0:06

The Reserve Bank ups its inflation forecast

0:08

and interest rates are set to stay

0:10

on hold for the foreseeable future. ANZ

0:13

joins the buyback club. And

0:16

Donald Trump threatened with jail at his hush

0:18

money trial. Welcome to Fear and Grie, Daily

0:20

Business News, people who make their own decisions.

0:22

It is Wednesday 8th May 2024. I'm

0:25

Michael Thompson and good morning Sean

0:28

Aylmer. Good morning, Michael. Sean,

0:31

you've got a great interview coming up

0:33

after the show today. You're speaking with

0:35

Westpac's chief economist Lucy Ellis. Yes.

0:37

So Lucy was an assistant governor at

0:40

the Reserve Bank until late last year.

0:42

She was responsible for the economic forecasting

0:44

from the Central Bank. So

0:47

a great person to talk to

0:49

about interest rates and what happened

0:51

yesterday. And we also

0:53

talked about how the Reserve Bank runs and the

0:55

changes that have been made, whether she misses it.

0:58

It's a really interesting, I suppose,

1:00

insight into what happens at

1:02

the Reserve Bank. We also do discuss the

1:04

fact that when I started as a graduate

1:07

at the Reserve Bank, Lucy and I sat

1:09

next to each other. She was a graduate at the same

1:11

time. She went on to become a very, very successful economist.

1:14

I end up with you, Michael, on Fear and Grie.

1:18

I just had a feeling that was coming just then,

1:20

Sean. But look,

1:22

you know what? It really is a great

1:24

interview. And her comments

1:26

on the economy are fascinating, but it

1:29

is really, really interesting to hear her

1:31

insight into the Reserve Bank and the

1:33

way that the Reserve Bank has changed

1:35

because of

1:38

all the changes that were made over the last, say,

1:40

six months or so. It is a really interesting perspective.

1:42

It's a great chat. It's coming up after the show.

1:44

And of course, today is Wednesday. So a quick mention

1:47

of the fact that our newsletter, our weekly

1:49

newsletter comes out a little later this

1:51

morning. Good morning that it

1:53

comes out. Head to fearandgrie.com.au if you

1:55

haven't already and sign up. Pop your

1:57

email address in and you will receive a free email. the

2:00

newsletter when that's, once

2:02

you've finished writing it Sean. That's

2:05

right. We need to get the show over and

2:07

done with so they can then go and write

2:09

the newsletter. Yeah that's right. Anyway, the main story

2:11

this morning, the Reserve Bank Board yesterday left the

2:14

benchmark cash rates at 4.35% and

2:16

it also sharply revised upwards its

2:18

inflation forecast, warning that the pace

2:21

of price growth isn't falling as

2:23

fast as hoped. The

2:25

board expects that it will be some time

2:27

before inflation is sustainably in the target range

2:30

and it wants to remain vigilant to upside

2:32

risks. That means the bank isn't ruling anything

2:34

in or out. For

2:37

most of us folk with a mortgage, it

2:39

means we'll keep paying those 12 year higher

2:41

interest rates for the foreseeable future and economists

2:43

reckon it will be at least the rest

2:46

of this year. One

2:48

thing to take away from it was

2:50

that the Central Bank Board's statement wasn't

2:52

quite as hawkish or aggressive I suppose

2:55

or downbeat on getting inflation

2:57

under control as some had

2:59

expected. It kept to its

3:01

neutral tone at least in the statement

3:03

though in the press conference afterwards Governor

3:05

Michelle Bullock was perhaps a little more

3:08

aggressive on the need to get control

3:10

of inflation, i.e. a little more hawkish

3:12

on inflation. So

3:14

speaking of inflation, what is the Central

3:16

Bank saying about inflation? So

3:18

it thinks the consumer price index to the end of June will come

3:20

in at 3.8% whereas previously

3:23

it thought it would be closer to 3.3%. The

3:26

uncertainty is sticky services inflation, your

3:29

favourite word there sticky. Sticky

3:31

services inflation, things like rent and

3:33

insurance, education, stuff that's just much

3:36

harder to not pay for. While

3:39

that stays high, the Reserve Bank won't want

3:41

to cut rates. It provided a bunch of

3:43

other economic forecasts yesterday, downgraded growth

3:45

ever so slightly, with

3:47

the unemployment forecast just attached.

3:50

But really it is all about inflation.

