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The RBA: Who’s Calling the Shots and How it Affects Your Rates · She's On The Money

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Speaker 1: My name is Tatasha Bamblet. I'm a proud First Nations
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Speaker 1: woman and I'm here to acknowledge country t glennyan Ganya, Niana,
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Speaker 1: kaka ya Ya bin Ahwaka nian Ar gay In, Nimbini,
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Speaker 1: yak um Jar, doumayamiga Umagahawakawaman, damon Immalan ummabang Gada boma
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Speaker 1: In and now in Waka ghana on yak rum Jar Watanadana. Hello,
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Speaker 1: beautiful friends, we gather on the lands of the Aboriginal people.
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Speaker 1: We thank acknowledge and respect the Aberiginal people's land that
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Speaker 1: we're gathering on today. Take pleasure in all the land
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Speaker 1: and respect all that you see. She's on the Money
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Speaker 1: podcast acknowledges culture, country, community and connections, bringing you the tools,
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Speaker 1: knowledge and resources for you to thrive.
0:45
Speaker 2: She's on the Money.
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Speaker 3: She's on the Money. Hello and welcome to She's on
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Speaker 3: the Money, the podcast that helps you feel confident with
0:54
Speaker 3: your cash even when the economy is doing the most.
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Speaker 3: And today we're talking about something that stresses the appsolentce
1:00
Speaker 3: life out of so many of us. The RBA rate decisions,
1:05
Speaker 3: why they make them, and what actually goes into those
1:07
Speaker 3: decisions and how you can get better at reading the
1:10
Speaker 3: signs instead of just sitting there hoping for a rate
1:12
Speaker 3: cut every month, because, let's be honest, every time there's
1:14
Speaker 3: an announcement, it feels like your financial future is hanging
1:17
Speaker 3: in the balance. I'm excited, and with me is a
1:20
Speaker 3: woman who can look at inflation data and somehow make
1:22
Speaker 3: it make sense. Victoria Devine. I try. I do a
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Speaker 3: really good job, and I'm pretty Look we saw it,
1:29
Speaker 3: you're pretty Oh, thank you? No, we saw it coming right.
1:33
Speaker 3: We knew that interest rates were going to increase. I
1:36
Speaker 3: don't we know why? I can tell you. Yeah, don't
1:39
Speaker 3: let me spoil the whole episode. But we'll get into
1:42
Speaker 3: the why when we're in how of the RBA? But
1:46
Speaker 3: I think this is going to be an important chat
1:48
Speaker 3: because it's not just like, hey, interest rates have gone
1:51
Speaker 3: up again. Oh, stuff's going to be more expensive? Yeah,
1:55
Speaker 3: this is more What is the RBA? How does it work?
1:58
Speaker 3: Why does it work? Is this elbow's fault?
2:02
Speaker 1: Right?
2:04
Speaker 3: And I think this will be helpful and also sad
2:07
Speaker 3: because sometimes it's nice having someone to blame, even if
2:09
Speaker 3: they're not the right person to blame. But yeah, yeah, yeah,
2:11
Speaker 3: I'll give you someone to blame. By the end of
2:13
Speaker 3: this episode, you're welcome. Perfect spoiler. It's not Elbow, and
2:17
Speaker 3: it's not because I'm trying to defend him. Hey, it's
2:20
Speaker 3: just not his fault. Okay, good to know. But if
2:22
Speaker 3: you still want to blame him, like pop off Couin, Yeah,
2:24
Speaker 3: go for it, hight are oh yours? This episode actually
2:27
Speaker 3: came from a DM you got, didn't it? It did,
2:29
Speaker 3: and I've brought the DM along. Okay, I feel like
2:32
Speaker 3: this DM is reflective of a lot of dms I get.
2:35
Speaker 3: So this one said, Hey, V do you know any
2:37
Speaker 3: good resources to understand all of the things that go
2:40
Speaker 3: into the RBA's decisions. I'm really stressed at the moment,
2:43
Speaker 3: but would love to actually be able to understand it
2:45
Speaker 3: and not just blindly hope for a rate drop every
2:48
Speaker 3: single time. And honestly, same yeah, Like, I also feel
2:53
Speaker 3: like we're all hoping for a rate drop, especially because
2:57
Speaker 3: we just had, as I mentioned, a rate decision. So
3:00
Speaker 3: that happened on the seventeenth of March, where the RBA
3:03
Speaker 3: made the decision to increase the cash rate to four
3:06
Speaker 3: point one percent, which, yeah, Beck, it was actually expected.
3:09
Speaker 3: Lots of economists all of the banks were saying, Oh,
3:12
Speaker 3: we're going to get a rate increase. I was blindly
3:15
Speaker 3: hoping and crossing my fingers and all of my toes
3:18
Speaker 3: and all of my legs and literally everything and put
3:21
Speaker 3: braids in my hair that it wouldn't happen the braids.
3:24
Speaker 3: But it was still pretty disappointing because we're in the
3:27
Speaker 3: middle of a cost of living crisis and it just
3:29
Speaker 3: it feels like another nail in the coffin. But it
3:32
Speaker 3: was expected. So today my plan is to give you
3:36
Speaker 3: a bit of a cheat sheet from what the RBA
3:40
Speaker 3: actually looks at, how these decisions are made, and how
3:43
Speaker 3: you can start reading the signs before the announcement hits
3:46
Speaker 3: your phone and you won't go oh. People were kind
3:50
Speaker 3: of saying that that might happen, but I don't fully
3:52
Speaker 3: understand why. Hopefully by the end I can have you going, oh,
3:56
Speaker 3: that makes a lot of sense, yes, trash. Still I
3:59
Speaker 3: didn't want to to happen, but I understand why, because
4:03
Speaker 3: that will make it feel a whole lot less chaotic.
