Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg Daybreak Asia podcast. I'm Doug Prisner. You can join Brian Curtis and myself for the stories, making news and moving markets in the Apec region. You can subscribe to the show anywhere you get your podcast and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business App.

Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg Daybreak Asia podcast. I'm Doug Prisner. You can join Brian Curtis and myself for the stories, making news and moving markets in the Apec region. You can subscribe to the show anywhere you get your podcast and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business App.

Let's bring in Jing Lu, chief economist for Greater China at HSBC, to take a closer look at China and what we might see from the big shopping festival coming up, the six eighteen festival, and also the general outlook. So we talk about that give and take. Here's China kind of giving Tesla something.

Let's bring in Jing Lu, chief economist for Greater China at HSBC, to take a closer look at China and what we might see from the big shopping festival coming up, the six eighteen festival, and also the general outlook. So we talk about that give and take. Here's China kind of giving Tesla something.

Why so, actually, I think after the pandemics, the shopping patterns thing to change a little bit at East. From what I understand, people may not necessarily fix it on certain kind of shopping festival to shop, but the discount e's sexual thing to spread out of the year. But talking about the six eighteen, we already see on the internet platforms different kind of e commerce start the offering discount on the price.

Why so, actually, I think after the pandemics, the shopping patterns thing to change a little bit at East. From what I understand, people may not necessarily fix it on certain kind of shopping festival to shop, but the discount e's sexual thing to spread out of the year. But talking about the six eighteen, we already see on the internet platforms different kind of e commerce start the offering discount on the price.

War et ceter So ching Leu, I'm curious when you look at a festival like six eighteen, is there a big generational gap? There is this primarily geared toward younger shoppers and older aged consumers maybe are not as interested in participating. They're focused maybe in other areas of the economy, and if they're thinking about what's going on in the real estate market, the housing market, maybe they're feeling a little less optimistic that there is a divide, a generational divide when you look at the Chinese consumer in the retail environment.

War et ceter So ching Leu, I'm curious when you look at a festival like six eighteen, is there a big generational gap? There is this primarily geared toward younger shoppers and older aged consumers maybe are not as interested in participating. They're focused maybe in other areas of the economy, and if they're thinking about what's going on in the real estate market, the housing market, maybe they're feeling a little less optimistic that there is a divide, a generational divide when you look at the Chinese consumer in the retail environment.

Not necessarily right now, China is actually offering some treaty, you know, for the durable goods, and some of the older generations also take advantage of this and try to exchange their existing home appliances or even autos into a newer and more energy efficient ones. And talking about the consumption in general, I think here the story is the same in a sense that after pandemic, people seem to rotate to service related consumption. So we have seen, for example, the service retail cells seem to grow at double the speed of the goods retail cells this year and laster more or less the same.

Not necessarily right now, China is actually offering some treaty, you know, for the durable goods, and some of the older generations also take advantage of this and try to exchange their existing home appliances or even autos into a newer and more energy efficient ones. And talking about the consumption in general, I think here the story is the same in a sense that after pandemic, people seem to rotate to service related consumption. So we have seen, for example, the service retail cells seem to grow at double the speed of the goods retail cells this year and laster more or less the same.

Do you think then that perhaps we are underestimating potential growth in China, simply because as you say there, that some of the spending is switched from goods to services and maybe the data doesn't quite reflect it.

Do you think then that perhaps we are underestimating potential growth in China, simply because as you say there, that some of the spending is switched from goods to services and maybe the data doesn't quite reflect it.

Yes, and no, I think you know to some extent, the traditional retail sales data only includes one type of services that is a cattering services. And there's this new data series but only dates back to last year, which is a service retail sales. So if we look at, you know, both data theories, certainly the service retail sales is stronger. And I said, no, I think you know. Earlier on you mentioned that does the property sector correction still drag on people's sentiment? I think that's certainly the case. If we look at the consumer confidence index, that still shows that it's not bunds back to the expansionary territory yet.