3:52

The Reserve Bank wants to be confident

3:54

that inflation is moving sustainably towards its

3:56

target range. After Yesterday, things

3:58

like next week's budget. The upcoming

4:00

Fair Work Commission decision on wages

4:02

they all become even more interesting

4:04

to see if they likely to

4:07

the expansion rate and cause inflationary

4:09

pressures. So let's bring all this

4:11

back to into strides. Even.

4:13

Some of the economists who thought they should be a

4:15

right costs. In. Coming months. And.

4:17

Now admitting that there is a chance.

4:20

Of. A right hot? Certainly the timing

4:22

of any right path. Has.

4:24

Been pushed out, gotten a bullet.

4:26

Must be getting very tired of

4:28

saying nothing is routine or asked.

4:30

Yesterday he said she felt the

4:32

economy's on the right past, but

4:34

conceded she's frustrated. That. Inflation is

4:36

taking so long Before she added that she

4:38

didn't think she had given any impression that

4:41

they'll be an interest rate cut by the

4:43

end of this year. The consensus among economists

4:45

is for the next move. In right has

4:47

to be down. Still, But. In terms

4:50

of time in the earliest would be like this,

4:52

he probably more likely to supposed to be month

4:54

of twenty twenty five. It

4:56

would be so hard wouldn't this? Trying to

4:58

to speak and being so so careful with

5:00

your language and still trying to communicate clearly

5:02

and make sure that these points to getting

5:04

across but not trying to give any indication

5:06

one way or the other because he knows

5:08

that everyone in the room at the press

5:10

conference will hold on to that and come

5:12

back And six months or twelve months time

5:14

and really just got a hold up and

5:16

said this is what you said. I.

5:18

Think I'm right in saying earlier this week

5:21

still applies who with Seats predecessor to Miss

5:23

your Bullets actually medical the him. He liked

5:25

the fact that he can say what he

5:27

wants to sites without being fearful of every

5:30

word. I reckon that to be the worst

5:32

thing about being governor of the Reserve Bank.

5:34

No matter what you said, Paypal would be

5:36

waiting for sentences he did. we would. Just

5:39

about art. Yeah, absolutely. And and when you

5:41

finish in the job A would have to

5:43

be the most liberating feely. Whatever life in

5:45

Dates like A markets have, they react as

5:48

a great idea. and ai six two hundred

5:50

finished up nearly one and a half the sent

5:52

with a sharp rally after the reserve bank miss

5:54

the fish hook has tried on hold by the

5:56

closed all eleven sectors recorded gains in the both

5:58

finished at seven thousand seven About 85% of stocks

6:00

ended higher yesterday. Basically

6:05

equity traders thought the central bank would be

6:07

more hawkish on rates when that didn't happen.

6:10

Equities jumped. Among the large caps, the

6:12

banks did very well with Westpac up nearly 3%

6:14

while Commonwealth Bank was 2% higher. National

6:17

Australia Bank went ex-dividend yesterday so it finished

6:19

1.5% lower. The big

6:21

miners did well, Westfarmers and Macquarie Group finished up

6:23

more than 2%, Transurban, CSL, Woodside,

6:26

Wyset, Global, Telstra. I could go on.

6:28

They all closed up sharply higher. There

6:31

were a couple of significant, well an

6:33

upgrade and a downgrade in the market

6:35

yesterday. AGL upgraded its earnings guidance for

6:37

the financial year due to higher consumer

6:39

demand and improved generation. Its share price

6:41

jumped 7%. On the

6:43

other side of the ledger, it seems its

6:46

share price fell 6% after the company issued

6:49

a major profit warning. And

6:51

what's happening in international markets? Smaller

6:54

prices have come off a bit. Goals

6:56

trading at USD 2320 an ounce and the Aussie

6:58

dollar is buying just under USD 66. Weigh

7:02

down a little bit by those Reserve Bank comments.

7:04

Local bond yields which reflect interest

7:06

rate expectations also fell yesterday after

7:09

the Reserve Bank announcement. There

7:11

is a lot going on. It is a big news day.

7:13

Big news week really. It is. It

7:15

is a big news month. Actually I'm upgrading this.

7:17

It is a big news month. When you think

7:19

about the budget as well next week and the

7:22

Reserve Bank board yesterday, it's a big news month.

7:24

It's huge. All the banks reporting. Lots going on.

7:26

Oh, very exciting. We'll be back in a moment

7:28

with the rest of the day's business news. Sean

7:38

ANZ yesterday joined NAB and Westpac

7:40

in announcing a share buyback scheme.