4:06
Speaker 3: So v who actually decides if rates go up or down?
4:09
Speaker 3: Not albow, not albow, not elbow, But lots of people
4:13
Speaker 3: want to blame him. So this is where I think
4:15
Speaker 3: people are often a little bit surprised. So it's not
4:18
Speaker 3: a politician, it's not the Prime Minister, and it's definitely
4:21
Speaker 3: not based on public opinion. Rate decisions are made up
4:25
Speaker 3: by the RBA's Monetary Policy Board. Okay. The RBA, just
4:30
Speaker 3: to step back a little bit, is the Reserve Bank
4:32
Speaker 3: of Australia. They're not a normal bank. They're a cool bank, okay,
4:38
Speaker 3: and we'll get into that a little bit later. But
4:40
Speaker 3: the RBA is kind of like they're the governing board
4:43
Speaker 3: of what the cash rate looks like. Different banks actually
4:47
Speaker 3: borrow money from the RBA, like they're the big dogs.
4:51
Speaker 3: And this RBA's Monetary Policy Board is a group of
4:56
Speaker 3: nine people and their entire job is to look at
4:59
Speaker 3: the econ and decide whether money needs to be a
5:02
Speaker 3: little bit more expensive or if it needs to be cheaper. Okay,
5:05
Speaker 3: I mean as a lay person, I'm like, just make
5:08
Speaker 3: it cheaper.
5:09
Speaker 1: Right, right?
5:10
Speaker 3: That would be so nice. And these guys they meet
5:13
Speaker 3: eight times a year, and these meetings aren't quick. They
5:16
Speaker 3: don't just like have a coffee catch up. They are
5:19
Speaker 3: two date deep dives where they meet and go through
5:23
Speaker 3: huge amounts of economic data, which might sound really boring,
5:26
Speaker 3: but low KEI, I would love to be a fly
5:28
Speaker 3: on the wall in one of those meetings one day.
5:30
Speaker 3: So if you want to invite me, guys, I could
5:32
Speaker 3: be the tenth person. I really could. But this board,
5:35
Speaker 3: it includes people like the governor, the deputy governor, the
5:39
Speaker 3: Treasury secretary, and then six external experts and those external
5:44
Speaker 3: members they are actually really really important. So these people
5:47
Speaker 3: are chosen because they are specialists, Like they're not just
5:50
Speaker 3: specialists in money, but specialists in different areas. So they're
5:53
Speaker 3: specialists in economics, the labor market, and financial systems, not
5:58
Speaker 3: because their corporate feed heads, Like they're not like, oh
6:01
Speaker 3: well you're this CEO VHP. Like they're actual just subject
6:05
Speaker 3: matter experts who are really good at deep diving and
6:08
Speaker 3: pouring over data and understanding it and being able to
6:11
Speaker 3: explain it. And they are specifically not allowed to have
6:14
Speaker 3: jobs or roles where they could benefit from the decisions
6:17
Speaker 3: that they are making. Got true, So like they couldn't
6:20
Speaker 3: be a CEO of a business, like if they benefit
6:23
Speaker 3: from the decisions that the RBA is making, they wouldn't
6:26
Speaker 3: be on the board. Oh this is very comforting. Well, yeah,
6:29
Speaker 3: because it's a whole structure built up to support our economy,
6:32
Speaker 3: not to just make political decisions. Right, So the whole
6:35
Speaker 3: point of this structure is to create debate, it's to
6:39
Speaker 3: challenge assumptions and to avoid what they call group think,
6:43
Speaker 3: which is where kind of everyone gets together and goes, oh,
6:45
Speaker 3: the money, it should be cheaper, right, it should be cheaper.
6:47
Speaker 3: We all want the same thing. Let's just let's just
6:49
Speaker 3: do that. I see, Okay, So the government doesn't actually
6:52
Speaker 3: control it at all. Like see, so many people blame Albo,
6:55
Speaker 3: but it's not really Elbow get invited invited to those meetings. Yeah, Like,
7:01
Speaker 3: I'm sure he would love to be invited, but sorry,
7:04
Speaker 3: he's not allowed. And that is a very important distinction.
7:08
Speaker 3: So the RBA is completely independent from the government. So
7:12
Speaker 3: while the government can set the framework and appoint board members,
7:16
Speaker 3: they actually can't tell the RBA what to do. They're
7:19
Speaker 3: independent and they can't call and say, hey, do you
7:22
Speaker 3: reckon we could get a little bit of a cheeky
7:24
Speaker 3: rate cut before elections. Do you reckon that would be possible.
7:27
Speaker 3: They'd be like, get in the bin. That's not an option.
7:31
Speaker 3: So that independence is there to protect the long term
7:34
Speaker 3: health of the economy and of our country. It's not
7:38
Speaker 3: there to go yeah, Beck deserves cheaper food, Yeah yeah,
7:43
Speaker 3: like go on. Even if the decisions are unpopular in
7:46
Speaker 3: the long term, they are being made so that our
7:49
Speaker 3: country is financially okay into the future. I see. So
7:53
Speaker 3: it's a bit of trash because it's like short term
7:55
Speaker 3: pain for long term gain. But yes, politicians, they might comment,
8:00
Speaker 3: but the decision itself actually happens in a completely separate lane.
8:04
Speaker 3: It's got nothing to do with them, hmmm. Being like
8:07
Speaker 3: so like above the government almost they can't tell me
8:11
Speaker 3: what to do. No, they can't. That's crazy. They can't.