Yes, and no, I think you know to some extent, the traditional retail sales data only includes one type of services that is a cattering services. And there's this new data series but only dates back to last year, which is a service retail sales. So if we look at, you know, both data theories, certainly the service retail sales is stronger. And I said, no, I think you know. Earlier on you mentioned that does the property sector correction still drag on people's sentiment? I think that's certainly the case. If we look at the consumer confidence index, that still shows that it's not bunds back to the expansionary territory yet.

So when you consider ways in which the government may try to stimulate the economy, we talk a lot about the interest rate environment, but I'm thinking of other steps Beijing may may look to take to try to get more engagement on the part of the consumer. And I understand the property market is a big part of that story and they're trying to address that. But I'm wondering if there are other things that you see that would have the potential for invigorating consumer appetites.

So when you consider ways in which the government may try to stimulate the economy, we talk a lot about the interest rate environment, but I'm thinking of other steps Beijing may may look to take to try to get more engagement on the part of the consumer. And I understand the property market is a big part of that story and they're trying to address that. But I'm wondering if there are other things that you see that would have the potential for invigorating consumer appetites.

I think the current the treating program where actually if a consumer tried to treating their combustion engine car, they can get up to ten thousand n of the credit to purchase a new car. That certainly helped. We see that the recent auto cells seem to reflect on that kind of trend. And other than that, I think the big problem is still if we look at the saving straight of the household, the trend is upward sloping, which means a lot of consumers are still trying to I mean, household are still trying to say for their own winning days. So the government has a lot to do trying to pick up the social city there. They're doing it, probably not quickly as a market would wish, but they have taken steps on that.

I think the current the treating program where actually if a consumer tried to treating their combustion engine car, they can get up to ten thousand n of the credit to purchase a new car. That certainly helped. We see that the recent auto cells seem to reflect on that kind of trend. And other than that, I think the big problem is still if we look at the saving straight of the household, the trend is upward sloping, which means a lot of consumers are still trying to I mean, household are still trying to say for their own winning days. So the government has a lot to do trying to pick up the social city there. They're doing it, probably not quickly as a market would wish, but they have taken steps on that.

Jinglu. When I was looking at the data yesterday, you know, I felt that it was quite mixed. You know, it's nice that retail sales had a little bit of a pot but when looking at the property prices and property investment, investment was weaker than expected, and fixed asset investment was weaker than expected, and also home prices were weak. They were actually negative, But that doesn't necessarily tell the whole story because you can understand how prices. I mean, it's not prices. We want to see sales. Okay, So what do we know about actual property sales?

Jinglu. When I was looking at the data yesterday, you know, I felt that it was quite mixed. You know, it's nice that retail sales had a little bit of a pot but when looking at the property prices and property investment, investment was weaker than expected, and fixed asset investment was weaker than expected, and also home prices were weak. They were actually negative, But that doesn't necessarily tell the whole story because you can understand how prices. I mean, it's not prices. We want to see sales. Okay, So what do we know about actual property sales?

Actually, yeah, I agree with you. I think in China, in particular during the rating in days, we have seen lots of local government in post different kind of price controls, usually setting the price setting of new homes below the market price. From that perspective, it probably is more informative to look at sales. And when it comes to sales, I think it's kind of interesting. We read the headline new Thing that the new home sales still down double digit, But if we look deeper, there's different type of new homes. One is the completed new homes, the other is pre sale, and in China, pre sale is the dominant mode of new home sales. And we see the clear contrast. For the completed new home sales it's already double digit growth, but for the pre sale new home sales it's still double digit contraction.

Actually, yeah, I agree with you. I think in China, in particular during the rating in days, we have seen lots of local government in post different kind of price controls, usually setting the price setting of new homes below the market price. From that perspective, it probably is more informative to look at sales. And when it comes to sales, I think it's kind of interesting. We read the headline new Thing that the new home sales still down double digit, But if we look deeper, there's different type of new homes. One is the completed new homes, the other is pre sale, and in China, pre sale is the dominant mode of new home sales. And we see the clear contrast. For the completed new home sales it's already double digit growth, but for the pre sale new home sales it's still double digit contraction.

