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Chapter 1: What is the main topic discussed in this episode?
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The RBA's decision to leave rates on hold might have triggered a collective sigh of relief from Australia's mortgage holders, but there was a clear warning from the governor that the board stands ready to hike further if necessary. And after months of negotiation, media giant ARN, well, not such a giant anymore, has reached a settlement with its former radio star, Kyle Sandlins.
Kyle gets a pretty nice multi-million dollar golden parachute and But could the deal mean he's soon a competitor with a company that helped make him a very wealthy man? Welcome to ABC Business Daily. I'm Carrington Clark.
And I'm the ABC's Chief Business Correspondent, Ian Verrinder.
Ian, yesterday when I was talking to Michael, we were sitting here in the room in the ABC office in Ultimo. You were on your way down to the RBA, although you just got there in the nick of time, to hear straight from Michelle Bullock, the Governor, about why the Board had decided to keep rates on hold.
I thought watching her press conference that it was pretty consistent with what the statement was, but she really was emphasising, including in an answer to you, that the fight against inflation remains the major battle that they think they need to fight and they're not as concerned with that surprising increase in the unemployment rate that we recently saw.
Yeah, look, you know, the Reserve Bank is always on message. Philip Lowe was always on message. Until he wasn't. Well, he was on message. He was saying he was very consistent, you know, with what he was saying, but he took consistency to an extreme level well beyond where it should have been.
And, I mean, look, interestingly, Michelle Bullock made reference to that yesterday where she said, you know, we didn't act fast enough when... Russia invaded Ukraine and inflation started to really boil up. And we sat there and we watched it and we waited for the numbers to come through. And by that stage, it was too late to act.
And so that was a pretty insightful admission, I think, from her perspective. But what she's saying is clearly that inflation is still the major thing that they're focusing on. They're not yet looking at the effects of growth and downturn in growth and what impact that might have on unemployment. But she said they're always mindful of unemployment.
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Chapter 2: What does the RBA's decision to hold rates mean for mortgage holders?
We're going to get rate cuts pretty soon. Let's go out and spend. So it's the messaging that is, do not even think that we're taking our foot off the brakes at this stage because we're not. And if inflation continues to become a problem, we'll have no hesitation in raising it. But it's the kind of language you do expect in a way.
when you don't really think you're going to be, you know, putting rates up again. Because, I mean, there are two weapons that you can use, only two, as the Reserve Bank governor. Now, they always say there's only one, and that's interest rates, the blunt tool. But there's also another weapon, and that's the jawbone. And you just, you know, it's like the parent dealing with a sullen child.
You know, it's the threat. Just wait till your father comes home, you know. Yes. So, you know, the message is loud and clear.
Chapter 3: What led to the settlement between ARN Media and Kyle Sandilands?
Don't even think about starting to spend just yet.
Yeah, I always feel a bit sorry for Philip Lowe when it comes to how he's now remembered because, unfortunately, despite, you know, so much long distinguished service in the Reserve Bank, what people remember him for is that – They feel he gave them a dud steer when it came to interest rates, that he indicated that he thought interest rates were going to be on hold.
They wouldn't be raised anytime soon. Now, he actually put a lot of disclaimers around that statement, but it was more forthright than most comms advisors would have wanted him to be. But unfortunately, that is the thing that he is now remembered for. And I think the Reserve Bank has learnt a lesson from that.
And unfortunately, it means that they're sometimes less willing to engage in predictions about where things are heading.
But on that too, they didn't just, you know, it wasn't just talking about interest rates and the way, you know, the Reserve Bank makes decisions to put rates up or lower them.
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Chapter 4: How much is Kyle Sandilands receiving in his settlement?
They actually put the Reserve Bank balance sheet on the line there because they went out and bought two-year government bonds in an attempt to basically muscle interest rates into that low position for a couple of years. And that's why he was fairly confidently saying that rates aren't going to rise. But unfortunately, the Reserve Bank is just...
player in a market, in a much bigger market than most people realize. And that if the market turns against you, even if you're the reserve bank, you end up paying the price for that.
Chapter 5: Could Kyle Sandilands become a competitor to ARN Media?
And that's what happened with the RBA back then.
So the language that Michelle Bullock used yesterday, when she was talking about how they are going to be guided by the data, I thought was interesting. She said, And you've referred to this, if you wait until you see it, it might be too late. Now, that is interesting.
