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The thing that flummoxed the Reserve Bank · Inside Politics

• 0:00
  S1: From the newsrooms of the Sydney Morning Herald and The Age.
• 0:02
  S1: This is inside politics. I'm Jacqueline Maley. It's Friday, February 21st. Well,
• 0:10
  S1: the reserve Bank finally answered our fiscal prayers this week
• 0:13
  S1: and announced an interest rate cut of 0.25%, providing relief
• 0:18
  S1: to stretched mortgages across the land. But arguably, no one
• 0:22
  S1: was sweating on the rate cut more than the Albanese government,
• 0:25
  S1: which desperately needed a strong sign that the cost of
• 0:28
  S1: living crisis has turned a corner. But what message did
• 0:31
  S1: the reserve Bank send more broadly about the persistent problem
• 0:34
  S1: of inflation? Will one rate cut be enough to make
• 0:38
  S1: a difference for Australians? And if it does make a difference,
• 0:41
  S1: will they reward the government by voting Labour at the
• 0:43
  S1: next election? Joining me to discuss today we have our
• 0:47
  S1: senior economics correspondent Shane Wright, and later in the podcast
• 0:50
  S1: we will talk about the national security speech given this
• 0:53
  S1: week by ASIO boss Mike Burgess. And for that chat,
• 0:56
  S1: we will have our national security correspondent Matthew Knox. But
• 0:59
  S1: for the time being. Hello, Shane.
• 1:01
  S2: Well, you're starting with age rather than wisdom. Clearly in
• 1:04
  S2: the lineup for this, I think.
• 1:06
  S1: I think you can claim both of those things. Shane,
• 1:09
  S1: talk to us like we're not economists, which most of
• 1:12
  S1: us are. The reserve Bank gave us a 0.25% rate
• 1:17
  S1: cut on Tuesday, but the message from the bank was
• 1:19
  S1: rather mixed. What did the bank board say in layman's terms?
• 1:22
  S2: Right. In Michelle Bullock's terms, yes, we've cut interest rates
• 1:27
  S2: because we think a bit of inflation has come out
• 1:29
  S2: of the economy, but we're not yet convinced it's dead
• 1:32
  S2: and buried and cremated, to paraphrase a former prime minister.
• 1:36
  S2: And so this was one of the most interesting aspect
• 1:39
  S2: of this, because as the figures are showing, inflation is falling.
• 1:43
  S2: There is no doubt about that, particularly if you're trying
• 1:47
  S2: to build a house, which has been the big problem
• 1:48
  S2: over the last 2 or 3 years. It's coming down. However,
• 1:53
  S2: financial markets have been saying for ages, oh, we think
• 1:56
  S2: the RBA is going to cut probably a full percentage
• 1:59
  S2: point this year. Michelle Bullock went out of her way
• 2:03
  S2: to say, no, we don't think that's right. She used
• 2:06
  S2: the term unrealistic, saying they've got far more confidence than
• 2:10
  S2: we do in how it's playing out. We've still got
• 2:12
  S2: some concerns about certain parts of the economy. So she
• 2:16
  S2: really tried to dampen the expectations that there would be
• 2:19
  S2: more rate cuts. But the average mortgage is now a
• 2:22
  S2: touch over 600 K. That's a bit over 100 bucks
• 2:26
  S2: a month that you're saving. There's plenty of people who'll say,
• 2:29
  S2: I'll pocket that extra 100 bucks a month, and I'll
• 2:31
  S2: be happy for the moment.
• 2:32
  S1: And how was the news of the rate cut greeted
• 2:35
  S1: by the prime Minister, Anthony Albanese, and also by the opposition?