All right, Does that mean we're going to get more support? Will we get more support from the PBOC?

All right, Does that mean we're going to get more support? Will we get more support from the PBOC?

Yes? I think you know here what's backing is still some potential household hesitate because they don't know whether they get what they're paying for. We need definitely more help, not just from the PVOC. I think in general we need the kind of the backup from the central government to ensure the home buyers either they get what they they are paying for or they get a refund if there's a default from the developer side.

Yes? I think you know here what's backing is still some potential household hesitate because they don't know whether they get what they're paying for. We need definitely more help, not just from the PVOC. I think in general we need the kind of the backup from the central government to ensure the home buyers either they get what they they are paying for or they get a refund if there's a default from the developer side.

All right, let me throw you a curveball. You didn't like the curveball at the beginning, but throw another one here. Does involve Tesla? It seems like Tesla and Apple are sort of fair haired boys in China. And you know, what is it about about foreign investment and foreign companies with China? Does it have favorites like Apple and Tesla?

All right, let me throw you a curveball. You didn't like the curveball at the beginning, but throw another one here. Does involve Tesla? It seems like Tesla and Apple are sort of fair haired boys in China. And you know, what is it about about foreign investment and foreign companies with China? Does it have favorites like Apple and Tesla?

You mean from the government perspective or.

You mean from the government perspective or.

Yeah, policymakers, Yeah, yeah, I think right now the Chinese government is very eager to engage the foreign you know, investors and corporate alike.

Yeah, policymakers, Yeah, yeah, I think right now the Chinese government is very eager to engage the foreign you know, investors and corporate alike.

Actually, I was, you know, in a business trip both last week and yesterday to Shanghai. I saw a lot of corporates actually visiting China.

Actually, I was, you know, in a business trip both last week and yesterday to Shanghai. I saw a lot of corporates actually visiting China.

Yeah, okay, we'll have to leave there, Jing, thanks so much, Jing Liu chief economist at HSBC on China. Joining us now on the program for a closer look at markets is Andrew Slimmon, head of Applied Equity Advisors, that team at Morgan Stanley Investment Management. Andrew, thanks very much for taking out the time to be with us. How convinced are you at the moment that inflation will continue edging lower and is not about to switch direction?

Yeah, okay, we'll have to leave there, Jing, thanks so much, Jing Liu chief economist at HSBC on China. Joining us now on the program for a closer look at markets is Andrew Slimmon, head of Applied Equity Advisors, that team at Morgan Stanley Investment Management. Andrew, thanks very much for taking out the time to be with us. How convinced are you at the moment that inflation will continue edging lower and is not about to switch direction?

Great question, Thanks for having me on. One of the concerns I have is the way inflation is measured, which is month over month, but it's also year over year comparisons. And last year in the spring we had very high inflation, so inflation was coming down, but as you got to the summer, the inflation numbers last year got much lower and below four percent. So I think the comparisons for June and July will get tougher year or of a year, which is why I think jer and pala is trying to focus on month over month. But that concerns me that the market has just taken gospel that inflation's coming down, and really what I think about it as an equi manager, the market's gone up forty percent off the October low. It's rally seven out of eight months, we're due for some type of pullback here and what could cause it? And I think stickier than expected inflation certainly could be, you know, one of the one of the causes.

Great question, Thanks for having me on. One of the concerns I have is the way inflation is measured, which is month over month, but it's also year over year comparisons. And last year in the spring we had very high inflation, so inflation was coming down, but as you got to the summer, the inflation numbers last year got much lower and below four percent. So I think the comparisons for June and July will get tougher year or of a year, which is why I think jer and pala is trying to focus on month over month. But that concerns me that the market has just taken gospel that inflation's coming down, and really what I think about it as an equi manager, the market's gone up forty percent off the October low. It's rally seven out of eight months, we're due for some type of pullback here and what could cause it? And I think stickier than expected inflation certainly could be, you know, one of the one of the causes.

