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Ferris Bueller tried to tell us tariffs don’t work · The Front

• 0:04
  Speaker 1: From The Australian. Here's what's on the front. I'm Claire Harvey.
• 0:06
  Speaker 1: It's Tuesday, April eighth, twenty twenty five. There's a risk
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  Speaker 1: of recession. Those chilling words from the Treasurer Jim Chalmers,
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  Speaker 1: as all sides of politics and a panicking market react
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  Speaker 1: to Donald Trump's sweeping tariffs. Releasing Treasury's pre election forecast,
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  Speaker 1: the government says that next rate cut could be as
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  Speaker 1: big as fifty bases points. The leaders meet on Tuesday
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  Speaker 1: night for the campaign's first debate, as Peter Dutton dumps
• 0:40
  Speaker 1: his policy of ending public servants work from home, and
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  Speaker 1: Anthony Albanez he seeks to reassure Australians he can handle
• 0:47
  Speaker 1: the relationship with Donald Trump. One in three university applicants
• 0:55
  Speaker 1: have claimed bonus entry points based on factors like disability, divorce,
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  Speaker 1: domestic violence or mental ill health. That's an exclusive live
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  Speaker 1: now at Beaustralian dot com dot AU. Tariffs are bad
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  Speaker 1: and free trade is good. That's supposed to be the
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  Speaker 1: economic consensus. But throw a populist politician like Donald Trump
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  Speaker 1: into the mix and suddenly everything we thought we knew
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  Speaker 1: about globalization and raising living standards gets chucked out the window. Today,
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  Speaker 1: I'm joined by our business editor Ves Napolak, who's at
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  Speaker 1: the center of the biggest story on Earth, to work
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  Speaker 1: out how Australia and our economy fit into this new
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  Speaker 1: world order.
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  Speaker 2: Bueller Bueller.
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  Speaker 1: Ferris Bueller's Day Off will be forty years old next.
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  Speaker 2: Year, Bueller Buehler.
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  Speaker 1: But the John Hughes classic, which launched Matthew Broderick to stardom,
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  Speaker 1: captured something about adolescent malaise that's still perfect today.
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  Speaker 2: In nineteen thirty, the Republican controlled House of Representatives, in
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  Speaker 2: an effort to alleviate the effects of the Anyone, Anyone
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  Speaker 2: the Great Depression.
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  Speaker 1: School was just so boring. The teachers wanted to talk
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  Speaker 1: about things like tariffs.
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  Speaker 2: Passed the Anyone, Anyone the Holly Smoot Tariff Act, which
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  Speaker 2: raised tariffs in an effort to collect more revenue for
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  Speaker 2: the federal government. Did it work, Anyone? It did not work,
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  Speaker 2: and the United States sank deeper into the Great Depression.
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  Speaker 1: If only more Americans had paid attention, we might not
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  Speaker 1: be here tonight.
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  Speaker 2: Trump's tariffs and financial markets into free from.
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  Speaker 3: Twenty five billion dollars wiped off the.
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  Speaker 1: Ax cten concerns of a recession at a global trade war.
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  Speaker 4: I find so few parallels with what we've seen before,
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  Speaker 4: and that's what's truly scary about this time. In March
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  Speaker 4: twenty twenty, in the COVID drawdown, smart investors knew that
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  Speaker 4: once we were past the worst of this, we were
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  Speaker 4: walking into one of the greatest consumption booms in history
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  Speaker 4: and everyone was going to be feeling really good and
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  Speaker 4: most importantly, they were going to spend. This is not
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  Speaker 4: the case here. This one is properly scary and no
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  Speaker 4: wonder one hundred and sixty billion dollars was wiped off
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  Speaker 4: the ax on Monday.
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  Speaker 1: Ve's Napolak is the Australian's business editor and her newsrooms
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  Speaker 1: around the country are melting down right now along with
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  Speaker 1: the stock market.
