Could I mate a big meeting coming up next week, very big meeting, and the markets are saying pretty much undersent, pretty much one hundred percent probability of in just rate decrease.

They're talking twenty five base points.

You, Steve good Goodness has actually been out there throwing out the fifty base points a few times, maybe just sort of tickling the market a bit.

On X.

I mean, Stephen Coculas on X.

What's going on out there?

What's changing?

Where do you see it all sort of developing?

You know, like what are the developers?

What's the momentum.

But we'll leave money markets out of the moment, and we'll leave out what the banks are saying at the moment, and we'll leave at what all the other experts out there are saying the moment.

What are you thinking?

What are you feeling and hearing?

You're quite right, I am poking the bet that call.

Well, you do that on XC.

I know you do it on purpose.

It's more to generate a conversation, Yeah, because I get frustrated and economics about a narrow consensus that doesn't question where we are.

So I'll take a step back.

We know that there is a there is an interest rate that is what we call neutral, that doesn't add or subtract to a functioning economy, and that's about three to three and a quarter percent.

We can't pinpoint it any more closely than that as an official rate, as an official cash rate.

When, if, and when interest rates are at that level, it's at that what we might call the goldilocks, not too hot, not too cold, just right.

When the economy is strong or and or we have high inflation, interest rates go above that level to scale back the economy.

When the economy is weak, they go below that to stimulate borrowing spending.

So right now you would say the current cash rate is restrictive, restrictive.

We're at three eighty five three point eight five percent on the official rate, that's let's just call it fifty basis points above neutral now.

And who also endorses that they do They also say, we still believe that the current cash rate official rate is restrictive.

Correct.

So we've had the RBA governor, we've had Sarah Hunter, who's sort of the chief economists I think her official to assistant governor.

We've had them coming out in the last month or two or three saying that rates are still restrictive, yes, and I think everybody i've heard agrees with that.

Now you have, as I said, you have rates restrictive when you've got high inflation or an overheating economy.

Now the economy is not overheating.

Definitely, definitely not.

GDP growth, which came out a little while ago and now sort of a little bit like ancient history was weak, and we've had things like retail spending, building approvals, consumers sentiment, they're all pretty soft.

Yeah, just have an overhead of economy.

Just on GDP though, just so for our audiences, just remind us of something.

So the annualized GDP is one point two.

Around that point one point three three one.

Point three, okay, which is considered to be weak.

That is, GDP growth from one year period to another one year period has only grown by one point three percent relative to the previous period and GDP being the usual measurement.

But in addition to that, the quarterly, last quarterly GDP growth was.

Point two, like this is not very good.

Point two, so that means.

Below the population.

So that's why per capita.

And we're going we're in a recession.

We're going back with back need correct.

But we just need the per capital bit out at the moment because you know, it's complex.

I don't know whether they should we shouldn't.

Do that, but but like if we just look at the number, it's zero point two, which, by the way, even if you extraplate that out, you know, for one year, we're talking about zero point eight eight less than one percent less one percent, which is strong.

In fact, it's weak.

And relative to other countries, very average compared to the US, although they've got a bit of volatility with the Trump tariffs and the big budget bill and all this other stuff whatever it's Cobb.

Yeah, their economy is doing better than ours.

New Zealand's recovering.

They did have a recession last year, but they've recovered.

They've had RB and Z New Zealand central Bank cutting rates aggressively, really aggressively.

Yes, so we are not performing as we should.

It's a bit like your old school reports doing okay, but could be doing better.

Economy okay.

You know what's funny about that?

That usually meant that you were not paying attention.

And you weren't.

You weren't functioning at your potential.

Correct, because you're goofing off looking at the footy, and I actually feel does my school report mark.

I feel that our government, I won't use the word guilty, but is sort of participating in that.

Yeah.

I just think the goofing not maybe not goofing off, but not paying attention, acting fast enough and not paying attention.

I just don't think there's enough attention paid to what's going on there because they're not experiencing it.

Be a business owner, mokety the I'll take two steps back.

One is that this productivity summit, that treasure gim charms has gone August.

In August, that's still a little way away.

Look fair enough.

But I can sit here and tell you what will results be.

We know it.

We know what the productivity issues are.

It is the tax system, It is red tape, it is skills education and training.

I was at a builders function last week, I think it was, and even though the labor market's a little bit softer, they can't find the tradees they need to build a house.

And therefore cost of building I.

Do need that electrician, that bricklayer, the machine operator, whatever the hell it is.

I got to pay up because because they're not stupid, they were I'm so busy, I can't get there.

So that we know what productivity is about, skills, tax, all these sort of things.

Just do it, as like the good old Nike.

Just do it.

You know, we know what the result is going to be.

And Okay, there are going to be policy decisions to boost productivity that might not be popular.

You know, you're going to crack a few heads when you're changing the rules and regulations.

But I look back at you know, Mark, I'm a huge fan of Paul Keating and even Peter Cascello in his heyday, you know, introduced the GST, introduced the Future Fund, the Sovereign Wealth Fund, did a whole lot of stuff that think, yeah, that's good Keating, reforming the banking sector, all this sort of stuff.

I opened that the competition floated the.

Dollar reform supernuation.

Right now, he's going nuts about what they're proposing to.

Fair enough, fair enough to So there's a whole lot of things that those reformers did twenty to thirty years ago.

What cost, It's a long time ago that we are benefiting from today.

We need that next increment of Okay, take a deep breath.

This Australia is doing okay, But if we don't change these issues, it won't be long before we are not doing okay.

And as Chris Joy said with your Beeth Economy, I don't buy that.

It's more of the it's more of the point that he's trying to make.