I'm curious about another. I mean, if you're joining us on a day when both the ES and P and the Nasdaq hit record highs today, a number of analysts have expressed a bit of concern about how narrow breadth has been and how concentrated the market's leadership has really been, and you know, some of the big megacap tech names. We've talked about it at nauseum. Is that a concern that you share, well.

I'm curious about another. I mean, if you're joining us on a day when both the ES and P and the Nasdaq hit record highs today, a number of analysts have expressed a bit of concern about how narrow breadth has been and how concentrated the market's leadership has really been, and you know, some of the big megacap tech names. We've talked about it at nauseum. Is that a concern that you share, well.

I think you have to be a little careful because if all you do is look at price action, and I'm not saying anyone does, but that a lot of those comments, I question that because fundamental uh performance validates it. In other words, yes, the megacap tech socks are you know, kind of sucking the oxygen out of the room, but they also have the best fundamentals. They have produced the strongest earnings, They are the most aggressive buy back buyers of their own stocks. So I'm just a little bit cautious on those to say, wow, these socks is ridiculous. What's going on. It's not ridiculous what's going on. They're fundamentals validated, Andrew.

I think you have to be a little careful because if all you do is look at price action, and I'm not saying anyone does, but that a lot of those comments, I question that because fundamental uh performance validates it. In other words, yes, the megacap tech socks are you know, kind of sucking the oxygen out of the room, but they also have the best fundamentals. They have produced the strongest earnings, They are the most aggressive buy back buyers of their own stocks. So I'm just a little bit cautious on those to say, wow, these socks is ridiculous. What's going on. It's not ridiculous what's going on. They're fundamentals validated, Andrew.

You know, we've had a number of drivers here and some have gotten better here of late. So one might think that at some point money will just naturally because evaluations flow out of that narrow band at the top and into some of the others. Because you have a secular growth driver like AI, you've got general optimism over the economy. We talked about, corporate earnings have been better, and these slightly better than expected readings on inflation, and then the potential for rate cuts later in the years. So that's a lot of positives, isn't it.

You know, we've had a number of drivers here and some have gotten better here of late. So one might think that at some point money will just naturally because evaluations flow out of that narrow band at the top and into some of the others. Because you have a secular growth driver like AI, you've got general optimism over the economy. We talked about, corporate earnings have been better, and these slightly better than expected readings on inflation, and then the potential for rate cuts later in the years. So that's a lot of positives, isn't it.

Yeah. I mean, I look, we're in a couple a couple of weeks, actually more about four weeks. We're gonna start getting earning season here in the States, and I think it's going to be strong for a lot of areas like the you know, the big money center, banks, insurance companies, a lot of financials are going to report very good numbers, and so I think this narrow breadth will broaden out when the recognition that there are a lot of industries doing well not just you know, AI tech related, So yeah, I think that is a that will be good. So fundamental earning strength has come year to day in areas well beyond just the megacap texbocs, well beyond just the AI plays. It just seems like right now that's the focus, but that could shift as we get into earning season. People as oh, these you know, financials are pretty cheap and they're doing well.

Yeah. I mean, I look, we're in a couple a couple of weeks, actually more about four weeks. We're gonna start getting earning season here in the States, and I think it's going to be strong for a lot of areas like the you know, the big money center, banks, insurance companies, a lot of financials are going to report very good numbers, and so I think this narrow breadth will broaden out when the recognition that there are a lot of industries doing well not just you know, AI tech related, So yeah, I think that is a that will be good. So fundamental earning strength has come year to day in areas well beyond just the megacap texbocs, well beyond just the AI plays. It just seems like right now that's the focus, but that could shift as we get into earning season. People as oh, these you know, financials are pretty cheap and they're doing well.

I remember back in the day that morganstantly had the Cyclical Index and the Consumer Index. I don't even know if they still exist, but the Consumer Index was oftentimes very useful for getting a read on the health of the American consumer. And we've got this retail sales data that is due this week. How are you feeling about the buying power of America consumers? Is it beginning to fade a little bit?