• 2:39
  S2: Well, I wouldn't say Anthony Albanese was cheering and dancing,
• 2:44
  S2: but you could see it behind his eyes that he's
• 2:46
  S2: pretty damn happy that this has occurred. It's been part
• 2:49
  S2: of the government's hopes, wishes, desires, expectations that this would
• 2:55
  S2: happen on their watch. So you can see both Albanese
• 2:59
  S2: and Treasurer Jim Chalmers relieved that this has happened, because
• 3:03
  S2: it helps feed into their narrative. Um, in terms of
• 3:07
  S2: the opposition's, uh, response, I think it was Albanese who
• 3:12
  S2: said that, uh, Angus Taylor, the shadow treasurer, looked like
• 3:16
  S2: someone had run over the cat in his front yard.
• 3:18
  S2: The the opposition knows as much as you try and say, well,
• 3:23
  S2: this yes, this is welcome, but it's all still the
• 3:26
  S2: government's fault that they're still at interest rates are still
• 3:29
  S2: at 4.1%. Um, so yeah, it's a fine line. And
• 3:33
  S2: we've seen, uh, Peter Dutton had to wind back some
• 3:36
  S2: of his commentary from last week where he effectively said, oh, look,
• 3:40
  S2: the bank may not be able to cut rates. It
• 3:43
  S2: may have to lift interest rates again. And that came
• 3:46
  S2: across as he was effectively telling the reserve Bank, oh,
• 3:49
  S2: hold your fire. Uh, rather than saying, well, we'd love
• 3:53
  S2: an interest rate cut for all those poor Australians out
• 3:56
  S2: there with a mortgage. Yeah, but still blame the government
• 3:59
  S2: for everything else.
• 4:00
  S1: The common wisdom is that the Prime Minister badly needed
• 4:04
  S1: a rate cut to convince Australians that the worst of
• 4:06
  S1: the cost of living crisis is over, and labor has
• 4:08
  S1: actually managed the economy reasonably well through this tricky period.
• 4:13
  S1: Will this rate cut actually deliver political dividends for the
• 4:17
  S1: Albanese government? In terms of voter gratitude, do you think?
• 4:21
  S2: Oh, gratitude might be a bit harsh, might be a
• 4:24
  S2: bit aggressive in your description. Um, put it this way,
• 4:28
  S2: if the bank had not cut interest rates, what would
• 4:31
  S2: the or what would be the counterfactual? There would be
• 4:34
  S2: people absolutely pointing the finger at the government accusing them of. Yeah,
• 4:39
  S2: effectively hurting so millions and millions of Australians. So having
• 4:44
  S2: a rate cut I haven't I can't recall a government
• 4:48
  S2: of any persuasion being upset or voters being upset with
• 4:53
  S2: an interest rate cut that none readily come to mind.
• 4:57
  S2: And so and that's the thinking inside government based on
• 5:01
  S2: decades of, uh, of where this of tracking where this
• 5:06
  S2: comes from.
• 5:07
  S1: Yeah. And it makes sense, but it is a slightly
• 5:10
  S1: confusing picture because the economic fundamentals are a bit all
• 5:12
  S1: over the place. Unemployment is extraordinarily low, isn't it? But
• 5:16
  S1: growth is also very low. So why is the jobs
• 5:19
  S1: market so strong. What's going on.
• 5:21
  S2: Well, this is the thing that's flummoxed. The reserve Bank
• 5:24
  S2: utterly flummoxed the reserve Bank. Um, so there are much
• 5:28
  S2: smarter people than me and you who are struggling to
• 5:31
  S2: come to terms with this. Some of it is in
• 5:34
  S2: my mind. It's because we're catching up, because we hadn't
• 5:37
  S2: employed enough people in certain sectors disability, veterans, aged care.