7:42

This time worth $2 billion. It

7:45

came after the Melbourne based bank reported a 7%

7:47

slide in net profit to $3.55 billion over

7:51

the 6 months to March. Like

7:53

the other two banks before it, ANZ

7:55

felt the pressure of competition in the

7:57

retail banking business which includes mortgages, That

8:00

hurts that bottom line. The result

8:02

was in line with analysts' expectations and

8:04

the group said it will pay a

8:06

slightly higher dividend of 83 cents per

8:08

share, not part or partially franked.

8:11

CEO Shane Elliott said the economy and

8:14

individuals are being resilient and prudent with

8:16

their money. The bank's all-important net interest

8:18

margin, the difference between what it receives

8:20

in loans and pays out on deposit

8:23

shrank slightly. Mr Elliott said

8:25

competition in the housing market remains hot. The

8:27

bank also slightly upped its provision for bad

8:29

debts. ANZ's share price closed

8:31

flat or was up just a touch.

8:33

That was helped by the Reserve Bank

8:35

decision. Prior to that

8:37

announcement, it was actually lower so

8:40

analysts weren't that much in

8:42

favour of the result yesterday. It does

8:44

mean that the three banks have now announced a total of $4.5 billion

8:46

in share buybacks. It

8:48

puts more money into shareholders' hands. That's good

8:51

obviously but it also suggests the banks can't

8:53

really think of better places to invest the

8:55

money which can sometimes raise questions

8:58

about longer term returns. I

9:00

feel like I'm really becoming a bit of an expert

9:02

now on share buybacks. This

9:05

time last week I asked you what does

9:07

a share buyback mean and what does it

9:09

mean. Every day since then it's just been

9:11

share buybacks here and share buybacks there. A

9:13

bit of an expert. In

9:15

the newsletter today I talk about

9:18

why I don't like share buybacks.

9:21

Aylmer Unleashed, it's coming.

9:24

Go to fearandgreed.com.au and sign up so

9:26

that you can hear Sean's true thoughts

9:28

on share buybacks. It'll be a rip-off.

9:31

The crowds will be coming now, won't they? You

9:34

never know. You never know. Someone might go, oh

9:36

I do want to read that. Off

9:38

to fearandgreed.com.au. Now Macquarie's chief

9:41

executive, Shimara Wickramaniaka, expects investments in

9:43

data centres will drive big returns

9:45

for the asset manager as the

9:48

world's big tech companies consume more

9:50

information to feed artificial intelligence

9:52

applications. Data centres require

9:54

huge amounts of energy and capital to

9:56

drive business development strategies while keeping up

9:58

with consumers in increased household

10:01

consumption. Ms Wickramaniyaka

10:03

said at an investor conference yesterday

10:05

and Macquarie wants very

10:07

much to take advantage of that.

10:09

She said tech is going to

10:11

impact every sector over the next

10:13

while but particularly data and clean

10:15

energy and that's where Macquarie wants

10:17

to put its money. Carbon

10:20

capture and storage has a quote role

10:22

to play in the energy transition but

10:24

the government has no plans to encourage

10:27

its development with subsidies according to Federal

10:29

Energy Minister Chris Bowen. Mr

10:32

Bowen told the Australian British Chamber of Commerce that

10:34

the government believed it had no role to play

10:36

in extending the life of

10:38

the use of coal but could play

10:40

a role in hard to abate energy

10:42

sectors. Now carbon capture and storage was

10:45

a favourite of former coalition governments, not

10:47

so much this government. Mr Bowen said

10:49

the government's view on carbon capture and

10:51

storage is pragmatic. His approach

10:53

is that it can and should play a

10:56

role in hard to abate sectors particularly where

10:58

it's proven to work but he also made

11:00

it clear he didn't want companies to simply

11:02

greenwash by talking about carbon capture and storage

11:04

that didn't work. Sean the

11:07

likelihood of BONSA flying again is

11:09

diminishing. With a Federal Court hearing

11:11

to set up a creditors meeting

11:13

being told the lessors of six

11:15

aircraft have clearly expressed their intention

11:17

to remove the planes from Australia.

11:20

James Hutton, SC for administrators Hall

11:22

Chadwick and BONSA Aviation said the

11:24

six Boeing 737s are

11:27

not part of the administration due

11:29

to the fact that their leases were

11:31

terminated the day before Hall

11:33

Chadwick was appointed according to a

11:35

report in the Australian. The aircraft

11:38

are not in the administrator's possession

11:40

and the lessors, AIP Capital have

11:42

clearly expressed their intention to

11:45

take the aircraft out of Australia. Almost 58,000 customers

11:47

along with 323 staff and 120 trade creditors are

11:49

owed money by BONSA.