I think, yeah, you're using colorul language to make a point.

No good on him, but we are at risk of we do know, and the Treasurer knows this.

And you know, good old Jim I love him.

I think he's a good guy and he's working his tail off to try to change things.

He knows what's got to be done.

But he's got to bring the people with him.

That speech he gave to the Press Club what was about a month ago now, he said, I've got to bring people with me.

I can't just sort of from on high say I know everything that's I've got to repair.

So that's sort of why he's got to consult the Trump the Electric.

Yeah, he's not like that.

He's got to consult the Electric.

You know, he's got to sort of bring them along.

So if we're to change the tax system, if we're to do something on the GST, if we do do something on negative gear and capital gains tax, if we're to do some reform that cuts red tape that might cause that business to fail because they're relying on that tape to keep them in business.

Well sorry mate, you're losing out.

You know, We've got to changes for the efficiency of the economy.

That's where he's coming from.

So that's but these things are more long run.

They're not going to change the economy tomorrow.

Even if you had your magic one today, it's not going to change the economy tomorrow.

They take a while to permeate through the economy.

Doesn't mean you don't do them.

You do them, do them faster, because the sooner you do them, the sooner you get the benefit.

Well, so I noticed the Prime Minister right this very day whiles you and I record this podcast, is actually launching something today actually where he's calling on private enterprise small business owners to do more for our economy.

And prior to you coming in here, I had a couple in who's just closed.

Down the business.

You know, they're one of the statistics that we keep reading about in terms of they're not bankrupt, but they've closed the business down.

Business closing in Australia and they're a new South Wales couple running a restaurant, hospitality usual story.

What do you think about the Prime Minister saying private enterprise, you're in private enterprise, you're for yourself, you're doing more for the economy.

I mean, we're doing the best we can.

Like, I mean our response might be back, well, that's a bit unrealistic, PM, Yeah.

Is it?

Look?

What is it?

Mate?

Is it?

Taxes?

Is a gest What are we talking about here?

Because it's a couple of those things, and I I don't want to move away from the fact that we do have restrictive interest rates.

Just by the way, I'm wondering if we did have an interstrate structure, which just goes back to that fifty point call that I've got, which won't happen, but I'm still going to make it, if we did have a lower interstrate structure, if the Reserve Bank move rates lower, that's not the fix fix all of everything.

But cyclically, as the cycle changes, it gives every Already the two rate cuts we've seen, I know people saying, thank god that's happened.

Now.

It doesn't mean they're going out and you're doing cartwheels down Pitt Street.

You know, I'm back happy days are here again.

But the sense of relief is obvious.

My repayments have gone down a couple hundred bucks.

I'm still not going out.

I'm still being very cautious with my money.

But they're seeing the early stages of improvement.

Let' learned this small business sector.

So the PM sort of saying we want the private sector to get out, Yes, we do.

You know, business investment for fifteen years has been shocking.

That's one of the reasons we have bad productivity.

Businesses have not been investing in in technology, artificial intelligence, these sorts of.

Things activity started, yes, whereas the US and Germany unbelievable, staggering.

You know, in fact, a lot of Asian economgis that I've seen the things on YouTube or whatever of car manufacturing plants.

Now there's barely a human.

There's machines that are screwing on the wheels and the seats and the windscreens.

A couple of humans working in the control consuming what what?

What?

How bloody good is that?

What?

But what?

Steve Coog fantastic during the and I was only having this conversation some of the other day, and I saw or a syntadinas who was the he was a Minister for.

Industry, Innovation and Science under the termal government, right correct, and then and then enough that under Morrison okay as well so and Arthur now Is was becoming the embassad in the US and now he's he's more in a consultancy bit of industry.

But but the thing that we have we don't even have a Minister innovation anymore, and there's no I mean, innovation is about what we're talking about here in terms of productivity.

We need more innovation and we need businesses to be.

Encouraged to risk takers, not ridiculous risk, but to take a risk.

Mark you took a risk with every business decision you take.

Still do you do?

Of course you do, and not everyone's going to pay off.

They don't.

But if you get most of them pay off when they path they do well, that's good for the economy.

And indeed, in a funny way, this is why you want businesses to start up.

And if that idea doesn't come to fruition and change the way things work, that's okay.

But we don't punish that poor decision, not poor decision, the decision that didn't didn't take off, for example, because the ones that do are fabulous.

And again just look at the USA are the innovation areas in innovation, technology and the things.

And this is the other thing about our economy too.

We've got to remember, and this isn't going to change.

We are not a manufacturing economy.

We've got a small manufacturing sector and we'll never get a big one back again.

And that's fine because people in Asia, in South America, Eastern Europe to some extent produce things cheaper than we ever will, and it'd be silly if we tried to make them ourselves.

We don't have the population and we don't have the structure of our economy.

However, on services, you know, Australian financial services are fantastic.

Our superannuation industry you mentioned before.

We have got some of the best fund managers in the world who manage money for the big institutions around the world.

So the Black Rocks and the State Street and these are the people are using Australian fund managers because of their skills of managing money.

That's one thing that's great.

So okay, is that innovative, Yeah, it can be because of the economies of scale.

It's sort of well, getting to Christopher's point the other day.

People love Australia.

It's a great place to holiday.

So we guess we're a tourist destination if we can milk that for all it's worth.

Because when a foreigner comes to Australia to have a holiday, well they stay at a nice hotel, let's charge them a fortune.

They eat at our restaurants, let's make money from they buy our lovely wine around the country.

Does it?

Yeah, having tourism, in fact, it's great because it creates a whole lot of jobs across the spectrum, and in fact, many of them are quite labor intensive.

