Michael Janda

Who knows what it will be by the end of trade today?

We do know the energy sector leading gains.

As you say, it's not just the consumer effects and the practical effects that are pushing down share prices in some other sectors on this conflict.

It's also the inflationary effect and the fear that interest rates will have to rise as they have done in Australia.

but haven't done yet in Europe or the US or other countries as a result of the inflation spike from this supply shock.

Now, if that happens, that undermines the value of a lot of companies, particularly in the tech sector.

And that's actually the biggest reason that we've seen tech hit quite hard

by the sell-offs around these conflict concerns because the higher interest rates rise, you need a bigger return, particularly on much more speculative investments like tech companies that don't yet make a profit but you hope will do in 10 years' time.

Yeah, well, interest rates are reflective of the time value of money and also risk.

And if I can get 5% or 6% for parking my cash in a safe bond now, maybe I'll take that over the potential for 10% or 15% in five years' time if I invest in a tech startup.

Yeah, so the CBA late last year hired someone called Madison Cartwright, who's their senior geo-economist, i.e.

geopolitics and economics put together.

The fact that Australia's biggest bank now feels it needs a geo-economics department and to bring people in to strengthen their understanding of the global political economy is

and how that's shaping the domestic economy tells you something, which is these events half a world away in the Middle East are directly affecting what will happen in Australia's economy.

CBA is obviously particularly concerned in what will happen with interest rates in Australia, and that is directly linked to what's going on in the Middle East because it's linked to inflation, which at the moment is being primarily driven by this energy shock and price increase.

Yeah, and the context here too, Carrington, central banks are still scarred by the experience of COVID and then the Russia invasion of Ukraine.

where for a long time, many months, major central banks here in the US, in Europe, described inflation from that supply shock as transitory.

Turned out it wasn't, and they had to massively increase interest rates.

Exactly.

It was a very, very long transit and required a lot of interest rate increases to get it back under control.