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  Speaker 4: Everyone's a markets writer today, Claire. We're talking to people
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  Speaker 4: who are really quite well off. You would think that,
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  Speaker 4: you know, they're not going to be so bothered by
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  Speaker 4: it four five percent draw down. You might be surprised
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  Speaker 4: that some of them are. And we're also talking to
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  Speaker 4: experts in the market who advise investors and manage money
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  Speaker 4: for a living, and those are the guys that are
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  Speaker 4: the most inclined to panic right now because suddenly everyone's
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  Speaker 4: ten percent poorer. It's measurable, and that's what makes it scary.
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  Speaker 1: Reason it's ninety five years since the Smooth Hawly Tariff
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  Speaker 1: Act failed to help the US, and the reason it
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  Speaker 1: failed is that other countries retaliated by imposing tariffs on
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  Speaker 1: American goods, and that reduced global trade. But how is
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  Speaker 1: it that we've ended up in a place where that
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  Speaker 1: message has been forgotten?
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  Speaker 4: I think we forget how hard we fought to get here,
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  Speaker 4: and a lot of the benefits of free trade can
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  Speaker 4: be minimized really easily, and that's exactly what's happened since
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  Speaker 4: twenty twenty four. So we get to a point everybody
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  Speaker 4: is feeling quite well off because the market has had
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  Speaker 4: some spectacular games until now. So the feeling is not
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  Speaker 4: one of, well, you know, there's a lot to lose.
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  Speaker 4: The feeling was one of let's see where this goes.
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  Speaker 4: And in hindsight, that was nice. But what's also true
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  Speaker 4: up until last year was your iPhone, your car, and
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  Speaker 4: your Lululemon never costs more than it did because of inflation.
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  Speaker 4: And I think a lot of things in history have
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  Speaker 4: really capitalized on inflationary periods where we ziggered with zag
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  Speaker 4: this instance, we've definitely zagged. But it's why central banks,
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  Speaker 4: including the RBA, have been so so serious about the
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  Speaker 4: scourge of inflation, because it does lead to events like
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  Speaker 4: this because people get fed up and cost of living
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  Speaker 4: is something we've been talking about for three years and
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  Speaker 4: it's no small thing. The wealth effect of the share
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  Speaker 4: market is a wonderful thing, and quite a lot of
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  Speaker 4: people participated that. But that's different to the scorecard of
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  Speaker 4: Bill's iPhones, legging sweet whatever it may be. Like, everyone
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  Speaker 4: has a reference point for these, and frankly, it's only
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  Speaker 4: been going up.
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  Speaker 1: On social media. Americans are alternating between defending Trump's tariffs
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  Speaker 1: and explaining the whole concept to one another.
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  Speaker 3: I think it's a negotiation strategy, so it's going to
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  Speaker 3: be outrageous and something to catch everyone's attention and then
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  Speaker 3: eventually there'll be some negotiation.
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  Speaker 1: I am not worried about price school or not. Why so,
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  Speaker 1: I'm not going to be man anything.
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  Speaker 2: We pay the terraffs, but the companies pay the terroriffs,
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  Speaker 2: not us.
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  Speaker 1: Shina doesn't pay the terriffs.
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  Speaker 4: I voted for CRAMP, but I didn't vote to lose
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  Speaker 4: my and I didn't vote for a global trade war,
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  Speaker 4: and I didn't vote for Elon Musk run a muck.
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  Speaker 4: Why are y'all going to admit that he has no
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  Speaker 4: idea what he's doing?
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  Speaker 1: Here in Australia we've had a sort of sea sawing
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  Speaker 1: relationship with tariffs, just like the United States have. We've
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  Speaker 1: had tariffs in one form or another ever since settlement. Really,
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  Speaker 1: in fact, we had a military coup because of tariff's
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  Speaker 1: in the early years of the New South Wales Colony.
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  Speaker 1: The Rum rebellion was really about import restrictions and tariffs
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  Speaker 1: on the trade in alcohol. Where do you think Australians
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  Speaker 1: are at now in their understanding of, you know, whether
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  Speaker 1: tariffs are a good or a bad thing.