You know, well, at this stage, we don't have robots making up a room.

When you move out of your hotel room, you've still got to be a person that makes the beds and cleans and all that sort of stuff.

So our structure of economy, the point what I'm trying to say is that we are a services based economy, which is very different to the mindset that we have to have manufacturing.

And I'm still learning to overcome that because manufacturing is great.

Yeah we produce stuff and yeah you can touch it, it's made, you know.

Whereas a service, financial service so what's a financial service, what's tourism, what's sports?

Education, education, things like that, so you get the best quality.

Well again, you know diversities in the UK and in America.

You know the Harvards and the Oxford and Cambridge whatever.

Wow.

You know who doesn't think they're the best university to send your kids too, if they can humanly get in there.

If you get they're making a fortune from them, fantastic.

We've got great universities in Australia.

Let's encourage that.

For our Asian neighbors who love to come here and pay.

Because it's a safe country.

It's a sort of integrated country.

You know you're not going to get sort of stood down or stood out because you know you're not you know, of a right color or right religion or whatever.

We're pretty tolerant in relation to those sorts of things.

I mean, if I just look at one thing in particular, and you're talking about services, as I understand it, create me if I'm wrong, or tell me if i'm close.

I think something like eighty percent.

Of our GDP is services related and twenty percent is product.

But it thinks like agriculture goods production.

Doesn't that tonally straight away services make so that's where we've got to concentrate and put our efforts into more making those more services more efficient, have much more innovation and data driven outcomes around this stuff.

And have a margin on it, make money from it, and don't change for it, and don't be shy about it because you're getting this service.

Yes it's good.

So it's a little bit like holiday.

You think I've had a holiday and just say I've spent ten grand on a holiday.

I've gone somewhere with the family, We've gone to a hotel, We've spent this money.

You come back from that holiday, what have you got?

Only memories and a few photos.

So you spend ten grand on furniture and a TV and new kitchen, you've got goods to show for it.

So that experience, it's experiences.

If you like going to a concert, going to see Taylor Swift, or going to the footy, you know, getting a great seat at the football Grand Final and whatever.

They're the experiences that people who can afford it love to spend their money on.

Nowadays, they don't need another dining table, They've already got one.

They don't need, you know, the latest TV because the TV that they bought two years ago is pretty bloody good.

They don't need to buy another new car because the one they got two years ago is also really good and is going to run for another few years.

What they do need or want is to go on a holiday.

They do want to go to the footy Grand File, let's you know, they do want to go to a concert.

They do want to do those experience, a walk along the Great Ocean Road, you know, go on one of these hikes, you know, fantastic and to do them well.

And the companies that are involved in ticketing, tourism, trekking, you know, all those things are doing well.

And that's where you know, we've got to be aware of where we've got to be careful not to sort of embrace manufacturing, not being any manufacturing.

The stuff that we do do is really good, you know, manufacturing in CSL with plasma and blood and medicines and things, fantastic.

Our wine.

I think Wine's camp is manufacturing.

Not agriculture again another really good business.

You know, we export tons of this stuff and you know whatever, not against them at all, in fact, in favor of them.

If you're got to go for it, but don't discount the fact that someone having a holiday spending three hundred bucks to see Taylor Swift going to the NRL Grand Final, getting the you know, spending one thousand dollars on a lamping you know, a really nice camping trip where you stay at these nice great.

So does that mean structurally the government hasn't change its emphasis.

State governments, federal governments and maybe local governments too for that matter, have to start to change their emphasis on how they market what we've actually got to each other, to ourselves.

Yeah, and by.

The way, and how do we fix but then and then, I know this bit off the topic, but how do we fix travel costs?

Like I mean, it's cheaper to fly to Bali, yes, or my previous guest said it was cheaper to fly to Italy and stay there for three weeks, then needs to fly to Queensland or Melbourne and stay that for five nights.

Yeah, that's probably right.

Yeah, So I mean that's just how on.

Earth does that happen?

And this is something that the Assistant treasure Andrew Lee is not about competition policy.

We've had virgin quantities on air fares, we had rex that didn't make money.

Unfortunately on the Sydney Melbourne leg they're still still operating in other other legs.

I don't know how to get that competition in to be viable.

It's something where again, what's the what's the barrier to entry?

This is sort of getting into the nitty gritty of economics.

I'm sorry, but what's the barrier to entry?

So if usually if a firm is making unreasonable profits, let's call it that.

Quantits making a lot of money, which is the case.

Yeah, and arguingly they're ripping us off.

You know, by the way, it's their job to do it.

If they get with half their luck.

I'm not being critical of.

Them, because that's their obligation, legal obligations to acting this afternoon back, it's you know what I'm saying, But it's the government's obligation also to say, okay, you're doing well enough, we need to something encourage somebody else to come in and take you on.

And in fact that's on the intern and maybe this can be more demonstrated on the international leg whereas you know, it's only it's only ever going to be bloody virgin Quantits and maybe Rex or one other that might do the domestic legs, but internationally Sydney to Europe, City to America, Sydney to Asia or Melbourne, you know the big.

Cities, Asia to Australia.

Whatever, Singapore Airlines, Cathay Pacific, all of the Middle Eastern airlines, Eddie had the Emirates, Turkish Guitar, Turkish United out of the US or USA, all these people.

Yeah, there's a millionaire.

There's dozens of airlines that if we let them come in here.

The only way that Quantus could get away with charging those excessive affairs, well they couldn't because Singapore had undercut them.

Vietnam Airlines had undercut them.

You know, these other airlines would come in and undercut them if we go.