• 5:42
  S2: And that's where a lot of the jobs growth has been,
• 5:45
  S2: because as a community, we absolutely shafted these sectors by
• 5:49
  S2: not employing enough people. And we've had we've had none. Surprisingly,
• 5:54
  S2: we've had three royal commissions into those, those areas, and
• 5:57
  S2: they've all come up saying, you just don't have enough
• 6:00
  S2: people to provide the services that are being demanded or
• 6:03
  S2: absolutely a measure of civilization. So that's part of it. Um,
• 6:09
  S2: just the way that business in this country has gone about,
• 6:13
  S2: they're not investing enough. Partly. And so if you've got
• 6:17
  S2: a choice between a new piece of kit or a
• 6:22
  S2: worker who might actually be cheaper than buying the new
• 6:25
  S2: piece of kit, or taking a punt or doing something different,
• 6:29
  S2: that may give you big rewards. The business sector is
• 6:32
  S2: probably a bit shy at the moment, and this has
• 6:36
  S2: been a problem for the last 1015 years. That's why
• 6:39
  S2: there's a lot of focus, say, on whether the productivity
• 6:41
  S2: boosts from artificial intelligence is going to come along and
• 6:44
  S2: change everything. But this is this isn't just an Australian problem.
• 6:48
  S2: This is a global problem. And that's why we've seen
• 6:52
  S2: job rates, unemployment rates falling pretty well across the world
• 6:57
  S2: over the last few years.
• 6:58
  S1: Yeah. And what about household consumption? Because that's really the
• 7:01
  S1: driver of economic growth, isn't it? And economic activity is
• 7:04
  S1: just what everyday Australians like you and me buy at
• 7:07
  S1: the shops. How's that going?
• 7:10
  S2: Well, that's been falling in per capita terms for the
• 7:14
  S2: best part of a year. Um, even with really with interest, like,
• 7:19
  S2: put it this way, the cash rate at 4.35. John
• 7:23
  S2: Howard said interest rates will never be lower when they're
• 7:25
  S2: about three and a quarter like we are in historically.
• 7:30
  S2: Interest rates are not that high. They and some people
• 7:33
  S2: will scream and cry and everything else, but they are
• 7:37
  S2: demonstrably not.
• 7:39
  S1: I'm sorry to cut across you there, but isn't that
• 7:41
  S1: sort of a false measure these days, given that household
• 7:44
  S1: debt is huge, mortgages are enormous and we have a cost.
• 7:47
  S1: We have a housing crisis, an affordability crisis.
• 7:50
  S2: Well, I'll cut across to you here, to my friend
• 7:52
  S2: and just say we have made a we have made
• 7:55
  S2: a decision as a community to spend a lot on
• 7:59
  S2: our housing, and you and I could do a whole
• 8:02
  S2: podcast on the fact that my views about the problem
• 8:05
  S2: with how much money you, me and everyone else are
• 8:09
  S2: bidding up housing and what that does to productivity, what
• 8:13
  S2: that does as a community. We've said, right, we value
• 8:16
  S2: bricks and mortar when we could be valuing other things.
• 8:20
  S2: That's that's a that's a that's a huge debate which
• 8:23
  S2: a lot of people don't like going down that because
• 8:25
  S2: they say, I love my house, I get that. But
• 8:28
  S2: if you're willing to take what the average mortgage in
• 8:31
  S2: New South Wales is $811,000.
• 8:34
  S1: Um, I think that's another podcast for another time, that
• 8:38
  S1: whole debate. But I would like to do that. Let's
• 8:41
  S1: bookmark that. Shadow treasurer Angus Taylor said that households are
• 8:44
  S1: the ones who've done the work to bring inflation down.
• 8:46
  S1: He said that households have been tightening their belts, but
• 8:50
  S1: the government has been splashing too much cash. So this
• 8:52
  S1: goes to the criticism that the opposition has launched at
• 8:55
  S1: the government that their cost of living relief, what they
• 8:58
  S1: call their cost of living relief, is actually just put
• 9:00
  S1: more cash into the economy and worsened inflation. Is there
• 9:04
  S1: any truth to that claim? I mean, hasn't hasn't the
• 9:06
  S1: reserve Bank sort of danced around a similar point?
• 9:10
  S2: They well, they talked a bit about this in their
• 9:13
  S2: monetary policy statement, which was also released on the day
• 9:16
  S2: of the cut. And that is yep, government spending has increased,
• 9:20
  S2: but some of that government spending is what has actually
• 9:24
  S2: driven down prices. The government say the subsidies for electricity
• 9:28
  S2: or Commonwealth rent assistance that has reduced the headline rate
• 9:32
  S2: of inflation, that is actually counted as government spending. Absolutely right.
