kind of what's helping the
Speaker 5: economy go at the moment. So the big question really
Speaker 5: is what happens with interest rates, And it always takes
Speaker 5: interest rates a long time to work. You can see
Speaker 5: interest rates started rising back in May twenty twenty two,
Speaker 5: so more than two years ago, and we're still feeling
Speaker 5: the effects. We still haven't seen all of that come through.
Speaker 5: The big question is if the Reserve Bank waits too long,
Speaker 5: If they wait right up until that point when everything's
Speaker 5: slow and inflation's back where it needs to be, if
Speaker 5: they don't cut interest rates before then, then they risk
Speaker 5: us going into a recession because that downward pressure is
Speaker 5: on the economy, so everything will come down to timing
Speaker 5: on the first rate cut. So far, the governor's saying
Speaker 5: not this year. I think it's probably a little bit
Speaker 5: too early. There's too many risks going both up and
Speaker 5: down to rule anything in or out at this point
Speaker 5: in time. In fact, I would think that it's more
Speaker 5: likely that we should have an interest rate cut before
Speaker 5: the end of this year, maybe in November, to just
Speaker 5: start getting things moving.
Speaker 4: Otherwise you'll slow the economy.
Speaker 5: Too much and instead of having that soft landing that
Speaker 5: the policy makers like to talk about, we could have
Speaker 5: a crash landing, and that's something that nobody wants to see.
Speaker 2: So the IRBA has said there's not going to be
Speaker 2: any rate cuts before Christmas, or they want people not
Speaker 2: to expect that. But based on what you're telling us,
Speaker 2: maybe the idea is that we need a decision before
Speaker 2: that point in order to affect change around the end
Speaker 2: of the year, that the decisions we make now actually
Speaker 2: take a while to influence the economy.
Speaker 4: Yeah, that's exactly right.
Speaker 5: In fact, if they cut interest rates in November this year,
Speaker 5: we won't see that for quite a long time. There
Speaker 5: are some things that are going to help the economy.
Speaker 5: Obviously the tax cuts, although it kind of looks like
Speaker 5: everybody's saving those rather than spending them, but it will
Speaker 5: help households. Things like the energy rebates that just take
Speaker 5: a little bit of pressure off the bills. Some state
Speaker 5: governments are doing a fair bit of spending as well
Speaker 5: and helping helping out, so that will offset some of
Speaker 5: the pressure from interest rates, but not enough at the
Speaker 5: moment to stop the economy from slowing further. So, you know,
Speaker 5: this is what the Reserve Bank and economists do. They
Speaker 5: look further out. They're not looking in the rear view mirror.
Speaker 5: They're saying what's going to happen in six months or
Speaker 5: twelve months, and they're adjusting their policy. The question is
Speaker 5: do they get the forecasts right? And there's a lot
Speaker 5: of uncertainty these models. It's not like doing a physics
Speaker 5: or chemistry experiment where you know, you drop the two
Speaker 5: chemicals in the beaker and they react exactly the way
Speaker 5: you know every single time under the same conditions. Economies
Speaker 5: are made up of people, and people don't always behave
Speaker 5: in the same way, so it becomes very hard to predict.
Speaker 2: You've mentioned big government spending initiatives and their influence on
Speaker 2: stimulating economic growth. But there's another factor that has been
Speaker 2: discussed on how immigration is helping us economically for the better.
Speaker 5: So there's been a lot of research done around the
Speaker 5: economic impacts of migration and the answer is it depends,
Speaker 5: but by and large, overall it doesn't have that big
Speaker 5: an impact on GDP, the economic.
Speaker 4: Growth per se.
Speaker 5: What it does do though, is there's some research done
Speaker 5: that shows that like in regional Australia, it can have
Speaker 5: a really meaningful impact to bring more skills into particular
Speaker 5: areas where they might otherwise have been have been missing.
Speaker 5: But essentially, you know, there are something that we kind
Speaker 5: of refer to as the three p's of growth, and
Speaker 5: that's the things that drive the economy, which is population.
Speaker 5: Of course, migration is a big part of that participation,
Speaker 5: so how many people are actually working and then productivity.
Speaker 5: Now we know productivity actually went backwards again this quarter,
Speaker 5: which is not great.
Speaker 4: It's been very soft for a long time.
Speaker 5: The participation rates very high, but it's probably getting close
Speaker 5: to its levels. So really we're looking at the population
Speaker 5: growth to drive economic growth. But when you have population
Speaker 5: driven economic growth, the pie gets bigger, but it doesn't
Speaker 5: necessarily mean that we're all better off. And in fact,
Speaker 5: if you look at this last quarter's National accounts, household
Speaker 5: incomes went backwards, our spending went backwards. And this is
Speaker 5: where you've got to be so careful at just talking
Speaker 5: about GDP and talking about average numbers. GDP is a
Speaker 5: particular construct. It is useful for some things, but it
Speaker 5: doesn't tell us all the story. And particularly when we
Speaker 5: think about the impacts of migration, we shouldn't just think
Speaker 5: about it as well that's the way to boost GDP,
Speaker 5: because migration has all sorts of other impacts, and the
Speaker 5: ones we're most interested in from an economic well being
Speaker 5: are we lifting productivity, Because it's productivity that's really going
Speaker 5: to boost our lifestyle.
Speaker 4: So if we have skilled migration, that's going to be
Speaker 4: the most.
Speaker 5: Important thing that we can consider when we're talking about
Speaker 5: the economic impact of migration.
Speaker 2: As an economist, what do you think our approach needs
Speaker 2: to be to support the transition to net zero and
Speaker 2: make sure that doesn't impact the economy or risk a recession.
Speaker 5: I think everybody is thinking about green steel, we're thinking
Speaker 5: about can we economically make green hydrogen?
Speaker 4: The jury is still a bit out on that, but
Speaker 4: that's a very important part of the equation.
Speaker 5: But of course perhaps more difficult for Australia will be
Speaker 5: that transition away from fossil fuel exports. You know, exports
Speaker 5: are twenty percent of our GDP our economy and fossil fuels,
Speaker 5: unfortunately are a very big portion of that. So we
Speaker 5: have to find things that are going to replace them
Speaker 5: of equal value so that we don't find our economic
Speaker 5: pie is shrinking again. That's why there's so much focus,
Speaker 5: you know, from industry, from researchers, from government to say, well,
Speaker 5: what's the next thing, what can we support, what are
Speaker 5: the things that need to be put in place to
Speaker 5: help that transition happen.
Speaker 3: Thank you so much for listening to another episode of
Speaker 3: The Daily OS. That's all we have time for today,
Speaker 3: but if you learn something from today's episode, you can
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Speaker 3: again tomorrow, but until then, have a great day.
Speaker 1: My name is Lily Maddon and I'm a proud Arunda
Speaker 1: Bungelung Calcuttin woman from Gadighl Country. The Daily oz acknowledges
Speaker 1: that this podcast is recorded on the lands of the
Speaker 1: Gadighl people and pays respect to all Aboriginal and Torres
Speaker 1: Straight Island and nations. We pay our respects to the
Speaker 1: first peoples of these countries, both past and present.