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  Speaker 4: I think it depends what part of the economy you
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  Speaker 4: play in. So fundamentally, the national accounts are a huge
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  Speaker 4: beneficiary of the iron ore trade. So we dig up
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  Speaker 4: iron or we sell it and that's what funds fiscal
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  Speaker 4: sped dig So that's cool. But you might feel a
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  Speaker 4: little bit removed from that if you're not working in
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  Speaker 4: the pilbro except that would be a mistake because we're
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  Speaker 4: not that removed from it. At all. If global growth slows,
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  Speaker 4: there's less demand for iron ore and things get fiscally
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  Speaker 4: a lot more vulnerable. Just because you're not a five
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  Speaker 4: FO worker or running an automated train or something, it
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  Speaker 4: doesn't mean that you're removed from this. This is something
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  Speaker 4: that will all feel.
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  Speaker 1: Yeah. So the government's ability to pay for things like
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  Speaker 1: roads and schools and hospitals and discounts on your electricity bill,
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  Speaker 1: that's linked to globalization in a way that some voters
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  Speaker 1: might not understand.
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  Speaker 4: We're so interconnected.
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  Speaker 1: Absolutely coming up. So should you buy that new car
• 8:46
  Speaker 1: now or hang on to your money? So looking ahead,
• 9:02
  Speaker 1: Donald Trump is saying, everybody, stop panicking. I'm going to
• 9:06
  Speaker 1: go and play golf this weekend. It's going to be phenomenal.
• 9:08
  Speaker 1: Everything's going to be okay. Is there a way in
• 9:12
  Speaker 1: which this is going to be okay in which it
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  Speaker 1: does settle itself out?
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  Speaker 4: I think both of those things can be true. But
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  Speaker 4: that doesn't rule out or minimize the fact that we
• 9:23
  Speaker 4: could have tremendous more pain ahead and buy more pain ahead.
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  Speaker 4: I mean, the market could draw down a further ten percent,
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  Speaker 4: and that would be a terrible thing. We also coming
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  Speaker 4: into this position without the benefit of the company tax
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  Speaker 4: cuts that the last Trump administration brought in at the
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  Speaker 4: market was hugely receptive to. So there's a lot more downside.
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  Speaker 4: And the other element to that is the starting point.
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  Speaker 4: The world was never richer, So the S and P
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  Speaker 4: five hundred, you're and video shares, whatever it may be,
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  Speaker 4: there is just so much more to lose from such
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  Speaker 4: a rich starting point. Where market strategists, investors, hatch funds
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  Speaker 4: were repeating themselves endlessly say there's no fundamental basis for
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  Speaker 4: these valuations, and they were right. We can't say we
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  Speaker 4: weren't warned because we did hear that information and we
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  Speaker 4: didn't really act on it.
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  Speaker 1: Have you been surprised by how much the market seemed
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  Speaker 1: to have been surprised by this.
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  Speaker 4: Yes. I think what it came down to was that
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  Speaker 4: feeling on Friday, when after Liberation Day, everybody was unified
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  Speaker 4: in saying, this is worse than we thought. It was
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  Speaker 4: a gambit, it was a trade play, it was bringing
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  Speaker 4: people to the table. It was none of that. It
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  Speaker 4: was actually just really bad.
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  Speaker 1: So there's a reassuring kind of idea that we could
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  Speaker 1: tell ourselves that actually what Donald Trump really wants his
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  Speaker 1: critical minerals and that this is the bargaining chip, This
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  Speaker 1: is the start of the negotiating process to make sure
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  Speaker 1: he gets the critical minerals that the United States needs
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  Speaker 1: to make the chips that make everything go. Is that
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  Speaker 1: a possibility.
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  Speaker 4: It's a possibility, but it wouldn't offset the broader, more
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  Speaker 4: debilitating wealth effect that's happening. It's not nothing, but it's
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  Speaker 4: a very small thing in what could be a setback
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  Speaker 4: for global growth that takes us so many years to
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  Speaker 4: recover from.