• 9:37
  S2: The RBA also noted there'd been a big increase in
• 9:39
  S2: defense spending. Trying to argue that that is inflationary, I
• 9:43
  S2: think would challenge just about any politician.
• 9:47
  S1: Mhm. The government you wrote this week is already hinting
• 9:50
  S1: at giving further cost of living relief, whether or not
• 9:53
  S1: that's inflationary. The opposition on, for its part, has been
• 9:56
  S1: very critical of cost of living relief, as we've just said.
• 9:59
  S1: Hasn't the opposition sort of hemmed itself in a little
• 10:02
  S1: bit with that? I mean, is it going to be
• 10:04
  S1: able now to go into an election campaign and say,
• 10:07
  S1: by the way, we're going to we're also going to
• 10:08
  S1: give you these bits and pieces to low, low, lower
• 10:11
  S1: your costs or electricity bills or whatever.
• 10:14
  S2: But that's the electricity issue is really interesting because the
• 10:17
  S2: RBA and everybody else is expecting this lift in inflation
• 10:21
  S2: from the second half of the year as those energy
• 10:24
  S2: subsidies roll off. And then you'll be going right if you're.
• 10:29
  S2: Treasurer Angus Taylor, you're saying right now you just have
• 10:33
  S2: to put up with like a big lift, like three,
• 10:37
  S2: $400 a year increase in your electricity bill? That'll be
• 10:41
  S2: the politics around that are really interesting about whether that's
• 10:44
  S2: whether they can maintain that. Because you've got Angus Taylor
• 10:49
  S2: talking the tough talk about that. But ultimately Peter Dutton
• 10:52
  S2: has to win an election, and telling people that would
• 10:56
  S2: make people worse off. You can't have been arguing for
• 10:58
  S2: three years. Higher electricity prices are terrible for people. Are
• 11:02
  S2: we going to make a decision that will lift power prices?
• 11:05
  S2: I think the politics of what they do are in
• 11:08
  S2: that space, which it's unclear, is going to be really interesting.
• 11:11
  S1: Yeah, it's sort of the principles of opposition versus the
• 11:14
  S1: pragmatism of government and wanting to make the leap from
• 11:17
  S1: one to the other. Shane. Fascinating as always, and we
• 11:20
  S1: will have you back on again soon. You are our
• 11:23
  S1: special guest star. Just like Heather Locklear in Melrose Place.
• 11:26
  S2: Well, long standing Heather Locklear was a long standing special
• 11:31
  S2: guest star all through Melrose Place. I'll take that as
• 11:34
  S2: a compliment, my friend.
• 11:35
  S1: She was a veteran. She was a she was a
• 11:36
  S1: valued veteran, just like you. Thank you. See you Shane.
• 11:41
  S2: See you mate.
• 11:48
  S1: And now we welcome our very own Matthew not to
• 11:51
  S1: talk us through Mike Burgess's speech on Wednesday. The speech
• 11:54
  S1: is called his annual threat assessment. What did the ASIO
• 11:58
  S1: boss say?
• 11:59
  S3: Yes, this is basically the one time of year where
• 12:02
  S3: we hear in a lot of detail from the head
• 12:05
  S3: of ASIO, the nation's domestic spy agency. This is only
• 12:08
  S3: the sixth of these annual addresses. Before that, it was
• 12:13
  S3: common to see and hear very little from the head
• 12:15
  S3: of ASIO, because what they do is incredibly secret. But
• 12:19
  S3: I think there is a view in Mike Burgess has
• 12:21
  S3: been noticeable in being a much more out there, much
• 12:24
  S3: more media friendly for the head of ASIO. He believes
• 12:27
  S3: that for ASIO to have the support of the public,
• 12:31
  S3: for the government to want to keep funding it, ASIO
• 12:34
  S3: needs to be a bit transparent about what it's doing.