8:14
Speaker 3: And so they're kind of like, well, here go, government,
8:16
Speaker 3: this is what we've decided, and the government's like, well shit,
8:19
Speaker 3: well what do we do exactly? So it's not emotional,
8:23
Speaker 3: it's not political. It's purely data. It's just data, babe, Okay,
8:28
Speaker 3: just data. And no one in that room is just
8:31
Speaker 3: making decisions based on vibes unfortunately, because if they were,
8:36
Speaker 3: they would pick up that the vibe is off and
8:38
Speaker 3: we need to catch a break. Absolutely read the room
8:41
Speaker 3: a little bit there. They can't read the room. In fact,
8:44
Speaker 3: they actively choose not to read the room. Yes, that's
8:46
Speaker 3: fair rude. But they are looking at data, they're looking
8:49
Speaker 3: at forecasts, they're doing some risk modeling and some probabilities,
8:53
Speaker 3: and they're asking what decision gives us the best chance
8:57
Speaker 3: of keeping our economy stable. That is very important and
9:02
Speaker 3: they have to make that decision even if it frustrates
9:04
Speaker 3: households in the shop.
9:05
Speaker 1: It does.
9:06
Speaker 3: They know it's best for us, and it might hurt,
9:09
Speaker 3: it might really hurt in the meantime. Exactly like, I
9:12
Speaker 3: don't want to call the RBA our annoying older sister,
9:16
Speaker 3: but they kind of are. But my sister has an
9:18
Speaker 3: annoying older sister and she's always right, isn't she. Well,
9:22
Speaker 3: that's exactly, she's always right. It doesn't mean it's good
9:25
Speaker 3: for you, Like in the short term you might not
9:27
Speaker 3: want to hear it, but it's gonna happen. It's annoying.
9:31
Speaker 3: So what are they actually trying to achieve when they
9:34
Speaker 3: change the rates. Well, they're not trying to piss us off.
9:37
Speaker 3: Well they're doing pretty bad job, But you're not right, Like,
9:40
Speaker 3: they're not trying to piss us off. They are. But
9:42
Speaker 3: at its core, the RBA has, like I would say,
9:45
Speaker 3: two main goals. So the first is to keep inflation
9:49
Speaker 3: under control, like, we don't want inflation to become astronomical
9:53
Speaker 3: inflation different to RBA. Yeah, so inflation is what is
9:58
Speaker 3: going to make your stuff every day more exp Yeah.
10:00
Speaker 3: And their other goal is to keep people in jobs,
10:04
Speaker 3: to keep people employed.
10:06
Speaker 1: That's it.
10:07
Speaker 3: That's their goal. Okay, keep inflation under control, keep people
10:11
Speaker 3: in jobs. Yeah, that's your job, RBA do it. So
10:14
Speaker 3: every single decision that they make comes back to two questions.
10:18
Speaker 3: Is the price of goods and services rising too quickly?
10:22
Speaker 3: And are people able to find jobs when they need to.
10:25
Speaker 3: We talk about the unemployment rate a lot. This is
10:28
Speaker 3: what the RBA plays into. They are trying to make
10:31
Speaker 3: money cheap enough that people can employ people. Money gets
10:34
Speaker 3: too expensive, I can't afford hire you, sorry, because when
10:37
Speaker 3: inflation gets too high, everyone feels it. Not just you
10:41
Speaker 3: and I going to the grocery shop, but you and
10:44
Speaker 3: I go into the grocery shop and then you know,
10:46
Speaker 3: not getting a raise at work, or maybe worker saying oh,
10:48
Speaker 3: inflation's kind of cooked. We can't afford, you know, to
10:51
Speaker 3: hire more people. That infects the whole economy and your
10:55
Speaker 3: grocery bill creeps up your rent grows up. Your money
10:58
Speaker 3: it just doesn't feel like it stretches as far as
11:01
Speaker 3: it used to. And even if your income hasn't changed,
11:04
Speaker 3: you feel poorer because you are yes, like you're not
11:08
Speaker 3: just feeling poor. You are poorer because your money isn't
11:12
Speaker 3: buying what it could. Last year. Yeah, used to get
11:15
Speaker 3: more for less and we liked that deal. That was
11:17
Speaker 3: a good deal. But when inflation is too high, what
11:22
Speaker 3: the RBA does is it goes, Oh, Bex's grocery is
11:25
Speaker 3: pretty cooked at the moment. We're going to have to
11:28
Speaker 3: increase interest rates so that people are paying more to
11:31
Speaker 3: borrow money so that things slow down. Oh, it's not
11:35
Speaker 3: going to reset it. It's not going to take money
11:38
Speaker 3: back to where it was. Unfortunately, I don't think we'll
11:41
Speaker 3: ever see the day of a fifty cent McDonald's cone again.
11:45
Speaker 3: That's crazy. But what they will do is go, oh,
11:48
Speaker 3: that's happening too quick. They've had too many price rises
11:51
Speaker 3: too recently. We're just going to increase interest rates and
11:54
Speaker 3: buy increasing interest rates, money is more expensive. So therefore
11:58
Speaker 3: the rate of groceries is not going to income crease
12:00
Speaker 3: as fast as it has been. So hopefully we can
12:03
Speaker 3: keep that under control. God's you going to put a
12:05
Speaker 3: cap on it. We're going to put the lid on.