11:54

Mr Hutton said that for that reason the

11:56

BONSA administration was different to that of Virgin

11:58

Australia in 2020. because that airline

12:00

was able to continue trading and

12:03

did not have a significant number of

12:05

customer creditors. In this case,

12:07

Bonsa is not trading, has all

12:09

those trade creditors and

12:12

the likelihood of it flying

12:14

again is not high. Oh,

12:17

bad use of the word high. Yes,

12:20

it certainly is actually. Sean,

12:22

in Victoria, the government has handed down its

12:24

budget including a $15.2 billion deficit,

12:27

a jump in net debt and

12:29

forecasts for an expanding economy. The

12:32

financial bottom line isn't great with net debt forecast to grow

12:35

to $188 billion by

12:37

2028, but it did include help

12:39

for households struggling with the cost of living

12:41

crisis. There's $400 million in handouts for families,

12:43

no new taxes or levies for the first

12:45

time in several years and few

12:48

tough cuts to programs. However, there

12:50

are delays in some projects. There's no

12:52

new money for the $10 billion Melbourne

12:54

Airport Rail link and there's a slowdown

12:56

in the rollout of 30 government owned

12:58

and operated early childcare centres, a delay

13:00

in school upgrades and in the

13:02

rollout of 60 mental health facilities. There's also

13:04

job cuts in the public sector. One

13:07

last one, Sean, before we get to

13:09

international news, the bidding war for Nemoic

13:11

Hotten continues with French-based Louis Dreyfus upping

13:13

it's offered a $0.67 a

13:16

share which is higher than rival Olam's

13:18

$0.66 a

13:20

share bid, just a little bit higher. Yeah,

13:23

now I don't want to trivialise this very

13:25

important take over stash, but Michael,

13:27

it's not often you get to use the word GINA,

13:31

G-I-N-N-E-R, which is exactly what Nemoic

13:33

Hotten is. A GINA is a

13:35

person, in this case a company

13:37

I suppose, who operates a cotton

13:39

gin and the word can be

13:41

traced back to a chorizo poem from around 1400. Isn't

13:45

that cool? Anyway, it's actually

13:47

kind of cool. I did not

13:49

know that. Yes, yes, I digress. Now

13:52

researching this story, I found myself

13:55

looking at these words that had disappeared

13:58

and this is one of the words that had more and more. or less

14:00

disappeared, but it's come back today. Yeah.

14:03

When you start kind of researching something and all

14:05

of a sudden you spend like 20 minutes and

14:07

you are suddenly about kind of 18 pages away

14:09

from where you started. Like I really don't know

14:11

where that time has gone. And you've got a

14:14

deadline and a fear and greed show to do,

14:16

you know, within the hour. Yeah.

14:19

But you've got a fascinating little stat about the word,

14:21

you know, that's right. I can talk about, you know,

14:24

back to the story. Singapore based OLAM

14:26

offered 66 cents a share

14:28

last week. It actually said it would be 70

14:30

cents a share if it reaches 90% acceptances. Only

14:34

problem. Louis Dreyfuss already owns 16.99% of

14:36

Nemoi. So

14:39

it's very hard for OLAM to get to 90% without

14:42

Louis Dreyfuss' support given they're bidding against

14:44

each other. That ain't going to happen.

14:47

So effectively, OLAM has

14:50

offered 66 cents a share. Today,

14:52

Louis Dreyfuss came in at 67 cents

14:54

a bid. Happiest people than all

14:56

this, Michael, of course, are the other shareholders watching

14:58

the bid price rise. It's just

15:01

sitting back just watching go keep going, keep going,

15:03

keep going. Now

15:05

international news, Sean, Hamas has agreed

15:07

to a ceasefire proposal for the

15:09

Gaza Strip. But Israel's

15:11

war cabinet unanimously rejected it

15:13

as quote, far from Israel's

15:16

necessary demands, hitting hopes for

15:18

an immediate pause in the fighting. Israel

15:21

vowed to continue its operation in

15:23

Rafah to exert military pressure on Hamas,

15:25

but also said it will send a

15:27

delegation to meet with mediators. The

15:29

Israeli Defense Forces have also announced fresh

15:32

airstrikes against Hamas targets in the Rafah

15:34

area in the south of the Gaza. That

15:37

came just hours after Hamas had said

15:39

it had accepted the Qatari and Egyptian

15:41

ceasefire proposal. Questions on

15:44

that were raised almost immediately, particularly around

15:46

the details with both US and Israeli

15:48

officials saying they were studying the Hamas

15:51

response, according to Bloomberg. Obviously not a

15:53

ceasefire, but steps in the right direction.

