WEBVTT - Are we actually headed for a recession?

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<v Speaker 1>Already and this is the Daily This is the Daily

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<v Speaker 1>ohs oh, now it makes sense.

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<v Speaker 2>Good morning and welcome to the Daily OS. It's Thursday,

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<v Speaker 2>the fifth of September.

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<v Speaker 3>I'm emma, I'm zara.

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<v Speaker 2>The latest figures on Gross Domestic Product that's GDP show

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<v Speaker 2>Australia's economy is growing very slowly, so slow in fact,

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<v Speaker 2>the Australian Bureau of Statistics says it's just recorded the

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<v Speaker 2>softest annual economic growth in over thirty years outside the pandemic.

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<v Speaker 2>So why is that and doesn't mean Australia is heading

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<v Speaker 2>for a recession. We've got lots of questions and unless

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<v Speaker 2>you're an economist, these data releases can be a bit

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<v Speaker 2>tricky to unpack. So that's why we've brought in an

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<v Speaker 2>expert for today's episode, independent economist Nikki Hutley. We'll talk

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<v Speaker 2>you through the latest figures in the deep Dive.

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<v Speaker 3>The Federal government has announced a new plan to regulate

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<v Speaker 3>the use of artificial intelligence. The ten new guard rails

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<v Speaker 3>for organizations and businesses include cybersecurity and transparency standards based

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<v Speaker 3>off similar overseas models like AI standards used in Japan

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<v Speaker 3>and the EU. The strategies aimed at helping organizations, which

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<v Speaker 3>could range from corporations to education institutions, to harness the

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<v Speaker 3>benefits of AI and address concerns about its potential harms.

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<v Speaker 3>The guardrails are voluntary, but Minister for Industry and Science

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<v Speaker 3>at Husick so the Government is considering legislation to make

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<v Speaker 3>the new AI standards mandatory.

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<v Speaker 2>The National Fire Authority has warned large parts of the

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<v Speaker 2>country could be in for an early start to the

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<v Speaker 2>fire season if current dry conditions persist. It comes as

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<v Speaker 2>parts of WA and South Australia experience record high temperatures,

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<v Speaker 2>heightening the risk of bushfire acting in those areas. The

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<v Speaker 2>newly released Spring Outlook from the National Council for Fire

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<v Speaker 2>and Emergency Services said parts of South Australia, Victoria and

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<v Speaker 2>Tasmania were most at risk of early fires heading into summer.

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<v Speaker 2>Authorities are advising communities to stay vigilant and prepare survival plans.

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<v Speaker 3>Shares in AI chip giant in Vidia have fallen by

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<v Speaker 3>nearly ten percent. That's marking the biggest value loss ever

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<v Speaker 3>recorded for a US stock. A two hundred and seventy

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<v Speaker 3>nine billion US dollar drop in in Vidia's market value

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<v Speaker 3>has been attributed to growing concerns from investors about emerging

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<v Speaker 3>AI technologies. In Vidia technology is used by some of

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<v Speaker 3>the world's biggest tech companies that includes Microsoft, Google, Meta,

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<v Speaker 3>Tesla and Amazon to train generative AI models and to

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<v Speaker 3>develop new software.

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<v Speaker 2>And today's good news, Olympic gold medallists Jess and Miami

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<v Speaker 2>Fox are being honored in their Western Sydney home town,

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<v Speaker 2>with part of Penrith's Whitewater Stadium to be named after them.

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<v Speaker 2>The sisters want to combine three gold medals across the

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<v Speaker 2>kayaking and canoeing events in Paris. An artificial island in

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<v Speaker 2>the center of the Whitewater Sporting Facility, newly dubbed Fox Island,

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<v Speaker 2>will be on the world stage next year when the

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<v Speaker 2>stadium hosts the Canoe and Slalem World Championships. The New

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<v Speaker 2>South Wales Minister for Sports, Steve Campus, said there is

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<v Speaker 2>no doubt that the Fox family are the first family

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<v Speaker 2>of paddling in Australia. The contributions that each of them

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<v Speaker 2>has made, he said, have lifted the sport to new heights.

