The RBA's Hat-Trick
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Hello, I'm Alan Kohler, editor-at-large of Intelligent Investor and finance presenter and columnist for the ABC.
And I'm Stephen Mayne, contributor at Intelligent Investor, founder of Crikey and shareholder activist. And we are the Money Cafe, Alan.
What are the implications of the RBA's latest rate hike?
It's all happening. Goodness me, where do we start today? So I guess interest rates maybe three months in a row.
That's right. Well, three meetings in a row at least. That's right. And the market's predicting another one in August.
Yes.
and probably another one by the end of the year, so possibly two more. Certainly Lucy Ellis, the Chief Economist at Westpac, thinks there'll be two more from here. And the RBA is predicting a slowdown, not a recession, but a slowdown from 1.8% growth to 1.3% growth this but surprisingly not an increase in unemployment for this year at least. Next year and the year after it's predicting unemployment will sort of rise gradually, but nothing too drastic.
So they're basically saying we can jack up interest rates without smashing the jobs market.
That's what they believe.
That's the calculation, isn't it? Yeah.
So, yeah, I mean, look, I think obviously the jobs market and the world economy and the Australian economy in general is in the hands of what's going on in Iran, which we'll get onto in a minute. A bit of a focus this morning on what Michelle Bullock said about the government in the budget basically warning, I mean, in central banker words, warning them not to splash cash too much in the budget next week. because that'll just make their job harder and, you know, possibly lead to more interest rate hikes, although she didn't specify that.
Did you take that seriously? Like, I saw, you know, the headlines went with that. It's not really going to move the dial, is it, particularly? I mean, I know there's a structural deficit of $35 billion, so, yes, the Feds are stimulating to the tune of $35 billion, so they should be reducing that. Maybe all these tax grabs that are proposed... give charmers cover for the tax grabs or michelle bullock said stop overstimulating so we've taken some more money out of the economy with all these tax grabs that we promised we wouldn't do before the last election yeah i mean look i mean there's clearly a a um a problem in the in the sense that
The, you know, the effort of governments and politicians is to offset the cost of living problems that their voters have in order to get their votes and the Reserve Bank is trying to cause more cost of living problems in order to get inflation down. So, you know, they're fundamentally in conflict. And, you know, the question is what actually takes place. I don't know. I mean... The government doesn't sound like it's going to do a lot of cash splashing, but maybe they will.
I think it's going to be more cash grabbing, isn't it? I mean, they're going to break their promise on capital gains tax trusts and negative gearing. Is that a promise? Was that a promise at the last election? Well, Alan, I think this is going to become known as the Cairns Declaration. So there's a News Corp journo, James O'Doherty, And he was in Cairns on April the 9th last year and he hit Albo directly with, can you promise there'll be no changes to CGT or negative gearing? And his comment was very dismissive. Yes, how hard is it for the 50th time? Unquote. So I predict if they do have a brain fade and breach the public trust that that Cairns declaration will join the Gillard, there will be no carbon tax under a government I lead and Abbott's election eve, no cuts to the ABC, no cuts to SBS, no cuts to anyone.
So I'm just surprised that they're going to be so blatant about it, given that they got a lesson in 2019 and promised they wouldn't do it.
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