I remember back in the day that morganstantly had the Cyclical Index and the Consumer Index. I don't even know if they still exist, but the Consumer Index was oftentimes very useful for getting a read on the health of the American consumer. And we've got this retail sales data that is due this week. How are you feeling about the buying power of America consumers? Is it beginning to fade a little bit?

It's the US consumer clearly. I've listened to so many conference calls and retailers, and what's clear is companies that were aggressive price takers, that raise prices the last couple of years, you know, whether that's Coffy or Hamburgers or whatever, they're the ones that are suffering. But the companies that have kept prices low the big box retailers, they're not suffering. So I think it is the consumer not weakening, just pushing back on the higher prices. And that's actually really healthy, and it tells me that the consumer isn't just willing to take any price possible. So yeah, I'm not sure it's weakening. It's just becoming pickier.

It's the US consumer clearly. I've listened to so many conference calls and retailers, and what's clear is companies that were aggressive price takers, that raise prices the last couple of years, you know, whether that's Coffy or Hamburgers or whatever, they're the ones that are suffering. But the companies that have kept prices low the big box retailers, they're not suffering. So I think it is the consumer not weakening, just pushing back on the higher prices. And that's actually really healthy, and it tells me that the consumer isn't just willing to take any price possible. So yeah, I'm not sure it's weakening. It's just becoming pickier.

That's how you get inflation down, is you know, higher price. That's the way it's supposed to work. You know, so exacting, But listen, Andrew, I mean, one of the possible negatives, for sure, is just the sheer weight of debt and deficits. That's a major concern and could come home to roost. The only problem is it's a little bit like not moving to southern California because of the big earthquake that might be coming.

That's how you get inflation down, is you know, higher price. That's the way it's supposed to work. You know, so exacting, But listen, Andrew, I mean, one of the possible negatives, for sure, is just the sheer weight of debt and deficits. That's a major concern and could come home to roost. The only problem is it's a little bit like not moving to southern California because of the big earthquake that might be coming.

Now.

Now.

I know that might sound cute to you, but I think you get the gist of the question. I mean, is.

I know that might sound cute to you, but I think you get the gist of the question. I mean, is.

That another way. I've been running these strategies for a long time, and it's the number one question I've gotten the last fifteen years. And if you were underweight equities because you're worried about the deficit fifteen years ago, I wouldn't be around. So I know the deficit is an issue, but I look at the dollar and say, well, if it was a big issue, the dollar would be weakening. If it was a major issue, treasury yields wouldn't you know, wouldn't be where they are, they'd be higher. And so I don't think I'm smart enough to know what the tipping point is on on deficits. And maybe maybe it's because it's more commentary on the rest of the world than just the dollar. But you know, it's tough to know when that will come.

That another way. I've been running these strategies for a long time, and it's the number one question I've gotten the last fifteen years. And if you were underweight equities because you're worried about the deficit fifteen years ago, I wouldn't be around. So I know the deficit is an issue, but I look at the dollar and say, well, if it was a big issue, the dollar would be weakening. If it was a major issue, treasury yields wouldn't you know, wouldn't be where they are, they'd be higher. And so I don't think I'm smart enough to know what the tipping point is on on deficits. And maybe maybe it's because it's more commentary on the rest of the world than just the dollar. But you know, it's tough to know when that will come.

Maybe it shows up to a greater degree the closer we get to the election. Do you have a cent of how the election is going to impact market psychology right now or is it a non event basically.

Maybe it shows up to a greater degree the closer we get to the election. Do you have a cent of how the election is going to impact market psychology right now or is it a non event basically.