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<v Speaker 2>We'll be back with the deep dive right after this.

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<v Speaker 2>GDP for the June twenty twenty four quarter shows a

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<v Speaker 2>thirty year low growth rate for the economy as the

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<v Speaker 2>government blames high inflation and high interest rates. But with

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<v Speaker 2>both of those concerns not really expected to ease for

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<v Speaker 2>months or even years to come, what's in store for

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<v Speaker 2>Australia's financial future? Are we actually headed for recession this time?

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<v Speaker 2>To answer all your questions, I'm speaking with someone who

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<v Speaker 2>knows a lot more about what GDP means that I do,

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<v Speaker 2>and that's independent economist Nikki Huntley.

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<v Speaker 4>Hello, Nikki, Hello, Thank you for having me.

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<v Speaker 2>Before we get stuck in to those latest figures, could

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<v Speaker 2>you take us through the broader idea of GDP. What

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<v Speaker 2>does it actually mean? Why are these numbers significant?

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<v Speaker 5>Yeah, so GENDP interesting well, interesting to economic serves anyway,

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<v Speaker 5>is actually a concept that's not quite one hundred years old.

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<v Speaker 5>But it was in the dark days after the depression

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<v Speaker 5>that we decided we had to have some way of

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<v Speaker 5>capturing how to measure the size of the economy. How

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<v Speaker 5>did we know whether things were getting better or getting worse?

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<v Speaker 5>And so some writespart came up with the idea that

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<v Speaker 5>we would measure all the money that we spend, all

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<v Speaker 5>the money that we invest and save everything that we produce,

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<v Speaker 5>and we have these three different measures of what we

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<v Speaker 5>call GDP or gross domestic product. But essentially, if you

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<v Speaker 5>think about the economy as a kind of pie where

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<v Speaker 5>we're all contributing to it for the way we work

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<v Speaker 5>and what we produce, is that pie getting bigger and

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<v Speaker 5>is our individual share of that pie getting bigger as well.

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<v Speaker 2>Australia's economy grew by zero point two percent in the

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<v Speaker 2>three months to June. What does that mean?

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<v Speaker 5>That means that our economy is really weak. Now, that's

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<v Speaker 5>kind of what you'd expect given that we've had thirteen

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<v Speaker 5>interest rate rises over the last couple of years. The

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<v Speaker 5>Reserve Bank of Australia wanted to slow the economy down

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<v Speaker 5>because that's the only way that they can get in flesh.

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<v Speaker 5>And those big price rises we've been seeing back under control.

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<v Speaker 4>We've seen it particularly.

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<v Speaker 5>In consumer demand, so the things that we buy, whether

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<v Speaker 5>it's goods or services, going to the vet at the supermarket.

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<v Speaker 5>We've been spending a lot less money, but businesses have

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<v Speaker 5>been investing less as well.

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<v Speaker 4>We're building fewer houses.

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<v Speaker 5>It's basically the government spending and not just one government

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<v Speaker 5>or governments.

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<v Speaker 4>And also our exports that are.

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<v Speaker 5>Kind of holding the economy in place, but also the

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<v Speaker 5>fact that we have more people in the economy because

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<v Speaker 5>our population through natural birth but also migration has been

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<v Speaker 5>increasing and of course the more people you have, the

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<v Speaker 5>more toothbrushes you need to sell.

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<v Speaker 2>Nikki the as Head of National Accounts Catherine Keenan yesterday

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<v Speaker 2>said the latest GDP figures were the lowest annual growth

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<v Speaker 2>scene since nineteen ninety one ninety two outside the COVID years.

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<v Speaker 2>So it's easier for us to understand why the economy

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<v Speaker 2>slowed during the pandemic, But what is it about twenty

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<v Speaker 2>twenty four, about this quarter?