12:06
Speaker 3: And what about unemployment? So when unemployment rates rise, the
12:10
Speaker 3: economy it gets a bit wobbly. So there's more people
12:13
Speaker 3: that are looking for jobs. Less income means less spending
12:17
Speaker 3: because like, if you don't have a job back, what
12:19
Speaker 3: are you doing tightening your purse strings? You're not going out,
12:22
Speaker 3: You're not, you know, buying as many discretionary items. Businesses
12:25
Speaker 3: start pulling back, and what that can lead to, to
12:28
Speaker 3: be quite dramatic, is a recession. We don't want a recession. Beck,
12:32
Speaker 3: that's a terrible thing to happen. So as much as
12:35
Speaker 3: we do not like interest rates increasing, it's stopping us
12:38
Speaker 3: going through a recession, which would be even worse for
12:41
Speaker 3: you than an interest create increase. So in this scenario,
12:45
Speaker 3: the RBA might actually cut rates to stimulate the economy
12:48
Speaker 3: because if I say, hey, bet money's cheaper, you can
12:51
Speaker 3: get more stuff, what are you gonna do? You're going
12:54
Speaker 3: to spend more. So every decision comes down to a
12:57
Speaker 3: balancing act. Yeah, Like they're trying to work out is
13:00
Speaker 3: this economy too hot? Is it too weak? And their
13:03
Speaker 3: job is to keep it like in the middle zone,
13:06
Speaker 3: to keep it just right, not too hot, not too cold,
13:09
Speaker 3: just right. So the RVA is goldilocks, Yes, I see.
13:13
Speaker 3: I wonder if they've ever like being like, oh, that
13:14
Speaker 3: was bad idea. So well, yeah, they have because you
13:17
Speaker 3: can't predict the future totally. So there's been times where
13:20
Speaker 3: they've increased interest rates and then they're like, oh, that
13:23
Speaker 3: didn't do what we needed it too, we need to
13:24
Speaker 3: pull a different lever. Okay. So true, they're not immune
13:28
Speaker 3: from being wrong. They make mistakes. They make mistakes too,
13:31
Speaker 3: I see, But they're doing like the decisions that they're
13:35
Speaker 3: making are being made hopefully in the best interest of
13:39
Speaker 3: the country, not the individuals. Got you, got you, got you,
13:42
Speaker 3: because if you just look at individuals, yeah, we're going
13:45
Speaker 3: to make some pretty I would say, good decisions because
13:47
Speaker 3: I want more money in people's pockets, I want sent
13:50
Speaker 3: link to pay more, I want all of these things.
13:52
Speaker 3: M but that doesn't help the country, I see. Okay,
13:57
Speaker 3: So when they sit down for these meetings, what are
13:59
Speaker 3: they actually looking at? Data? So much data, so much data,
14:03
Speaker 3: But there are a few things that they're looking at.
14:05
Speaker 1: Right.
14:05
Speaker 3: First is inflation data. I would say that's the biggest
14:08
Speaker 3: one that they look at. They look at whether prices
14:10
Speaker 3: are still rising, how quickly those prices are rising, and
14:13
Speaker 3: how widespread those increases are across the whole economy, Like
14:17
Speaker 3: is it just a couple of things or is it everything?
14:19
Speaker 1: Is it?
14:19
Speaker 3: Like you know, cheese is more expensive? Okay, well maybe
14:22
Speaker 3: we don't need parmesan every week? Or is it your
14:25
Speaker 3: whole damn grocery basket and it's like the bread and
14:28
Speaker 3: the milk and the eggs. Then you've got wage growth,
14:31
Speaker 3: So are people earning more? Fantastic? But is that sustainable?
14:37
Speaker 3: Like can we maintain that as a country, Because if
14:40
Speaker 3: wages grow too slowly, they're not keeping up with inflation,
14:44
Speaker 3: and then households are going to struggle. Yeah, But if
14:47
Speaker 3: they grow too quickly and you get lots more money
14:50
Speaker 3: than you used to have, what that does is push
14:52
Speaker 3: inflation higher because you've got more disposable income. As a country,
14:56
Speaker 3: it's not about the individual, it's about as a whole. Like, yeah,
15:00
Speaker 3: Beck can afford a few more ice creams, fantastic? Does
15:03
Speaker 3: that impact the economy? Well, yes it does because there
15:07
Speaker 3: are millions of Beck's. Yeah, and if millions of people
15:11
Speaker 3: have a little bit more each week to spend. What
15:14
Speaker 3: does that look like for the whole country? Right? That's good? Yes, yeah,
15:19
Speaker 3: but it's not good sometimes too. And then there's unemployment
15:24
Speaker 3: and then the job data. If jobs are strong, the
15:26
Speaker 3: economy has momentum, fantastic, things are moving. If unemployment starts
15:31
Speaker 3: rising and there are more people with less jobs, that's
15:34
Speaker 3: a sign that things are going to start slowing down.
15:36
Speaker 3: And then, as I said before, household spending massive one.
15:40
Speaker 3: If we've all got more money, we're stimulating the economy.
15:44
Speaker 3: If people are spending freely, the economy is strong, fantastic.
15:48
Speaker 3: Like the small businesses out there, they've got money coming
15:51
Speaker 3: in the door. But if people are pulling back, that
15:54
Speaker 3: then tells the RBA that their previous rate hikes they're working. Okay, gotcha.
15:59
Speaker 3: So sometimes we do want people to pull back on
16:02
Speaker 3: their spending. Mm okay. So they're saying, hey, spend less
16:06
Speaker 3: for a second. Yeah, But we can't tell people to
16:08
Speaker 3: spend less because they won't do it, because on an
16:12
Speaker 3: individual level, you'll be like, well, I don't really care.
16:15
Speaker 3: I've got one hundred bucks in my bank account. I'm
16:17
Speaker 3: going to spend it how I want to spend it.