So we need structure open Slater and yeah, look Bugaret, it open so that we need competition because as you know, your brilliant market taking on the big financial institutions, you were at the forefront of embracing competition.

You saw a market failure with Wizard and other things.

Not thought this.

These buses are ripping off people.

You got on there and you've changed need interest margins on banks yep.

So, by the way, thank you for that.

And I'm not saying that to blow smoke up or anything like that.

But where there is a market and how did that happen?

And we'll go back to the reforms of the keeping years and how whatever years.

I can't really what you or this started up.

But because banks were protected before that, because of the rules and regulations about the bank, it was.

Poor candel inquiry recommendation.

And then along came Mark Broson thought here's an opportunity to undercover, so we need that in airlines.

It started off with government, though it started off with courageous decisions by Keating.

Yes, and the chemical cameral grove was nine eighty seven.

Yes, Keating brought.

It in the mid nineties.

He adopted it.

And the way you go and the banks who were lazy, I'll be blunt.

Back in the eighties the banks were lazy, laze.

They had an edge margin of three hundred bases.

They were not now, but they were.

Yeah.

But then along came you and a whole bunch of others came along because they saw what you did first.

And now the margins under two hundred bases.

And by the way, they're still making money, by the way, look at.

And making a fortune.

It's still making fortunate.

But there's an examples, by the way, and the reason why this is important it's not just because some economic theory that's a whole lot of crop.

It's we as consumers are benefiting from greater competition banks.

Now, banks are easy to dislike, but I don't.

I think banks provided an amazing serve today today, and they're so efficient and the competition you can tell me more than I can tell you.

The competition in the banking sector is it's extreme.

It's extreme, it's very intense.

And the ability So if you've got your mortgage with bank X, y Z, you think these other well they're offering twenty basis points lower ring up, they'll they'll match it, going to lose a customer, and it's good for consumers.

And that's what this when I'm banging on about, oh, we need more efficiency and productivity and cut red tape and recognize that we're a service as economy.

See, banks are a service.

They're providing a service.

They're providing an opportunity for me to buy money to buy them a house.

And by the way, how's gilded banks.

They're making a lot of money and it's a very and it's a very healthy industry.

So yes, so we'll get onto the economy now.

But like, but this is part of the economy, so so this summer they're holding.

Really they just have to that.

No one has to come up with anything of genius.

They just forgot about to say, Okay, where have governments influenced structural change such that consumers do better, we don't kill off the service provider, and and where we made.

A courageous decision.

And the best example, stirring at him right in face, is there is comes from their very own One of the greatest.

Gods of the Labor Party is Paul Keating.

Serious, No, he is.

He's bloody fantastic.

I love Paul Keeper and Keating did this courageous thing back in the nineties.

He did something else quite courageous, which is also now being attacked by the current government.

He introduced the Superinnoation Guarantee, which is like probably one of the globally recognized one of the greatest pension building superhnovation funds.

In the world.

The rest of the world wasn't look at what we do.

Now we're tinkering.

I mean, I'm not here to get political, but now we're tinkering with the superannuation and I just think it's the silliest thing that we should ever do.

I think we should be encouraging more money to go more supernovation and to be getting greater benefits out of the supernoat instead of sort.

Of putting a lid on it.

And I think we should be making those big courageous decisions about industries like transport, saying okay, you two guys making a fortune, you know, to the two big airlines for example, just for example, not trying to pick on the airlines, but we need to start to.

We're not going to affect you.

You can compete and they'll probably end up being as good as CBA is today, they'll probably make more money.

On it's not telling these airlines or even the supermarkets you remember.

The market insurance company, supermarkets.

All that stuff.

It's not telling them what to do, but it is getting rid of the impediments to a competitor to come in and say, hey, I'm going to want to cut you, so you better lift your game.

And if you don't lift your game, you're out, you know so, And of course they'll improve their service provision and as consumers we are the ones that benefit from that.

It's not the government the benefits, it's not the businesses.

In fact, on the country, they've got to lift their game if they're to succeed.

So they've got to introduce and it's even in retailing mark you know, I remember can I.

So it was really important for everybody to understand too, by the way, because you made quite a good point.

Then the banks have to improve.

So what our banks did, you know, whether you like or not, it didn't make us have branches anymore.

They closed the branches down because the cost of cost me income ratios were out of control.

But they got very innovative in relation to digital.

Yes, so you go along to CBA and CBA has got an amazing app and has got an amazing app.

My Quarrie's going.

They're all got amazing apps.

Okay, my banking is all done on this yep.

So so the point being here made is that they innovated in order to.

Compete technology technology, and so in fact, this is what is what we need to do.

I'm not a bank analyst, but this is an important point about that productivity issue.

You know, you mentioned that banks are still making lots of money.

And because they don't costs out because because you said, the cost of me doing to the bank back in the day, when I used to go into a branch feeling in the withdrawal form, give it to a teller, they tipe it in that give me a hundred bucks to.

You lined up.

Whatever the cost of providing me that hundred dollars that I then spend on the weekend, whatever was a fortune.

Nowadays I can get it one hundred dollars click click, click, click click.

It costs them a microcent and a faster human, fast and more convenient.

But the fact that there are literally bitings of these transactions going on every year means they still make money.

But the efficiency is so powerful, the productivity is powerful.

And again I'll say it again, Look at the bank share prices.

They're still paying different ends.

Look at their p and L.

I don't remember CBA floated at six bucks.

It's no in nineteen ninety and nineteen ninety nine.

Yep, fix bucks.

Imagine if you're still holding it.

But that's been good for everybody.

Good for CBA shareholders, good for consumers, good for pranuation holds, good for good for superannuation who have reinvested.