• 12:38
  S3: It's something that he's become very well known for, is
• 12:40
  S3: he will talk about specific plots, he will talk about
• 12:43
  S3: specific operations that ASIO has been involved with, but he
• 12:47
  S3: will almost certainly never identify the country involved, for example.
• 12:52
  S3: So there's a lot of guessing games the day after
• 12:54
  S3: because he will say one foreign country are was kicked
• 12:58
  S3: out of Australia for having a nest of spies last year.
• 13:01
  S3: He talked about an unnamed politician who had been cultivated
• 13:04
  S3: by foreign spies. This year he was talking about foreign intelligence.
• 13:08
  S3: Operatives are trying to harm and possibly even kill people
• 13:12
  S3: on Australian soil. But he's quite reluctant to go into
• 13:16
  S3: where those people were coming from, which nations they come from.
• 13:20
  S1: He talks specifically about state sponsored murder plots, which is
• 13:23
  S1: a pretty headline grabbing phrase. What was the detail on that?
• 13:28
  S1: And even though he didn't name countries, which of the
• 13:30
  S1: foreign countries that we can surmise might be involved in
• 13:32
  S1: these plots?
• 13:33
  S3: Yes, he did go into quite a bit of detail
• 13:36
  S3: about what was involved in these plots. For example, one
• 13:40
  S3: of them was a foreign intelligence operatives are tricking a
• 13:44
  S3: human rights activist into visiting another country.
• 13:47
  S4: ASIO chief says nation state agents have been caught harassing
• 13:51
  S4: and intimidating individuals who have migrated to Australia, but are
• 13:55
  S4: still considered a threat.
• 13:57
  S5: In one operation, a foreign intelligence service wanted to silence
• 14:00
  S5: an Australian based human rights advocate. The scheme involved tricking
• 14:05
  S5: the unsuspecting activists into visiting a third country where the
• 14:09
  S5: plotters would be waiting. They planned to arrange an accident
• 14:13
  S5: that was anything but accidental, with the objective of seriously
• 14:16
  S5: injuring or even killing the activist.
• 14:19
  S3: This wasn't the only one. There were other examples of
• 14:22
  S3: foreign intelligence agencies wanting to harm and possibly kill a
• 14:27
  S3: human rights activists here on Australian soil. He didn't go
• 14:31
  S3: into the specific countries, but in in those examples. But
• 14:34
  S3: he did name two countries as being of particular concern.
• 14:39
  S3: He spoke about Russia and the threat that Russia poses
• 14:43
  S3: to Australia, particularly in the context of sabotage. It was
• 14:47
  S3: essentially saying that because of our support for Ukraine, You
• 14:50
  S3: could imagine Russia trying to pull off something quite serious
• 14:53
  S3: in Australia in terms of a major cyber attack, possibly
• 14:57
  S3: in terms of attacking a nuclear submarine program. The Aukus
• 15:01
  S3: program that we're involved with is making us a much
• 15:03
  S3: bigger target for foreign operatives are the other country was Iran,
• 15:07
  S3: which we have had experience about a lot of activities
• 15:10
  S3: here in terms of harassing, uh, people from the Iranian diaspora,
• 15:15
  S3: people who go to protests against the Iranian regime, that
• 15:18
  S3: there have been threats and kind of stalking and, and
• 15:21
  S3: social media harassment of those people. So they're two countries,
• 15:25
  S3: a third country that wasn't named, but of course, is
• 15:27
  S3: very relevant here. Is China very active in this space?
• 15:31
  S3: There's quite a well-chronicled history of Chinese officials trying to
• 15:36
  S3: lure people back to China where they might be disappeared
• 15:40
  S3: or they go into imprisonment. But also India has also
• 15:44
  S3: been very active in this space. We've seen examples in
• 15:47
  S3: Canada that are really alarming about Sikh activists who have
• 15:51
  S3: been targeted by what are allegedly Indian spies operating in
• 15:57
  S3: over there. And so that's one possibility here as well.