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<v Speaker 4>So there's a couple of things going on here.

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<v Speaker 5>One is an underlying economic malaise if you like that.

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<v Speaker 5>The Australian economy before COVID was quite stagnant. We had

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<v Speaker 5>very low growth in incomes productivity with sluggish and we

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<v Speaker 5>had this sense that we needed to build back better

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<v Speaker 5>after the COVID downturn, but we didn't really put.

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<v Speaker 4>In policies in place that allowed us to do that.

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<v Speaker 5>Unfortunately now, of course, once we had the pandemic, we

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<v Speaker 5>had huge amount of growth that led to very high

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<v Speaker 5>inflation which was picked up too slowly by central bankers,

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<v Speaker 5>and of course then they had to slam on the

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<v Speaker 5>brakes by raising interest rates and that's brought the economy down.

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<v Speaker 4>So there's two things.

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<v Speaker 5>There's one is that structural weakness that we had before

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<v Speaker 5>we even went into the pandemic. And on top of that,

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<v Speaker 5>we've had this, you know, really really short, sharp and

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<v Speaker 5>very strong increases in interest rates.

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<v Speaker 4>Never had that many rate rises that quickly before the

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<v Speaker 4>Reserve Bank.

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<v Speaker 5>It's a slow economy because otherwise we don't get the

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<v Speaker 5>inflation genie back in the bottle. The question then is

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<v Speaker 5>what is Australia's future, And I think Australians have a

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<v Speaker 5>bit of trouble thinking about what that looks like. The

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<v Speaker 5>truth is we're actually a services based economy, you know,

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<v Speaker 5>things like healthcare, age care, education, which is a see

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<v Speaker 5>the export for us as well. It's not all about

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<v Speaker 5>necessarily sexy high tech jobs where our future is. It's

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<v Speaker 5>not just about building new renewable energy projects.

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<v Speaker 4>We've got a shortage of lawyers who know how to

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<v Speaker 4>do the deals.

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<v Speaker 5>We've got a shortage of educators who can train the

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<v Speaker 5>people who need to work on those projects. Every single

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<v Speaker 5>area where these projects go up still needs teachers and

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<v Speaker 5>doctors and nurses and everybody else to support the population.

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<v Speaker 5>We do, I think can do a lot better with

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<v Speaker 5>regional Australia really misses out at the moment, and I think,

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<v Speaker 5>you know, we need to think more broadly how we

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<v Speaker 5>can engage all Australians in the growth story.

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<v Speaker 2>The language around GDP figures at the moment. You know,

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<v Speaker 2>we've heard the treasureressay words like soft and subdued. It's

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<v Speaker 2>a very kind of, I guess demure approach to speaking

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<v Speaker 2>about economics. But should we be concerned when we hear

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<v Speaker 2>the economy described as quote unquote soft.

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<v Speaker 5>Well, we absolutely should, because when the economies, it means

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<v Speaker 5>there's fewer jobs being created, and that means unemployment is rising.

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<v Speaker 5>We've already seen that it means it's not only harder

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<v Speaker 5>to find a job, but then it becomes harder to

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<v Speaker 5>get a decent wage increase.

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<v Speaker 4>From a financial well.

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<v Speaker 5>Being point of view, we need economic growth to make

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<v Speaker 5>sure that we are improving our standard of living.

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<v Speaker 2>So there is that growth, albeit slow. What are we

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<v Speaker 2>predicting to come next? This is sort of looking back

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<v Speaker 2>at those months, the three months to June, where in

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<v Speaker 2>September now, so are we heading for a recession.

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<v Speaker 5>Yeah, look, it's way too early to say the our word.

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<v Speaker 5>But the big question is what do the policymakers do.