So my point is, our point is government, if you're listening, don't be afraid to make the big cause of cuping made because someone's putting pressure on you from.

Whoever it is, whichever entity that is just still relying on the old school team because if the old school.

System, because if you had never done that against the banks, we probably wouldn't have the innovation we have today.

And you still be lining up a bank branch because the banks never felt would never have felt any competition, never felt compelled then to change what they were doing because it's all working.

And we'd be still lining up at the teller with the filling a little pink format as you remember, and.

Ucks and doing a hundred bucks.

And again this is the other thing that's extremes happened.

It's true.

That's it's a nice way of explaining it, I think for our listeners here because it does show.

And even to the airlines, we'll go back to then for just one second.

You know, nowadays you get your boarding pass on your phone.

You know, you don't click in and you check yourself in and all these other things.

There are few people at the airports, which is fine, but that automation is something that the airlines have embraced your card so they don't have to print out these boarding passes that cost a fortune and all these other things.

So the efficiency is very very good.

I mentioned retailing before price gouging, so did the extent that we and I don't think the big supermarkets are price gouging because you know, people do shop around.

So there's Coals and Woolies and Aldi and the IgA stores, and we want more competition there.

But at the end of the day, you know, the share price of Allworths and Coals is where it was five years ago.

They're not price gouging.

If they were making money, their share price would be booming.

It's not.

And so there's one example where perhaps they've taken a what was what do we call it a political easy target because everyone goes to the supermarket.

Oh, the price of my potatoes has gone up, the price of my washing powder has gone up, and all the sudden people can see it.

That's fine.

We did have high inflation, as we've discussed, we did have high inflation.

It did hurt.

It was the consumer crunch that occurred, but that wasn't because they were ripping people off.

That was because the price of buying that stuff input went up.

Supply chain problems, Yeah, cost of transportation was a problem anyway, that's.

Just my WI should get straight to our board.

Yes, definitely, we've got a lot to talk about, Mark, because the economy is rolling on still pretty slowly.

Right Cookie, now we're at the we're at the sharp end.

Mate, right now is on the left hand side as I look at it, So it's all on the tightening side.

So you've got your categories.

So what are we going to do?

So RBA meets next week.

They have something this This is the boris the coolest version of the RBA board meeting, and they look at the components of the economy to see what's hot and what's.

Not just before we do, so we don't undersell the RBA.

And I think it's important because we're being a bit cute with this, but sort of they're doing this, but they have I think they're models called Martin, Yes, and and they.

Have they model like this is modeling, but we're just doing in a physical sense, but they do it in a much more data driven sense.

We should just mention to everybody.

They just don't sit around you know, having a cup of Team Lamington's and throw things around.

They actually are very technically biased, very data driven biased.

And it is and is not just what is the most recent data, it's extrapolating forward extrapolating backwards sensitivity analysis.

They're saying, well, what if this, what if that?

What if this?

What that?

Therefore what it looks like?

So as much, maybe you just give.

Me a mark thank you for saying that.

Because the bank has well I think it's about four hundred economists working for them.

All of them are smart.

To get a job at the RBA, you've got to be mighty good economics.

Yeah, and mathematics and model building.

Correct And so they're models, which I think is the RBA governor and governors in historically and other RBA fishers said they're the starting point of their deliberate They have the models to look at the correlations between GDP and inflation, what's happening in the world and inflation, commodity prices, all of the interlinkages and even half of the stuff that we've just been talking about.

And if we do this could happen, if we press.

On this button, what happens over here, And that's what they do as the starting point, and that churns out, I suppose is the word their recommendation unofficial forecasts and their recommendations.

Then the the Monetary Policy Board sits around the table and looks at these numbers.

And then also here's the contribution.

Because the other thing that the RBA do, which is not model driven, they've got a business liaison program.

So in each of the capital cities and regions, they go around, how's business, what are you doing?

And they categorize on construction and retail and it and whatever whatever they are finding.

They're aware of all the bankruptcies.

Oh indeed they are, and they ask people what are you hearing?

Because again what you're hearing today will not be in the data for another couple of months.

So they're getting some real time.

So they get some real time stuff that feed into the whole decision.

And therefore we're going to cut rates or hold them steady or put them up.

But the modeling is the I don't know, the backdrop and the support for what they do, yep, and so that.

But they have all of.

These components effectively, that and a whole more.

Yes, it's effectively this sort of stuff this is why the now they back in the back in the day, they used to have a monetary policy checklist.

Yeah, they then got rid of it because it was too formulaic, if that's the right word, and they instead relied on the modeling.

That's when, oh gosh, I think it was even Ian McFarland as governor.

I'm going back that far, and then Glenn Stevens.

They sort of maybe twenty odd years.

They've always had models, but then they sort of changed their approach and got rid of the checklist and decided to adjust policy and assess monetary policy from arranged.

But this is still this is still relevant and from my perspective, I'm not as smart as the people at the RBA.

I need something like this to under stand what is happening in the economy and where the pressures are.

Because each of these things is sensitive to interest rates.

It is a hard data.

We do the data on GDP, inflation, labor market, so we can sort of see compared with what we're used to.

This is this historical thing as well as throwing forward, are we underperforming and if we're underperforming, we need more rate cuts.

If we're outperforming, if we're booming.

We need rate hikes, the simple as.

That, And it does go back to the simplicity of keeping us between two and three percent.

Correct and full employment, and between two and three percent correct.

Full employment as measure by unemployment.

Which is very hard to get a hard measure.

But anyway, we've got our checks.

I'm sure it was important to say that, because no, I don't want anyone the thinks we're undermining the RBAU don't.

No, no, no.