Well, you know, that's a great question, because my belief the last few months have been well, I mean, if you look at the history of presidential elections, we have the conventions in the summer, and if the incumbent is leading coming out of the conventions, the markets do pretty well because the markets know what they got, you know, it looks like the president is going to get re elected. We know what we have with them, and they like certainty, and if the challengers is leading, well, then the markets weekend because we really don't know what we've got with the Challenger. I think the reason why this is a little different is the challenger has already been president, So rightly or wrongly, you know what you got with both these two gentlemen. So I, on the one hand, I say, okay, So I don't think this presence is going to affect the market nearly as much as it normally does. But I will say this, if the Democrats are elected, you could get a capital gains tax increase and that could cause lots selling after the election.

Well, you know, that's a great question, because my belief the last few months have been well, I mean, if you look at the history of presidential elections, we have the conventions in the summer, and if the incumbent is leading coming out of the conventions, the markets do pretty well because the markets know what they got, you know, it looks like the president is going to get re elected. We know what we have with them, and they like certainty, and if the challengers is leading, well, then the markets weekend because we really don't know what we've got with the Challenger. I think the reason why this is a little different is the challenger has already been president, So rightly or wrongly, you know what you got with both these two gentlemen. So I, on the one hand, I say, okay, So I don't think this presence is going to affect the market nearly as much as it normally does. But I will say this, if the Democrats are elected, you could get a capital gains tax increase and that could cause lots selling after the election.

All Right, Andrew, thanks so much for joining us. Andrew Slim and head of Applied Equity Advisors at Morgan Stanley Investment Management. The Reserve Bank of Australia is expected to hold the cash rate target at four point three five percent at its meeting today. Joining us now to discuss the meeting is James McIntyre, Bloomberg Australia and New Zealand economist. So, James, is it likely that we're going to hear a lot more about higher for longer from the RBA today?

All Right, Andrew, thanks so much for joining us. Andrew Slim and head of Applied Equity Advisors at Morgan Stanley Investment Management. The Reserve Bank of Australia is expected to hold the cash rate target at four point three five percent at its meeting today. Joining us now to discuss the meeting is James McIntyre, Bloomberg Australia and New Zealand economist. So, James, is it likely that we're going to hear a lot more about higher for longer from the RBA today?

Look?

Look?

I think that's the case. I think we'll see the IRBA continuing to articulate that they don't see rates going anywhere anytime soon in either direction. We had a little bit of a stronger CPI data for April coming through and that's likely to keep the RBA a little bit concerned and wanting to make sure that they have inflation returning to targets. So it's going to be not much from them at today's meeting, just articulating that they think that they can remain patient and we'll have to see what they come and do in August, which is going to be the next key catalyst or key meeting, when they'll update their forecast and we'll get a stronger view from them there.

I think that's the case. I think we'll see the IRBA continuing to articulate that they don't see rates going anywhere anytime soon in either direction. We had a little bit of a stronger CPI data for April coming through and that's likely to keep the RBA a little bit concerned and wanting to make sure that they have inflation returning to targets. So it's going to be not much from them at today's meeting, just articulating that they think that they can remain patient and we'll have to see what they come and do in August, which is going to be the next key catalyst or key meeting, when they'll update their forecast and we'll get a stronger view from them there.

I think Australia seems to be extremely sensitive to rates when you look at the real estate component, housing, the rental market as well. When you look at that part of the landscape, how does it look, particularly the rental story.

I think Australia seems to be extremely sensitive to rates when you look at the real estate component, housing, the rental market as well. When you look at that part of the landscape, how does it look, particularly the rental story.

Yeah, the rental story remains quite acute, quite strong in terms of the very big population surge that's come through migrants, international students and working holidaymakers coming back after the borders were reopening following the pen and that's created intense pressure within the rental markets of Sydney and Melbourne, the two largest capitals and the two biggest components of the rental index when it comes to the CPI as well, So there's still a lot of pressure there, some signs hopefully towards the end of the year that it will begin to loosen up as the migration inflow peaks, which it has done and rolls over, but there's enough there to keep the RBA at bay and keep that inflation pressure high. There's a real two speed dynamic within the housing market overall, though the price growth in Sydney and Melbourne has eased off with the affordability with those high interest rates being very very effective at moderating repayments and putting a big dent on borrowing capacity, whereas in other capital cities where prices are somewhat below what people can afford, you've still got that strong price going on there. So there's a lot of heat still in the housing market that if they were to indicate that maybe they were done, or that rates might move lower sometime soon, you could possibly Stoke might not be ready for that sort of dynamic in the economy just yet.