16:20
Speaker 3: So what they have to do is make the world
16:21
Speaker 3: more expensive so that money that you have can be
16:25
Speaker 3: spent on less stuff.
16:26
Speaker 1: I see.
16:27
Speaker 3: It almost feels cruel. It is, it's rude, but it
16:31
Speaker 3: kind of makes sense when we start like breaking it
16:33
Speaker 3: down right, Like we need to have a country that
16:37
Speaker 3: can maintain its roads, We need to have a country
16:39
Speaker 3: that has a healthcare system. We don't want to be
16:42
Speaker 3: a country that is in such significant debt that it
16:45
Speaker 3: then ultimately impacts us. We don't want to become Greece. Yeah, okay, gotcha.
16:50
Speaker 3: I see. Greece is historically, for those of you following along,
16:55
Speaker 3: terrible economy, billions billions and billions and billions of debt,
17:00
Speaker 3: like they're not recovering through them that and that is
17:03
Speaker 3: impacting their entire economy. I see. Oh my god, they
17:07
Speaker 3: seem like they've got their shit together. They've got nice peaches,
17:10
Speaker 3: they have really nice beaches. Yeah, that's making up for it. Yeah,
17:13
Speaker 3: I reckon. So what about the bigger picture, what about
17:17
Speaker 3: what's happening globally? Globally, Greece has got great beaches, Yes
17:21
Speaker 3: that's true, but unfortunately Australia, we don't operate in a
17:26
Speaker 3: bubble so other countries do impact US. So what's happening
17:30
Speaker 3: right now in the US and in China and globally
17:34
Speaker 3: actually matters a lot when the RBA is making these decisions. So,
17:38
Speaker 3: for example, if US inflation stays really high and they
17:42
Speaker 3: keep interest rates elevated, that impacts our dollar and how
17:46
Speaker 3: much our dollar can buy internationally, and our own inflation
17:50
Speaker 3: pressures start happening, right because like if we import things
17:54
Speaker 3: from the US, but it's really expensive to spend our
17:58
Speaker 3: money in the US, that's to impact us, right, So
18:01
Speaker 3: things like back to oil prices, they're a really good example,
18:06
Speaker 3: and I feel like that conversation has been blowing up
18:09
Speaker 3: in my news feed recently, Like everyone's talking about how
18:11
Speaker 3: expensive oil is and like we only have x amount
18:14
Speaker 3: of days left of petrol and whatnot. Like that is
18:17
Speaker 3: going to stress people out. But if oil prices rise globally,
18:21
Speaker 3: that then flows into higher fuel costs here. It flows
18:25
Speaker 3: into your household because you're spending more money on petrol
18:28
Speaker 3: instead of on groceries. You've got less wiggle room in
18:31
Speaker 3: the budget because it's more expensive to fill your tank up,
18:34
Speaker 3: which then pushes up the cost of things like transporting
18:37
Speaker 3: goods and services, and that then feeds into inflation. So
18:40
Speaker 3: even though it feels very local, like it feels like
18:44
Speaker 3: it's just happening in our own back pocket, the RBA
18:46
Speaker 3: is constantly looking at global pressures as well because they
18:50
Speaker 3: have to. They have to kind of predict what's going
18:52
Speaker 3: on to put us in the best possible position. Right, Okay,
18:56
Speaker 3: So well, actually I think this is a really good
18:57
Speaker 3: time to have a quick break. Like that was a lot.
19:01
Speaker 3: She has a lot of information to digest when we
19:04
Speaker 3: come back. Let's figure out how to stop guessing what
19:05
Speaker 3: the RBA is going to do next and actually read
19:08
Speaker 3: the signs properly. Okav. So we've just unpacked who's actually
19:15
Speaker 3: making these decisions and what they're looking at behind the scenes.
19:18
Speaker 3: But how do we take all of that and actually
19:20
Speaker 3: read the signs ourselves without just manifesting a rate cut
19:24
Speaker 3: every month? You could continue to manifest a rate cut?
19:27
Speaker 3: Is that?
19:27
Speaker 1: Okay?
19:27
Speaker 3: Well, I'm not gonna lie I do so. As I've
19:31
Speaker 3: said before on the podcast, may your delulu come true true? Yes?
19:34
Speaker 3: Thank you. Like I am slightly delusional. Whilst I have
19:39
Speaker 3: said a million times I don't believe in manifestation because
19:41
Speaker 3: like you've actually got to get out there and do
19:44
Speaker 3: the work. Like you want a new job, great, you
19:47
Speaker 3: can't just manifest a new job. You're going to have
19:49
Speaker 3: to do your resume, you know, like there are some
19:51
Speaker 3: things that we need to do. Yeah, but it does
19:56
Speaker 3: get interesting when we start trying not to manifest it
19:58
Speaker 3: and just try to understand it properly. Because beck, once
20:02
Speaker 3: you know what you're looking for and how that works,
20:05
Speaker 3: you can start to kind of piece together the likely direction.
20:08
Speaker 3: Like you don't have to do this, you could just
20:10
Speaker 3: ignore it, but I think that understanding this is really important.
20:15
Speaker 3: If inflation is clearly falling, that's a good sign. It
20:19
Speaker 3: means that pressure is coming out of the system, out
20:22
Speaker 3: of the economy, and the RBA it's less likely to
20:27
Speaker 3: keep hiking. So how like the banks come out and
20:30
Speaker 3: they go, oh, we predict that the RBA is going
20:33
Speaker 3: to increase rates. Well they're not just going, oh that
20:37
Speaker 3: fuels good. They're going, we can see the inflation is
20:40
Speaker 3: increasing and that's not good, and the RBA is probably
20:44
Speaker 3: going to knock us back a few pegs, make it
20:46
Speaker 3: more expensive because they need to like they've predicted that,
20:51
Speaker 3: because they're like, this is how the system works. They're
20:54
Speaker 3: not just super smart, they're not you know, mind readers.