And while we can debate their decisions, did they they've been too slow, too much, too little, too late, whatever to whatever, this is sort of like a if the RBA were ever to look at this, this exact board here, I think it'd fit they sort of say, yeah, that's actually not a bad way of explaining.

Yeah, yeah, particularly for the point of view of our podcast, that is.

And for people to understand.

In fact, Michelle Bollocks, in her term, which has been there almost two years.

Now coming up in the September, ye yeah wow.

She has been very very good and trying very very hard to make the RBA output understandable to the punters.

And that's not being patronizing, because back in the day, you look at this sort of stuff, and god, that's highly complex, and it's complex to you and me.

Know, no wonder people can't understand what the Reserve Bank did.

So she's trying to make it easy.

So this is what we're trying to do too.

We're trying to help their rather than hinder them.

Okay, so going through our checklist here GDP growth as we said, point two percent for the quarter one point three, I'd be cutting rates unambiguously.

Inflation Now, the Bureau of Statistics produced the monthly reading, which is a subset of the quarterly result.

We do have the monthly reading up to May.

In a few weeks time we get the dune quarter end of dual number, which is what about three weeks four weeks away, But we already know that headline inflation is two point one, near the bottom of the band.

The trimmed mean in the main numbers two point.

Four, best we've ever seen, best we've had.

For a long time.

I cut rates because inflation is under control.

It's yesterday's problem.

Labor market.

I'm putting in neutral because, as we discussed, we've got a four point one unemployment rate.

That's pretty good compared with the last fifty years of history.

There's some pretty good, bloody good.

Bloody good and there are still some anecdotes and anecdotes and some hard evidence from the NAB survey of labor shortages in some areas.

So the labor market is tight in some areas.

So we mentioned it.

In building and construction.

If I want to find some tradees to fast track the construction of this dwelling, I can't find them.

I can't find enough of them at the right price.

Yeah, So, Lady Marcus Chentral wages neutral as well.

They're running at about three point four percent.

We know that for a given product.

This is where it gets a bit messy, and I don't mean to be messy on the on the podcast.

But if we get wages at about between three and three and a half percent annual increase, that's good.

That's consistent we see inflation rate.

We're at three point four.

We weren't three point two the quarter before that.

So at three to three and a half you will take We don't get the next wage number till the middle of August, so we've got that'll be really interesting number.

By the way, in national economy, I'm putting between neutral and easy We've got the Trump BBB legislation just went through at the time of our recording.

Basically, that's a stimulatory measure for the economy, and we know that Trump is sort of bagging power.

Aren't you cutting more?

Well, Pal's actually a little bit worried that this is stimulating the US economy.

We had the non fine payrolls last night.

They were good.

Unemployment back to four point one.

China is still weak.

Having said all that, Europe's muddling.

UK is in trouble.

The world economy is weak, but not catastrophically so, and most central banks are still cutting, although they're coming towards the end of the cutting cycles.

That's why I'm neutral to slide easy.

I still think the Fed's got a few rate cuts to come, regardless of mister Trump, but it's on the easing side.

House prices starting to pick up again, the rate cuts.

Oh look, the house prices are starting to pick up again because there's a shortage of housing.

We're not building enough.

Immigration is still strong, and that's why house prices going back.

Up, not because of interest rates, not because of affordability.

So if affordability is well, if affordability was a problem, surely house prices would fall, don't they.

That's my rhetorical question to you.

But but I mean rate As rates reduce houses, it become more affordable.

Oh, yes, it does.

The way that I'll spend two minutes on this because I heard Chris joining you, Chris Joy, and he was adamant about it, and good on you, Chris.

I don't think house prices are driven by interest rates.

And what I'll do is, I'll take a step back.

If interest rates are unchanged, house prices are increased by about five percent per year, right, the cost of building, all that sort of stuff.

When we've had rate I'll look at from the spective of rate hikes.

Well, just in the recent ex cycle from two thousand and two to the end of two thousand and four, we had four hundred and twenty five points of rate high house went up, Frozen went up.

In Perth, I went up thirty seven percent.

Why didn't interstrates work in Perth?

I went back to two thousand and two to two thousand and eight.

We had a whole lot of rate hikes in that boom.

We had a mining boom and rates went up.

What happened the house prices in Melbourne and Sydney up eighty eight zero percent.

Rates are going up.

What happened?

Shortage cost of building these sorts of thing.

So it's it's just a basic of supplying demand.

Supply and demand and the cost of construction.

But what drives demand, What.

Drives demand, people hold format.

People to do.

But what drives the demand within a person.

It come where they've got a job.

Labor market's important for the for the the reason why the host price is going up now because the labor market's relatively tight.

As we said just a moment ago to you.

And I agree on most things, but on this one we agree to just.

Okay, we'll agree to disagree.

I'm writing a mark, I'm writing a paper on that note.

I'd love you to comment on it.

No, I definitely will, because we're going to publish it.

I don't know.

I'm writing it first and then I'm going to have a chat to a few people about what you want to put it.

It's going to be I don't know if you read Allen Coleer's piece in the monthly quarter whatever that whatever.

That quarterly essay is that he wrote about a year ago on why house pricings unafford It was actually quite a good read.

It was like twenty five thousand words.

It was a mini mini book, really interesting.

I'm not sure whether I agree with all of his stuff with a housing debate.

It's just a typical of economist and it's healthy to disagree economic science.

You know, rarely do scientists ever agree on anything.

But that's the point, is the one that we've done, and that's the whole point.

And that's what it's so complex to fix it.

Yeah, because if we can't self excluded, if smart people can't work out what the problem is, how do you fix something that you don't know what the problems?