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<v Speaker 5>And there's two sets of policy makers. One's the Reserve

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<v Speaker 5>Bank and they can use interest rates, and the other

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<v Speaker 5>is governments, and they of course can do things like

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<v Speaker 5>the tax cuts that we've already had, or giving people

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<v Speaker 5>other types of incentives to help them with the cost

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<v Speaker 5>of living and other pressures. Keep the economy. They can

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<v Speaker 5>invest in more infrastructure, build more roads. They're already doing

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<v Speaker 5>a lot of that. That's kind of what's helping the

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<v Speaker 5>economy go at the moment. So the big question really

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<v Speaker 5>is what happens with interest rates, And it always takes

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<v Speaker 5>interest rates a long time to work. You can see

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<v Speaker 5>interest rates started rising back in May twenty twenty two,

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<v Speaker 5>so more than two years ago, and we're still feeling

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<v Speaker 5>the effects. We still haven't seen all of that come through.

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<v Speaker 5>The big question is if the Reserve Bank waits too long,

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<v Speaker 5>If they wait right up until that point when everything's

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<v Speaker 5>slow and inflation's back where it needs to be, if

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<v Speaker 5>they don't cut interest rates before then, then they risk

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<v Speaker 5>us going into a recession because that downward pressure is

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<v Speaker 5>on the economy, so everything will come down to timing

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<v Speaker 5>on the first rate cut. So far, the governor's saying

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<v Speaker 5>not this year. I think it's probably a little bit

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<v Speaker 5>too early. There's too many risks going both up and

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<v Speaker 5>down to rule anything in or out at this point

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<v Speaker 5>in time. In fact, I would think that it's more

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<v Speaker 5>likely that we should have an interest rate cut before

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<v Speaker 5>the end of this year, maybe in November, to just

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<v Speaker 5>start getting things moving.

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<v Speaker 4>Otherwise you'll slow the economy.

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<v Speaker 5>Too much and instead of having that soft landing that

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<v Speaker 5>the policy makers like to talk about, we could have

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<v Speaker 5>a crash landing, and that's something that nobody wants to see.

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<v Speaker 2>So the IRBA has said there's not going to be

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<v Speaker 2>any rate cuts before Christmas, or they want people not

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<v Speaker 2>to expect that. But based on what you're telling us,

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<v Speaker 2>maybe the idea is that we need a decision before

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<v Speaker 2>that point in order to affect change around the end

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<v Speaker 2>of the year, that the decisions we make now actually

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<v Speaker 2>take a while to influence the economy.

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<v Speaker 4>Yeah, that's exactly right.

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<v Speaker 5>In fact, if they cut interest rates in November this year,

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<v Speaker 5>we won't see that for quite a long time. There

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<v Speaker 5>are some things that are going to help the economy.

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<v Speaker 5>Obviously the tax cuts, although it kind of looks like

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<v Speaker 5>everybody's saving those rather than spending them, but it will

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<v Speaker 5>help households. Things like the energy rebates that just take

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<v Speaker 5>a little bit of pressure off the bills. Some state

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<v Speaker 5>governments are doing a fair bit of spending as well

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<v Speaker 5>and helping helping out, so that will offset some of

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<v Speaker 5>the pressure from interest rates, but not enough at the

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<v Speaker 5>moment to stop the economy from slowing further. So, you know,

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<v Speaker 5>this is what the Reserve Bank and economists do. They

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<v Speaker 5>look further out. They're not looking in the rear view mirror.

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<v Speaker 5>They're saying what's going to happen in six months or

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<v Speaker 5>twelve months, and they're adjusting their policy. The question is

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<v Speaker 5>do they get the forecasts right? And there's a lot

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<v Speaker 5>of uncertainty these models. It's not like doing a physics

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<v Speaker 5>or chemistry experiment where you know, you drop the two

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<v Speaker 5>chemicals in the beaker and they react exactly the way

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<v Speaker 5>you know every single time under the same conditions. Economies

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<v Speaker 5>are made up of people, and people don't always behave

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<v Speaker 5>in the same way, so it becomes very hard to predict.