And so she's saying they got it wrong the other time around because they think they were too slow to act in hiking the first time around and then perhaps – That was the lesson they'd had learnt last year, which is why we saw three rate cuts. But actually, perhaps they did go too quickly on that particular occasion. So now it's this question of when do you move?
Do you wait until inflation is down into the target range, which according to the Reserve Bank forecast, is not until mid-2028. It's a long time into the future, and obviously things can change, as we know, based on how much volatility there has been particularly over the last year. Or do you think that they will act before that because they will be going based on what the trend shows them?
Look, I think if you look back to what happened last year with those three rate cuts, you know, let's put it into a bit of context here. Inflation had jumped to what, was it 7.8% or 7.3%? I think that's right, almost hitting 8%, yeah. It was right up there. And we had 13 rate hikes, some of them double hikes. right? And then inflation then dropped down to inside the target zone.
And all of those rate hikes were still kept in place. Now, if you've got your foot on the brake to that extent, right, when inflation is really starting to come right off the boil, I think it'd be completely irresponsible not to cut rates in that situation. And so I don't think they did the wrong thing at all.
There's been a lot of criticism of the Reserve Bank for, you know, they should never have cut rates. Well, I think they should have because, you know, The idea is to have a balance to make sure that the economy maintains growth.
Even though we then subsequently saw inflation rearing its ugly head at the end of last year, you don't think the Reserve Bank's actions going with the three cuts made that situation worse? Should they have done one or should they have waited longer? What do you think?
Possibly they could have waited a bit longer, you know, and maybe not the three, maybe two and just sit there and wait and see. But I mean, look, hindsight's a wonderful thing, isn't it? And it's not a precise science.
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Chapter 6: What warnings did RBA governor Michelle Bullock give about future rate hikes?
inflation and why they think it is the most damaging, one of the most damaging things that can happen to an economy and that it actually does hurt the most vulnerable more than anyone else. And so that's why they're fixated, even though obviously people who have mortgages think, why are you imposing this pain on us right when we're already facing higher prices?
But they know how damaging this is historically. And so that's why they're trying to to deal with it while not running the economy into a recession. Again, the question was asked of Michelle Bullock, is that basically a cost you're willing to wear? And she kind of skirted around it. She said, that's not our intention, but we need to, and she said, other...
Central banks around the world have done that. They've hiked rates so quickly that- New Zealand, are you listening? Right, exactly. But she's saying that's not what we're trying to do here. We're trying to adjust more incrementally so that we can hopefully have a situation where unemployment isn't rising too quickly, but inflation is coming under control. But that is difficult.
Chapter 7: What challenges does ARN Media face in the current advertising landscape?
And one of the things I thought was interesting, Lucy Ellis, who's the chief economist at Westpac, she's a former- Reserve Bank Assistant Governor. She said, at the moment, the Reserve Bank has a pretty pessimistic view of the Australian economy.
Chapter 8: How has the public perception of Kyle Sandilands and Jackie O affected ARN Media?
They really don't think the economy can be growing at much more than 2% without hitting constraints, which cause inflation to rise. The last GDP numbers indicate that we're running slightly above that. And so that's one of the concerns.
On an annual basis. On an annual basis.
It's slowed down substantially.
And I think if you look at each of the quarter growth figures that's coming off, you know, on each quarter, that annual growth is coming down. So in our quarterly growth was 0.3%, which is pretty dire, really. And if it wasn't for the, you know, huge amount of money being put into data centers, we would have been really,
Absolutely. One of the things I thought she said that was interesting is that we have seen an impact in confidence, not just because of the rate hikes, but also what's happening globally. But she said there hasn't been a material impact on spending or an investment.
Now, as you say, most of that investment seems to be about data centers, which don't seem to be particularly sensitive to interest rates. And she points out that the three rate hikes the Reserve Bank has imposed are haven't washed through completely through the economy.
Oh, no way.
And not even getting close.
I mean, if you look at your bank statement, right, if you've got a mortgage, the last rate hike, your bank is probably only just scheduled to put it in in a few weeks to come. So it hasn't even hit your... you know, hasn't even hit your wallet just yet. And the other way, look, it takes about a year for the full effect of an interest rate movement to wash right through the economy.
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