20:57
Speaker 3: If that makes sense, then if employment starts rising, that's
21:02
Speaker 3: another signal that the economy is slowing down because people
21:06
Speaker 3: aren't hiring people if their businesses aren't doing well. Yeah, true,
21:10
Speaker 3: which can then bring a rate cut closer, because then
21:13
Speaker 3: the RBA is like, well, so many people in our
21:15
Speaker 3: economy they're not getting jobs. We need to cut the
21:17
Speaker 3: rates so the businesses can afford to hire some more
21:20
Speaker 3: people because like, these people don't have jobs. And then
21:24
Speaker 3: if retail spending drops, what that tells the RBA is
21:27
Speaker 3: that people are pulling back. Yeah, okay, you're going, oh,
21:31
Speaker 3: I don't have as much like you know, disposable income
21:34
Speaker 3: like land, But I'm not going out and buying like
21:37
Speaker 3: a pair of Peter Alexander pajamas because I don't need them.
21:40
Speaker 3: I just wanted them. Probably not going to do that, right,
21:43
Speaker 3: Like we're not talking like oh, food and milk and
21:46
Speaker 3: bread and stuff. We're talking like retail. Yeah, like luxuries, Yeah,
21:51
Speaker 3: like luxuries like New Jarmis like stuff like that, right,
21:55
Speaker 3: which is exactly what higher rates actually designed to do.
21:58
Speaker 3: They're designed to stop you from spending your discretionary income
22:03
Speaker 3: on frivolous things, essentially, But if inflation starts rising again,
22:08
Speaker 3: that's a red flag, Beck, red flag. That's when the
22:11
Speaker 3: RBA might need to step back in and go, hey,
22:14
Speaker 3: not now, we're going to have to put some more
22:16
Speaker 3: rules in place. We're going to maybe have to increase
22:19
Speaker 3: rates again so that there's less discretionary spending, because discretionary
22:24
Speaker 3: spending drives inflation, and if inflation increases too quickly, none
22:29
Speaker 3: of us can afford stuff, gotcha, And I want you
22:33
Speaker 3: to afford stuff. Like, if inflation just kept growing, Beck,
22:36
Speaker 3: loads of bread would get to fifty bucks. That's crazy, right,
22:40
Speaker 3: So I'm not saying that a loaf of bread is
22:43
Speaker 3: going to cost fifty dollars, but like it's astronomical. The
22:46
Speaker 3: other day I literally spent I think, like nine dollars
22:48
Speaker 3: on a loaf of bread. Don't get me wrong, it
22:50
Speaker 3: was a nice loaf of bread. But I kind of
22:53
Speaker 3: was like, oh, red hut. I was like, it's bread,
22:56
Speaker 3: isn't it bread? Like a dollar? Like in my head,
22:58
Speaker 3: bread is like it's cheat, it's wild. That's a lot.
23:02
Speaker 3: But if inflation kept rising, bread would get to fifty bucks.
23:07
Speaker 3: So the RDA's job is to make sure that that
23:09
Speaker 3: doesn't happen for you. So it feels like they're being mean. Yeah,
23:13
Speaker 3: I see, but they're not. So we can actually see
23:15
Speaker 3: this in our real life. Yeah, like the bread, So
23:18
Speaker 3: your grocery bill increases. You go to the shops and
23:20
Speaker 3: you're like, wow, you know, groceries used to cost me
23:23
Speaker 3: one hundred bucks a week. You can't get away with
23:26
Speaker 3: that anymore, absolutely not right, So you're seeing that in
23:30
Speaker 3: real life. That is inflation. You go to the petrol pump,
23:34
Speaker 3: you put petrol in the car, you're like, oh, I
23:37
Speaker 3: don't know, sixty bucks used to fill my tank. Nowadays
23:42
Speaker 3: a whole tank. No, mate, that's over one hundred dollars.
23:45
Speaker 3: That's crazy. That's global cost pressure. Friends, you're chatting too,
23:51
Speaker 3: struggling to find a job, struggling to find work, like
23:54
Speaker 3: you're having those conversations more regularly. That's a weekend job market,
24:00
Speaker 3: not just your friends, that's everybody. You go to the
24:03
Speaker 3: shopping center, you go to shop like, I don't know,
24:05
Speaker 3: chatty on the weekend, and it's a big quiet in comparison,
24:09
Speaker 3: I don't know. You turn up on Saturday and you're like,
24:11
Speaker 3: hold on, this used to be like real busy on
24:13
Speaker 3: Saturdays like this used to be chaos. Yeah, hy am,
24:16
Speaker 3: I not anxious and overstimulated, right, I'm meant to be
24:18
Speaker 3: really overstimulated, guys. Come on, you meant to stressed. What
24:22
Speaker 3: you're going to look at there is like oh that's
24:24
Speaker 3: spending slowing down. Yeah, I see. These aren't just headlines,
24:28
Speaker 3: they're signals. They're telling us that the economy is doing
24:32
Speaker 3: economy things. Yeah. Okay, so what do we actually do
24:35
Speaker 3: with all of this information and put it in group chat?