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<v Speaker 2>You've mentioned big government spending initiatives and their influence on

0:12:57.640 --> 0:13:01.520
<v Speaker 2>stimulating economic growth. But there's another factor that has been

0:13:01.520 --> 0:13:06.720
<v Speaker 2>discussed on how immigration is helping us economically for the better.

0:13:07.640 --> 0:13:10.320
<v Speaker 5>So there's been a lot of research done around the

0:13:10.360 --> 0:13:13.880
<v Speaker 5>economic impacts of migration and the answer is it depends,

0:13:13.960 --> 0:13:17.800
<v Speaker 5>but by and large, overall it doesn't have that big

0:13:17.800 --> 0:13:21.240
<v Speaker 5>an impact on GDP, the economic.

0:13:20.800 --> 0:13:22.079
<v Speaker 4>Growth per se.

0:13:22.720 --> 0:13:25.840
<v Speaker 5>What it does do though, is there's some research done

0:13:25.880 --> 0:13:28.480
<v Speaker 5>that shows that like in regional Australia, it can have

0:13:28.559 --> 0:13:32.120
<v Speaker 5>a really meaningful impact to bring more skills into particular

0:13:32.200 --> 0:13:35.520
<v Speaker 5>areas where they might otherwise have been have been missing.

0:13:36.080 --> 0:13:38.959
<v Speaker 5>But essentially, you know, there are something that we kind

0:13:39.000 --> 0:13:42.000
<v Speaker 5>of refer to as the three p's of growth, and

0:13:42.040 --> 0:13:45.200
<v Speaker 5>that's the things that drive the economy, which is population.

0:13:45.520 --> 0:13:48.600
<v Speaker 5>Of course, migration is a big part of that participation,

0:13:48.800 --> 0:13:51.760
<v Speaker 5>so how many people are actually working and then productivity.

0:13:52.120 --> 0:13:54.800
<v Speaker 5>Now we know productivity actually went backwards again this quarter,

0:13:54.800 --> 0:13:55.520
<v Speaker 5>which is not great.

0:13:55.559 --> 0:13:57.280
<v Speaker 4>It's been very soft for a long time.

0:13:57.679 --> 0:14:00.880
<v Speaker 5>The participation rates very high, but it's probably getting close

0:14:00.960 --> 0:14:04.160
<v Speaker 5>to its levels. So really we're looking at the population

0:14:04.280 --> 0:14:08.920
<v Speaker 5>growth to drive economic growth. But when you have population

0:14:09.120 --> 0:14:13.960
<v Speaker 5>driven economic growth, the pie gets bigger, but it doesn't

0:14:13.960 --> 0:14:16.439
<v Speaker 5>necessarily mean that we're all better off. And in fact,

0:14:16.440 --> 0:14:19.960
<v Speaker 5>if you look at this last quarter's National accounts, household

0:14:20.000 --> 0:14:23.520
<v Speaker 5>incomes went backwards, our spending went backwards. And this is

0:14:23.520 --> 0:14:25.760
<v Speaker 5>where you've got to be so careful at just talking

0:14:25.760 --> 0:14:29.840
<v Speaker 5>about GDP and talking about average numbers. GDP is a

0:14:30.040 --> 0:14:33.600
<v Speaker 5>particular construct. It is useful for some things, but it

0:14:33.640 --> 0:14:37.000
<v Speaker 5>doesn't tell us all the story. And particularly when we

0:14:37.040 --> 0:14:40.240
<v Speaker 5>think about the impacts of migration, we shouldn't just think

0:14:40.240 --> 0:14:42.560
<v Speaker 5>about it as well that's the way to boost GDP,

0:14:42.720 --> 0:14:46.080
<v Speaker 5>because migration has all sorts of other impacts, and the

0:14:46.080 --> 0:14:49.600
<v Speaker 5>ones we're most interested in from an economic well being

0:14:49.640 --> 0:14:54.440
<v Speaker 5>are we lifting productivity, Because it's productivity that's really going

0:14:54.480 --> 0:14:55.680
<v Speaker 5>to boost our lifestyle.