• 16:00
  S1: Mhm. What about home grown terror threats? What did Burgess
• 16:04
  S1: say about that. Because he also spoke about the risk
• 16:08
  S1: of terror attacks and how that's quite a sort of
• 16:10
  S1: diverse risk. Are we talking about well organized terror plots
• 16:14
  S1: on home on home soil, or are we talking about
• 16:16
  S1: lone wolf actors or a bit of both?
• 16:18
  S3: Yes, he did speak about this, and this is in
• 16:21
  S3: the context of last year. Mike Burgess raised the terror
• 16:25
  S3: threat level in Australia from possible to probable. So in
• 16:30
  S3: recent years, he's been speaking a lot more about the
• 16:32
  S3: issue of espionage and foreign interference. That became the number
• 16:35
  S3: one threat. And it still is. But what he made
• 16:38
  S3: clear last year with that threat assessment level was that
• 16:41
  S3: terrorism is still very real, and it can happen here.
• 16:43
  S3: And we've seen all the stories recently about caravans with
• 16:47
  S3: explosives and whatnot in the context of anti-Semitism. So it
• 16:51
  S3: very much is real. He went into some quite interesting,
• 16:55
  S3: granular detail about the nature of extremism today, and about
• 16:59
  S3: how lots of the old boundaries are breaking down. And
• 17:02
  S3: it used to be relatively easy to categorize how extremists
• 17:06
  S3: and potential terrorists thought and what they did. For example,
• 17:10
  S3: ten years ago, it was very much quite controlled by
• 17:13
  S3: a group like Islamic State from afar directing people to
• 17:17
  S3: conduct attacks. He was talking about here. Now everything's becoming
• 17:20
  S3: really muddled and mixed up, and people are cherry picking
• 17:23
  S3: different extremist views and combining them in ways that weren't
• 17:27
  S3: common before. So the internet's allowing people to cherry pick.
• 17:30
  S3: So it's more individuals self-radicalizing on the internet picking different views,
• 17:37
  S3: and they can pose a threat very quickly at less organized,
• 17:41
  S3: less structured, less easy to keep an eye on than
• 17:43
  S3: in the past.
• 17:44
  S1: Yeah, but that doesn't mean they can't do damage. Apart
• 17:47
  S1: from monitoring the threats. Is there anything that ASIO or
• 17:49
  S1: the government more broadly can do to eliminate these threats,
• 17:52
  S1: or at least mitigate them? Did he talk about that
• 17:54
  S1: at all?
• 17:55
  S3: He did speak about the operations they engage in. I
• 17:59
  S3: think what's clear is that these threats mutate and change.
• 18:03
  S3: They don't go away. Some of the things we were
• 18:05
  S3: concerned about five years ago are not as relevant today.
• 18:09
  S3: There would be a hope that all the action being
• 18:11
  S3: taken on anti-Semitism that's really flared since the the war
• 18:16
  S3: in Gaza won't be such a big issue in the future.
• 18:21
  S3: So really, what he tries to go into, most of
• 18:24
  S3: the things he spoke about are plots that have been
• 18:26
  S3: disrupted by ASIO. So I think Mike Burgess sees this
• 18:29
  S3: speech usually as a way to say, we're getting things done,
• 18:32
  S3: we're keeping you safe. Bad things are going on. You
• 18:34
  S3: don't hear about day to day, but we have a
• 18:37
  S3: very active network that is working to disrupt these threats.
• 18:42
  S3: So that's part of the point of the speech as well.
• 18:44
  S1: There's a there's a PR component, dare we say it?
• 18:47
  S1: Thank you so much, Lottie. That was absolutely fascinating. And
• 18:50
  S1: we'll see you again soon, I'm sure.
• 18:51
  S3: No worries at all.
• 18:56
  S1: Today's episode of Inside Politics was produced by Tammy Mills,
• 19:00
  S1: with technical assistance by Debbie Harrington and Josh towers. Tom
• 19:04
  S1: McKendrick is our head of audio. Inside politics is a
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