24:38
Speaker 3: Be like I'm so smart? Okay, crisis arising, that's global
24:41
Speaker 3: cost pressure. But also the goal isn't to predict it perfectly. Unfortunately,
24:48
Speaker 3: nobody can do that. It's to prepare. So a few
24:52
Speaker 3: practical things from me, get this, you're going to be
24:56
Speaker 3: so shocked. Get your emergency fund together. Oh I do
25:02
Speaker 3: see that coming. No, yeah, I see. But when things
25:05
Speaker 3: are feeling unstable, build a buffer. Yeah, Like, get your
25:09
Speaker 3: emergency fund together, like so that you can feel a
25:13
Speaker 3: little bit more financially supported. I know, I'm not an idiot.
25:17
Speaker 3: I know that that's really hard right now. But future
25:21
Speaker 3: you is gonna thank you for the extra twenty bucks
25:23
Speaker 3: even if it is twenty bucks. Right, Like when money
25:26
Speaker 3: is tight, it's not oh, Beck, you should have had
25:29
Speaker 3: a thousand dollar emergency fund. That wasn't gonna happen. No,
25:34
Speaker 3: But if I said, look, if you can like cut
25:36
Speaker 3: back on a few coffees here or there and like
25:38
Speaker 3: get a few extra dollars in your savings account, I
25:40
Speaker 3: promise future you is going to go, oh thank god
25:42
Speaker 3: I had access to that. Yeah, Like it's the small
25:45
Speaker 3: things that are gonna take a little bit of pressure off,
25:47
Speaker 3: Like you don't need to feel as stressed like and
25:50
Speaker 3: you might still because you go v like there's literally
25:52
Speaker 3: nowhere in my budget I can cut back, And that's
25:54
Speaker 3: okay too, I totally get it. But if you can,
25:57
Speaker 3: that's really good advice. If rates look like going to pause,
26:01
Speaker 3: that's your chance to build up your offset or your
26:03
Speaker 3: savings account and review your interest rate regularly. So like
26:08
Speaker 3: if you have a mortgage, consistently review it. Obviously, having
26:12
Speaker 3: a good mortgage broker, like the mortgage brokers as Zella Money,
26:15
Speaker 3: I would recommend that we have our finger And this
26:17
Speaker 3: is like obviously me promoting my own business, but like
26:20
Speaker 3: having a good relationship with a mortgage broker means they're
26:23
Speaker 3: going to have their finger on the pulse. Yeah, Like,
26:25
Speaker 3: even me at this point in time, I'm looking at
26:28
Speaker 3: it and going, what I like is consistency. So like,
26:33
Speaker 3: I don't love the interest rates are increasing. I don't
26:36
Speaker 3: think they're going down soon. I have a mortgage that
26:39
Speaker 3: puts financial pressure on my family, and like, that's okay.
26:43
Speaker 3: But at the moment I'm even looking at like, do
26:45
Speaker 3: I lock in my interest rate? Hopefully interest rates go
26:49
Speaker 3: down like last year they were talking about it going down,
26:52
Speaker 3: so I think a lot of us are holding on
26:53
Speaker 3: to hope that that happens. But I'm like, you know
26:55
Speaker 3: what I would prefer. I'd prefer to lock in my
26:59
Speaker 3: interest rate right now now, even if interest rates go
27:01
Speaker 3: down at least I can predict it. Whereas if interest
27:04
Speaker 3: rates increase again, which they might, I just don't want
27:09
Speaker 3: more money coming out of our budget to go towards
27:11
Speaker 3: our mortgage. If I could lock it in, like, I'd
27:13
Speaker 3: prefer to like totally pay a consistent higher amount just
27:17
Speaker 3: for consistency, because I look at it and go, oh, well,
27:20
Speaker 3: if interest rates increased by like zero point two five
27:23
Speaker 3: percent again, that means I actually do have to really
27:26
Speaker 3: change my budget, and like we're going to have to
27:28
Speaker 3: change what we do and you know how we spend,
27:31
Speaker 3: whereas I just let's just make it predictable, is how
27:34
Speaker 3: I'm personally feeling at the moment. I totally agree. Does
27:36
Speaker 3: that make sense? Like you kind of go, well, I'd
27:39
Speaker 3: prefer to an bad example, but I'd prefer to pay
27:41
Speaker 3: fifty bucks a month for my phone plan then you know,
27:44
Speaker 3: potentially have a twenty dollars a month phone plan that
27:47
Speaker 3: could go up to fifty at any point. Like, just
27:50
Speaker 3: just give me something that I can predict, I know,
27:52
Speaker 3: And it's times of uncertainty, you just want to be
27:55
Speaker 3: like tried and true and like, yes, I could save
27:58
Speaker 3: a few dollars, but it's not I will. It's like
28:01
Speaker 3: the opportunity to absolutely Does that make sin? Absolutely? I
28:04
Speaker 3: really really agree with that. Banks get really competitive when
28:07
Speaker 3: rate hikes slow down, So I wouldn't be sitting there
28:10
Speaker 3: and just paying more than you need to, like, I
28:12
Speaker 3: would also be reviewing it and making sure that I'm
28:15
Speaker 3: okay with it. And that's why I say have a
28:17
Speaker 3: good relationship with a broker, because they can sit down
28:19
Speaker 3: and look at your budget and go, well, Beck, you
28:21
Speaker 3: know if your interest rates increased, Yeah, maybe it would
28:23
Speaker 3: cost you sixty bucks per month more you can afford
28:26
Speaker 3: that though, That's all good, or it might be the opposite,
28:30
Speaker 3: or maybe you do need to like freeze your interest
28:32
Speaker 3: rate because sixty bucks a month, that's gonna have to
28:34
Speaker 3: come out from somewhere else. Yeah, and like that's going
28:37
Speaker 3: to impact your quality of life, Like you probably don't
28:40
Speaker 3: want that, beck.