0:14:55.800 --> 0:14:59.080
<v Speaker 4>So if we have skilled migration, that's going to be

0:14:59.160 --> 0:14:59.840
<v Speaker 4>the most.

0:14:59.560 --> 0:15:02.920
<v Speaker 5>Important thing that we can consider when we're talking about

0:15:02.960 --> 0:15:04.480
<v Speaker 5>the economic impact of migration.

0:15:05.040 --> 0:15:08.800
<v Speaker 2>As an economist, what do you think our approach needs

0:15:08.840 --> 0:15:12.240
<v Speaker 2>to be to support the transition to net zero and

0:15:12.320 --> 0:15:15.480
<v Speaker 2>make sure that doesn't impact the economy or risk a recession.

0:15:15.920 --> 0:15:19.120
<v Speaker 5>I think everybody is thinking about green steel, we're thinking

0:15:19.160 --> 0:15:22.120
<v Speaker 5>about can we economically make green hydrogen?

0:15:22.160 --> 0:15:23.800
<v Speaker 4>The jury is still a bit out on that, but

0:15:23.840 --> 0:15:26.440
<v Speaker 4>that's a very important part of the equation.

0:15:26.640 --> 0:15:30.000
<v Speaker 5>But of course perhaps more difficult for Australia will be

0:15:30.160 --> 0:15:33.880
<v Speaker 5>that transition away from fossil fuel exports. You know, exports

0:15:33.920 --> 0:15:38.560
<v Speaker 5>are twenty percent of our GDP our economy and fossil fuels,

0:15:38.640 --> 0:15:43.280
<v Speaker 5>unfortunately are a very big portion of that. So we

0:15:43.400 --> 0:15:46.560
<v Speaker 5>have to find things that are going to replace them

0:15:46.760 --> 0:15:49.960
<v Speaker 5>of equal value so that we don't find our economic

0:15:50.000 --> 0:15:53.840
<v Speaker 5>pie is shrinking again. That's why there's so much focus,

0:15:54.160 --> 0:15:57.760
<v Speaker 5>you know, from industry, from researchers, from government to say, well,

0:15:58.200 --> 0:16:01.080
<v Speaker 5>what's the next thing, what can we support, what are

0:16:01.120 --> 0:16:02.760
<v Speaker 5>the things that need to be put in place to

0:16:02.800 --> 0:16:04.720
<v Speaker 5>help that transition happen.

0:16:05.560 --> 0:16:08.080
<v Speaker 3>Thank you so much for listening to another episode of

0:16:08.200 --> 0:16:10.400
<v Speaker 3>The Daily OS. That's all we have time for today,

0:16:10.440 --> 0:16:13.200
<v Speaker 3>but if you learn something from today's episode, you can

0:16:13.240 --> 0:16:15.720
<v Speaker 3>hit follow on Apple or Spotify, or if you're watching

0:16:15.800 --> 0:16:18.560
<v Speaker 3>us on YouTube you can hit subscribe. We'll be back

0:16:18.600 --> 0:16:20.880
<v Speaker 3>again tomorrow, but until then, have a great day.

0:16:23.720 --> 0:16:26.000
<v Speaker 1>My name is Lily Maddon and I'm a proud Arunda

0:16:26.240 --> 0:16:31.040
<v Speaker 1>Bungelung Calcuttin woman from Gadighl Country. The Daily oz acknowledges

0:16:31.120 --> 0:16:33.280
<v Speaker 1>that this podcast is recorded on the lands of the

0:16:33.320 --> 0:16:36.840
<v Speaker 1>Gadighl people and pays respect to all Aboriginal and Torres

0:16:36.880 --> 0:16:39.800
<v Speaker 1>Straight Island and nations. We pay our respects to the

0:16:39.800 --> 0:16:42.600
<v Speaker 1>first peoples of these countries, both past and present.