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  Speaker 1: Is there a possibility, there's no. Given that every Australian
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  Speaker 1: has some money in superannuation, even if you're not actually
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  Speaker 1: exposed to the stock market, you have a super balance.
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  Speaker 1: Is there a possibility that will reduce inflation here in
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  Speaker 1: Australia that make people more conservative, less likely to go
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  Speaker 1: and spend.
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  Speaker 4: There is a possibility. I think it's too early, genuinely
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  Speaker 4: to know, and it's fundamentally more of a bad thing
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  Speaker 4: than a good thing. Demand is everything. I think when
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  Speaker 4: you don't have demand intact, everything else is a second thought.
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  Speaker 4: And so that's why recession is such a loaded word,
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  Speaker 4: because it destroys everything.
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  Speaker 1: Anthony Albanezi is basically saying stay calm, don't worry about it.
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  Speaker 1: Peter Dutton is saying, well, this is actually a really
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  Speaker 1: big concern. How do you think they are playing it?
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  Speaker 1: How should they play it?
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  Speaker 4: I'm so glad you asked this, Claire. I'll tell you
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  Speaker 4: because this year we don't have eleven RBA meetings in
• 12:26
  Speaker 4: a year. We're on the new Progressive RBA schedule and
• 12:30
  Speaker 4: we're not going to hear from the RBA until after
• 12:34
  Speaker 4: the election, which feels like a really extraordinary thing, like
• 12:38
  Speaker 4: where's our central bank? We want to hear what they
• 12:41
  Speaker 4: think they can have such an influential role and voice
• 12:45
  Speaker 4: in this crisis and be neutral and a source of truth.
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  Speaker 4: But there's no meeting, so I think people feel quite
• 12:54
  Speaker 4: a bit winded by that. So I'm really curious, just
• 12:58
  Speaker 4: as a student of the market, to see who will
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  Speaker 4: be the voice that decides to carve out a position
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  Speaker 4: of calm here.
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  Speaker 1: Do you think there'sn't that we've lost the consensus about
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  Speaker 1: free trade, that it's no longer widely accepted really even
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  Speaker 1: by economists, that free trade is universally a good thing,
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  Speaker 1: and that it's a rising tide that lifts all boats.
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  Speaker 4: Yeah, I do think so Claar. I think that's a
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  Speaker 4: really honest observation, and we're probably all a little bit
• 13:31
  Speaker 4: guilty of losing our trade literacy in all of this.
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  Speaker 4: And there are from time to time you see really
• 13:38
  Speaker 4: interesting business case studies of a car maker or a
• 13:41
  Speaker 4: beverages company. It's carved out a beautiful little global niche
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  Speaker 4: by arbitraging some weird tariff scheme or regime. Look, that's nice,
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  Speaker 4: but nothing's better than global growth. We know what global
• 13:54
  Speaker 4: growth does. It advances everyone's a lot in life. And
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  Speaker 4: this is a walk back from that.
• 14:02
  Speaker 1: If you were advising someone just asking for a friend
• 14:05
  Speaker 1: who was thinking about buying a car or maybe thinking
• 14:07
  Speaker 1: about getting a new phone, what would your advice be.
• 14:10
  Speaker 4: It's a great question. It's probably what everybody's thinking. And
• 14:13
  Speaker 4: just like the share market, which is a sea of
• 14:16
  Speaker 4: read today, there's no buyers. Why is there no buyers?
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  Speaker 4: Because it could be five, ten, fifteen percent cheaper, So
• 14:22
  Speaker 4: hold on, Well, there may be a better deal in
• 14:25
  Speaker 4: it for you if you can just hang out a
• 14:27
  Speaker 4: little bit longer.
• 14:39
  Speaker 1: Vesnopoljak is The Australian's Business editor. This story's moving fast
• 14:44
  Speaker 1: and you can keep up with the latest all the
• 14:46
  Speaker 1: time at the Australian dot com dot au