28:42
Speaker 1: Yeah.
28:42
Speaker 3: On the flip side, if you're renting and you don't
28:44
Speaker 3: have a mortgage, which is normal, I would say understand
28:48
Speaker 3: that rate movements can then flow into your rent over time. No,
28:51
Speaker 3: this is what I don't like bullshit, right, yeah, so
28:55
Speaker 3: it's not our Yes, I would use stable periods to
28:58
Speaker 3: strengthen your position. Got to so, like you know your
29:01
Speaker 3: savings and making sure that you're okay, because as much
29:04
Speaker 3: as it should not happen, landlords sometimes get cheeky and
29:09
Speaker 3: pass on the rates to you. They go, oh, so
29:11
Speaker 3: many rate increases this year. I'm going to charge back
29:14
Speaker 3: ten bucks more a week yep, yep, because it's costing
29:17
Speaker 3: me more, and personally I don't believe that's how it
29:19
Speaker 3: should work, but ultimately that's what people do, right, got
29:23
Speaker 3: you and then more broadly, I would use this context
29:26
Speaker 3: to make better career and financial decisions. So like, if
29:29
Speaker 3: the job market is softening, maybe like that's not the
29:32
Speaker 3: time to randomly quit your job without a safety net. Becksy, ed,
29:38
Speaker 3: I really regret that, I gotta say. But also I
29:43
Speaker 3: don't think you regret that. I think you're happier because
29:46
Speaker 3: like I know you well enough to know that that
29:48
Speaker 3: was a good decision for you personally. But if you
29:50
Speaker 3: and I went to the pub with a friend who's like, oh,
29:52
Speaker 3: bloody hate my job, yeah, I think the advice we
29:55
Speaker 3: would be giving is like, oh, like probably just hold
29:58
Speaker 3: on and wait and see, or like maybe make sure
30:00
Speaker 3: that you've got another job to go to before you,
30:02
Speaker 3: you know, jump out of that ship, because like you
30:05
Speaker 3: want your friend to be okay, right, And when it
30:09
Speaker 3: comes to investing, because obviously that's going to be the
30:11
Speaker 3: next question, people like, well what about my investments? We
30:14
Speaker 3: are focusing on the long term. Markets move before rate
30:18
Speaker 3: decisions are even announced, Like people get angsty, They get
30:21
Speaker 3: a little bit like, oh, what's going to happen? Maybe
30:23
Speaker 3: I shouldn't, maybe I should, and like you'll see more
30:25
Speaker 3: volatility in the market during that time, So reacting emotionally
30:30
Speaker 3: actually usually does more harm than good. I see, take
30:33
Speaker 3: your emotions out of your investments, yes, take your emotions
30:36
Speaker 3: out of everything. That's a good idea, even quitting your
30:39
Speaker 3: job right, putting my emotions to the side. This income
30:44
Speaker 3: I might need it right now. Yeah, yeah, yep, points
30:48
Speaker 3: I know. But also like on that, Yeah, I don't
30:51
Speaker 3: want our community to hear Victoria said stay in a
30:54
Speaker 3: bad job. No, your mental health is also incredibly important.
30:57
Speaker 3: But we also need to make pragmatic decisions for future.
31:00
Speaker 3: So we need to find the balance that's so true
31:02
Speaker 3: that is needed to disclaim it because I'm like, don't
31:04
Speaker 3: stay in a bad job. No, please start with that.
31:06
Speaker 3: But sometimes we have to just troop on for a
31:09
Speaker 3: little bit because yeah, money's hard, it's heart dobe me,
31:13
Speaker 3: but be somewhere between me and Victoria.
31:15
Speaker 1: Yeah.
31:16
Speaker 3: Sound So there are some really good takeaways here. I'm
31:20
Speaker 3: really liking it. I would like to think that there are,
31:23
Speaker 3: and I think the biggest one from all of this
31:26
Speaker 3: conversation about the RBA is that the RBA's decisions sometimes
31:30
Speaker 3: can feel really unpredictable, like we don't know what the
31:33
Speaker 3: heck's going on. But they're actually very structured and they're
31:36
Speaker 3: not decisions that the government makes. Once you understand what
31:40
Speaker 3: you're looking at and how that works, it becomes, i
31:43
Speaker 3: would say, a lot easier to make sense of what
31:45
Speaker 3: the heck's going on in our economy. M okay, and
31:49
Speaker 3: maybe panic a little bit less. Yes, no panicking. We
31:52
Speaker 3: don't need to panic like we need to just calm down.
31:55
Speaker 3: Put the sign up in your kitchen, keep calm, carry on.
31:58
Speaker 3: You won't look like a loser at all. But, my friends,
32:01
Speaker 3: if this episode helped you finally understand what the RBA
32:05
Speaker 3: actually does day to day, you know what we would love,
32:08
Speaker 3: beck if you sent it to a friend who also
32:10
Speaker 3: spirals every time there is an announcement. Yeah, and if
32:13
Speaker 3: you want more episodes that breakdown exactly what's happening in
32:16
Speaker 3: our economy so that you can feel a little bit
32:18
Speaker 3: more in control, make sure that you are subscribed absolutely
32:22
Speaker 3: and will be back again on Friday. See you guys,
32:25
Speaker 3: SI guys.
32:31
Speaker 2: The advice shared on She's on the Money is general
32:33
Speaker 2: in nature and does not consider your individual circumstances. She's
32:37
Speaker 2: on the Money exists purely for educational purposes and should
32:41
Speaker 2: not be relied.
32:41
Speaker 3: Upon to make an investment or financial decision. If you
32:44
Speaker 3: do choose to buy a financial product.
32:46
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