I agree, And if housing affordability is an issue, and I think that is an issue, that's what I do.

We all agree, Yeah, I affordability is an issue and to young people and rental and all this sort of stuff.

You know, we'll talk about that.

I'll show your draft of my look.

Retail sales weak as water consumers, consumers aren't hunkering down.

Consumer sentiment it's picked up a bit, but it's still well below neutral.

So there are more pessimists and optimists.

So I'd be cutting rates on the back of that building approvals.

I'm going to put that in the negative side.

We've had a dip back in building approvals in the last three to four months.

We're not building enough.

And while red tape regulation those sort of things that are constrained on new construction, so are interest rates.

Our interstrates will help our business building building numbers pick up business investment.

Putting that between utually, it's not catastrophic, but it's you know, as we were saying, we want cap X to improve our product heat.

One way we're going to get that productivity better is if businesses, the private sector, as the Prime Minister said, invest in machinery, equipment and people so that they produce things more efficient.

And by the way, just on that, I mean, if I could just interject, I would like to see the government invest more money in making the employees that they put on in the various parts of governments to be much more efficient too.

So I think capital investment another that it's called business investment, called a capital investment by government instead of you're saying, oh, we've got all these things have got to fix, let's just put more people on and who just end up working more hours, therefore becoming less productive.

To have the same outcome.

I would like to see much more capital investment by government in making sure that the people they employ are much more efficient.

Transfer to driverless trains, So let's.

Not just try and solve everything by people.

Let's just try and have some combination.

Is there a way that we can fix it with capital investment?

Employing another hundred people on this job.

I know it's outside of business investment.

I'm doing about capital investment generally.

It's very very relevant.

We need it across all sectors, all sectors private public, and then retail, finance, tourism, everything, export, industry, mining, everything.

Because when I heard the promise to say that he wants businesses to take a greater role in our recovery at the moment or our growth at the moment.

I thought of himself, Yeah, but you're out there.

Employing, you're you're the biggest employee, had been the biggest growth and employment in this country for a couple of years.

What have you done in terms of capital investment to make it your more efficient set of trust trying to put more people.

Out on it.

And it even relates to some of the very big ticket items that we've got in our budget.

For the next ten years.

Defense and things.

It's not necessarily necessarily just building building submarines and missiles.

And I'm not a defense expert by any means.

I reckon that our biggest three is some sort of cyber attack.

It'll be It won't be they drop a bomb in Sydney Harbor or anything like that.

It'll be a cyber attack on our banking, on our technology.

Yes, it'll be something like those lines.

That will be very painful anyway, So that's what we should be spending out defense money on putting up barrists up.

But that's another issue.

Business confidence pretty ordinary, not catastrophic again, but erring on the side of easing global commodity prices, they're actually doing okay.

You know, so iron ore is still close to one hundred US dollars a ton.

Oil is very volatile, but all the geopolitical issues there.

But we don't have a commodity's boom or a bus.

So that's jenip terms.

Its commodity prices are not doing anything.

Stock market, well, we don't record highs.

I'll just put that in neutral but maybe slightly there.

But you don't hike industrates as your stock market's doing well, well, if it's doing well because of low costs and the right and the rest that's right and current straits we said they're restrictive, so to get to neutral, we need to cut them to get to neutral.

So we've got the red dots are overwhelmingly on the easing side or neutral side.

There's almost nothing, but there's nothing in the tightening side.

So when I see this compared to previous periods, yep.

I think one of the things that our watchers and listeners need to understand or maybe take from this, maybe or if they could take from this, is that when the majority of stuff isn't easy, or at least it's half an easing and half a neutral, they've got to look at that in the backdrop of where interest rates are currently and currently interest rates right now restricted.

So if you have a restrictive interest rates, but everything else, even if everything else is in neutral, you would still maybe think maybe we should have read.

Wish Why I'm on this is what I'm saying.

I don't think it's the fifty basis points.

That won't happen, but it won't happen because they do too.

They do one enjoy in August.

Yes, they've got another one in August.

At the end of August, I think it is in another one, and.

They'll have data coming out of July.

Correct, they'll have that very important CPI, the inflation number at the end of July.

And then we've got, of course, every monthly labor force number is really important for their deliberations.

And as you see, labor market's okay good at the moment, it's very very good.

So yes, that sort of goes into the rate cutting, So cut twenty five.

It's one of those ones.

What they say, We've had this cliche many times before.

It's what they say, is this is important.

Is what they do in the language the governor.

She'll give her press conference an hour after the decision is announced to the public.

They'll be sort of three or forty very eager journalists there to ask her and grilla questions, as they should.

And she's done a brilliant job, frankly, in how she handles the journalists.

And she's very honest and I think she's a breath of fresh air and how central banking should be functioning.

And again, it's not to say that we all agree with everything she says or doesn't say.

Or whatever.

It's at least transparent.

The RBA's deliberations are transmits.

Well, actually, I don't think that that's right, but I can understand where you're coming from, and I think that's a really important part of RBA operations right now.

So what she says, will she signal, Well, here's twenty five and if we get that low CPI low inflation number at the end of July, if the next couple of employment numbers between now in our next meeting shine employment at four point three ish percent, yeah, we'll probably go again.

And if they don't, will then pause, I reckon you say that.

Shouts said.

In those words, she will say that we continually on the outlook for information that confirms the inflations at the bottom half of our target reserve bank speak, which I haven't learnt to do.

Yeah, but I but I think that where we are right now, I think we should sort of enjoy the moment because you know, we've been through a lot of interest rate increases.

We are in pretty good terartory, I.

Think, data wise, for seeing interest rates come down, and maybe you could just reflect quickly on what the money markets are saying.

