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Hedge Clippings | 29 November 2024 RBA Governor Michele Bullock recently spoke at the Committee for Economic Development of Australia (CEDA) Annual Dinner, and her message was clear that the RBA isn't rushing to cut interest rates like some of its international counterparts. That won't please the Treasurer Jim Chalmers, who likes to quote the fact that annual inflation has now fallen from 3.8% in June, to the October rate released this week of 2.1%, the lowest rate since July 2021. Dr. Chalmers is facing an election in the first few months of the new year, and he would dearly love the RBA to start cutting rates to help his cause. The RBA's issue is that much of the reduction since June has been thanks to the Treasurer's generosity in reducing electricity and power prices via government handouts - also we suspect with an eye on the upcoming election. Electricity prices have fallen 35.6% in the past 12 months, the largest fall ever recorded. Unfortunately (for Dr. Jim) the RBA looks beyond the headline rate, preferring the "Trimmed Mean" which cuts out extremes like electricity and fuel (-11.5%), and which sits uncomfortably at 3.4%, up from 3.2% in September, due in part to rises in food and non-alcoholic beverages (+3.3%), recreation and culture ( +4.3%) and alcohol and tobacco (+6.0%). At the CEDA event, Bullock stressed the bank's focus on sustainable falls to inflation, and that the Board can clearly see through the current drop in electricity prices as being temporary. In fact, in her speech she mentioned sustainably or sustainable no less than 13 times, just in case the Treasurer didn't get the point (which we're sure he did, he probably just didn't like it). So while she conceded that other central banks are starting to ease rates as inflation drops, Bullock was clear that Australia isn't there yet. Core inflation is still too high to consider rate cuts in the near term and according to Bullock, forecasts show a sustainable (there's that word again) return of underlying inflation to target won't occur until 2026. Meanwhile, PinPoint Macro Analytics has shared their insights on the broader economic landscape, particularly around the uncertainty following President Trump's return to the White House. In their piece, "Trump & Uncertainty," (see below for a link to the full article) they pointed out how unpredictable things are right now, from trade policies to fiscal and monetary directions. Markets are holding their breath, waiting to see what happens with potential tariffs, tax cuts, and any shifts in Federal Reserve policy. While some areas like infrastructure and defence spending seem relatively stable, the takeaway from PinPoint is that investors need to stay nimble given the ongoing geopolitical and fiscal unpredictability. All these recent developments reflect a bigger theme: Uncertainty is the name of the game, both at home and globally. The RBA's cautious stance makes a lot of sense in this context—it's about maintaining stability in an unpredictable world, especially with international pressures adding more layers of complexity. Whether it's changing U.S. policies or shifting global trade dynamics, everyone—from investors to businesses to policymakers—is having to adapt on the fly. Bullock's emphasis on a steady hand is a reminder that sometimes, the smartest move is knowing when not to make a move. Chalmers and Albo have no such leeway. May is not far away. News & Insights How Co-Investments are Transforming Affordable Housing | Webinar | HOPE Housing Fund Management Global Matters: The data centre opportunity for infrastructure investors | 4D Infrastructure 10k Words | Equitable Investors Market Commentary - October | Glenmore Asset Management October 2024 Performance News Bennelong Twenty20 Australian Equities Fund Insync Global Quality Equity Fund |
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