16:00

fend off a new Cold

16:02

War as the European Union

16:04

increasingly aligns with US concerns

16:06

over security risks and trade

16:08

tensions. Mr Xi

16:10

told French President Emmanuel Macron that

16:12

the two nations should uphold mutual

16:14

benefits and jointly oppose decoupling and

16:17

the disruption of supply chains, according

16:19

to the Beijing News Agency. Xi

16:21

is in Paris on a state visit before heading

16:24

to Serbia and Hungary in his first trip to

16:26

the European Boc in five years. He is hoping

16:28

to convince Europeans that Beijing offers an economic

16:30

opportunity despite warnings from officials in Washington about

16:33

the risks of dealing with China. The EU

16:35

and China are at odds on a bunch

16:37

of issues. The big one, of course, is

16:39

Russia's war on Ukraine. Finally,

16:41

Sean mentioned this one at the top

16:44

of the show. The judge overseeing Donald

16:46

Trump's Manhattan hush money trial threatened to

16:48

jail the former president if

16:51

he continued to harass witnesses and

16:53

jurists. Isn't that

16:55

a line that you never thought you

16:57

would have to say? If

17:00

the threatened to jail the former

17:02

president if he continued to

17:04

harass witnesses and jurors, it's just

17:06

unbelievable after concluding that fines

17:09

have failed to deter the

17:11

defendant from repeatedly violating a

17:13

court-imposed gag order. Justice

17:16

Juan Murchin issued the final warning

17:18

as he found Trump

17:20

in criminal contempt for the 10th

17:22

time over comments made online and

17:25

to the media. The presumptive

17:27

Republican nominee has now been fined $10,000

17:29

per violation which is the

17:33

maximum financial penalty allowed by New

17:35

York State law. Justice Murchin

17:37

said the court will have to consider a jail

17:40

sanction so it was the last thing he wanted

17:42

to do. Defendants held in criminal contempt

17:44

can be sent to jail for 30 days according

17:46

to the Financial Times. However,

17:49

it does raise some constitutional questions

17:51

about imprisoning a presidential candidate. I

17:54

don't think we've talked about that one before. What

17:56

about the logistics Michael? Like, you put Donald

17:59

Trump. In one cell the

18:01

secret service detail the one next to him I

18:03

don't know in another cell Those

18:07

are the ones that draw the short straw and have to go to

18:09

jail with him The

18:12

funny thing about Donald Trump which I

18:14

still can't get my head around is

18:16

that these kind of tenants of democracy

18:19

like fair trials and not

18:21

harassing people It just

18:23

totally ignores He

18:25

won't get a job and the judge couldn't put him in jail

18:28

But it's the fact that he

18:30

just totally ignores these really central

18:32

tenants of democracy is a quite extraordinary

18:35

Yeah, it is. It really is. All

18:37

right, Sean up next is the fear

18:40

and greed daily interview But today we've

18:42

mentioned before you are speaking with Lucy

18:44

Ellis Westpac chief economist And

18:46

until late last year the chief economist really

18:48

at the Reserve Bank of Australia So she

18:50

has great insights into yesterday's decision and what

18:52

it's like working inside the central bank Of

18:55

course Michael if you don't want to listen

18:57

to Lucy next you can go straight to

18:59

how they afford that with you and kind

19:01

Of Campbell either one would be great. In

19:03

fact, you should do both. I think well

19:05

Yeah, I would want everyone to go and

19:07

listen first to Lucy Ellis Mm-hmm and then

19:09

to me and canna doing how do they

19:11

afford that which is of course our Weekly

19:13

podcast all about making your money work a

19:15

little bit harder for you It comes out

19:17

every Wednesday and then while you're on kind

19:19

of working through all the to-do list head

19:21

to fear and greed calm Today you and

19:23

sign up for today's newsletter. Yeah Including

19:26

your hard-hitting comments on share

19:28

buybacks on yeah, that's

19:30

right I mean, it's pretty much your morning satisfied,

19:32

isn't it? Well the next hour of your morning.

19:34

Anyway, yes Skip work and just stick with us

19:37

fear and great. Thank you Sean. Thank

19:39

you, Michael. It's Wednesday the 8th of May

19:41

2024 make sure you're following the podcast and

19:43

please join us online on LinkedIn Instagram X

19:45

tick tock and Facebook I'm Michael Thompson and

19:47

that was fear and greed. Have a great

19:50

day