You have the best information.

Money markets who trade every day on these sort of things.

We've got the money market pricing in about another one hundred points of rate cuts between now in the middle of twenty twenty six, so over the next twelve months roughly, we've got an official cash rate currently three point eight five priced into two point eight five, no lower.

So we're not going back to where we're during the pandemic, no way, but we're getting sort of this range now that if we do see these three or four more rate cuts between now and this time next year, that's seventy five one hundred points off mortgage rates, and then that'll be enough to breathe a sigh of relief.

People will feel a bit of a relief.

And you know, when we do have those rate cuts coming through, I'm sure retail spinning will pick up, consumer confidence will pick up, the builders will say, I can afford to build this property.

Now, get some of these red dots not moving towards a rate high, but moving to neutral, which is sort of the the goldilocks where we want to be.

The Reserve Bank know that, and we also need to see too, just by the bye, what the actual government delivers in terms of its reform agenda.

And then finally, Kookie, just one one wrap to the government.

I don't give them any, but I'll give him one if they can.

And that's not the government, by the ways, the RBA is doing it and us consumers.

But if the government, under this government's leadership, if the RBA can land us, you know, consistently, you know, closer to and a half percent inflation and unemployment number four point one, they've done a bloody good job.

If we can, If we are here in a year's time and we're roughly two and a half inflation, roughly four to four and a quarter, you know, without being the decimal point low fours, let's call it, that'll be a great outcome for unemployment to it run employment rate four point one, four point two, four point zero unemployment rates.

And if we've had three rate reduction.

Half we've had the rate cuts.

GDP's two and a half, two and three quarter percent.

So we've got a bit of business investment coming back up because the private sector is spending, spending on capex and those sort of things.

Retail sales have picked up a bit because we consume as a whole breathing a side of relief on the rate cuts.

That will actually be pretty bloody good.

We'll have a really good conversation if that happens.

Maybe one year ago, I think about a year ago, you and I threw up the proposition that it's all going to be even threes, so I remember that.

Yes, three through three.

So it'd be really interesting if that we're going to get around that territory, because you know, then we are really the lucky country.

I'm going to sure inflation has gone back good, some prices.

Haven't really gone reduced, but still we haven't had massive increases.

I mean right now, we are not feeling the benefits of low inflation yet because it takes well to fee because our incomes and we going to sort of catch up to that cost of living increase.

We had heavy cost living increase.

You had your in twenty twenty one, twenty two, and twenty three, and probably a little bit of twenty four.

So we haven't felt that yet.

But in a low inflation.

And I say this to listeners to give them some confidence and hope, we haven't really endured a low inflation rate period yet.

So you been a couple of months, yeah, a couple of months literally, and a low interest rate period yet.

Only really just started.

You know.

The first cup was in February, which.

Is we'll get it there.

We'll get there in May.

And again, Mark, we've had this conversation to an economy doesn't turn around in months.

A year.

Yeah, and so what you do today, the Reserve Bank or the government whatever, does not impact on these dots for about a year.

And the good thing about this though we started two years ago, Mate, we're around the other way.

We're looking at rate rises to bring everything into neutral from tightening.

Because we had high inflation, we had three point four unmployment, we had wages growth it was four and a half percent.

The international economy was booming.

House prices are going twenty percent.

Yea, all of the almost all of these got through in the tightening camp.

And on behold the RBA titan.

Yep, they did.

But in a funny way.

You know, this is the thing.

Yes, I've been critical of the RBA.

But if we're here in a year's time and we do have two and a half inflation, yeah, plus and minus a few tenths, the labor market is at full employment and growth happening, I'll eat some humble pie.

Same here, and I will say right now, I feel quite confident.

I feel quite confident that I'll definitely give the RBA a wrap.

Oh yeah, they took some courageous yep, but they did say some greateous moves.

Oh that some of those last couple of great hikes in twenty three towards the middle country of the exact dates.

Now thought, oh my god, what do they do?

And you're not critical, by the way, weber rate right November, we were critical, didn't it happen?

But that was one of the early ones of Michelle Bullocker's gardner.

I think she just wanted to this is not a critician.

She wanted to impose her you know, stamp on, I'm a tough inflation fighter.

And well maybe maybe she was right.

Well, time will tell them, but I have to I did my hat to them now right now.

So because we're in a good, good position, So mate, twenty five base points on, I think a July, July and the next and then everyone should be looking out for the data comes out at the end of July, really important CPI data that'll be we'll get you know, the quarterly and we'll get the yearly for June and you know, we're hoping it's going to be the same territory it's currently sitting.

And I don't see ay reason why shouldn't be, to be frank with you, unless something crazy happens, if we haven't been expecting, and then we'll see in the next meeting of that I think is the eighteen of the August.

It's late August.

Yes, I don't have the dates in front ofly, but middle to late August it might be.

Yes, I've got a FEU in August, but that it is because we've got.

The wages numbers coming out then about the same time.

So we got yes, two board rb A board meetings in the next six weeks, and I would expect, and I think you would agreed with me too, rate reductions of reduction each one.

If I was a betting person, that's I have my money, and that's sort of as we're saying, largely, not completely, but largely priced into the capital market.

Credit mate, good to see Coogie's mark.

Well done, mad, and I'll be sending a copy of this to joy Boy.

Thanks mate.

We should have a chat getting in here.

It's hard to get in hard.

He was always around in Miami or wherever he's got officer around the world now.

But like it was enough getting him him just for that.

But like if you can get in, I'll crawl over broken the last.

To get him to the opposite each other.

You can be you can be.

The I'll be the media judge mate th skoi

Yahm