Yeah, the rental story remains quite acute, quite strong in terms of the very big population surge that's come through migrants, international students and working holidaymakers coming back after the borders were reopening following the pen and that's created intense pressure within the rental markets of Sydney and Melbourne, the two largest capitals and the two biggest components of the rental index when it comes to the CPI as well, So there's still a lot of pressure there, some signs hopefully towards the end of the year that it will begin to loosen up as the migration inflow peaks, which it has done and rolls over, but there's enough there to keep the RBA at bay and keep that inflation pressure high. There's a real two speed dynamic within the housing market overall, though the price growth in Sydney and Melbourne has eased off with the affordability with those high interest rates being very very effective at moderating repayments and putting a big dent on borrowing capacity, whereas in other capital cities where prices are somewhat below what people can afford, you've still got that strong price going on there. So there's a lot of heat still in the housing market that if they were to indicate that maybe they were done, or that rates might move lower sometime soon, you could possibly Stoke might not be ready for that sort of dynamic in the economy just yet.

James higher for longer in the United States has been very much at play. I think it's been ten or eleven months or something like that that they've had rates at this level, and everybody talks about the lagged effect. US economy though, has hung in there pretty well. We did see weaker first quarter or GDP for Australia. Tell us a little bit about some of the effects of the lagged of the lag effect on the economy in Australia.

James higher for longer in the United States has been very much at play. I think it's been ten or eleven months or something like that that they've had rates at this level, and everybody talks about the lagged effect. US economy though, has hung in there pretty well. We did see weaker first quarter or GDP for Australia. Tell us a little bit about some of the effects of the lagged of the lag effect on the economy in Australia.

Yeah, so what we had in the first quarter for Australia was a point one percent growth in the quarter. That's what's really interesting there is that Australia's population grew by about point four or point five in that quarter, so really you've had GDP per capita sliding backwards, and so Australia is really hidden a deep downturn in the economy, the biggest per capita decline in GDP since the recession that we had back in nineteen nineteen ninety ninety one, and we've hidden that weakness, that impact from the RBA's tightening by swamping economy with two and a half two point six percent population growth. So that's sort of been what's going on, and it's kept demand and almost actually it's sort of helped firms not have to cut prices so much or allowed them to continue to raise prices. This migration and ongoing demand impulse within the economy, so that's what's going on. But it really is a case of the RBA can be comfortable and needs to be wary on the inflation front so long as we've got that migration support. But as I said, that peak is in and if that demand side begins to falter, that ability for the RBA to stay higher for longer could be pivoted from quite quickly.

Yeah, so what we had in the first quarter for Australia was a point one percent growth in the quarter. That's what's really interesting there is that Australia's population grew by about point four or point five in that quarter, so really you've had GDP per capita sliding backwards, and so Australia is really hidden a deep downturn in the economy, the biggest per capita decline in GDP since the recession that we had back in nineteen nineteen ninety ninety one, and we've hidden that weakness, that impact from the RBA's tightening by swamping economy with two and a half two point six percent population growth. So that's sort of been what's going on, and it's kept demand and almost actually it's sort of helped firms not have to cut prices so much or allowed them to continue to raise prices. This migration and ongoing demand impulse within the economy, so that's what's going on. But it really is a case of the RBA can be comfortable and needs to be wary on the inflation front so long as we've got that migration support. But as I said, that peak is in and if that demand side begins to falter, that ability for the RBA to stay higher for longer could be pivoted from quite quickly.

It's very interesting recently we've heard from the Treasure of Australia Jim Chalmers, who was saying that he's cautiously confident that maybe the government can bring in a soft landing. Now I know that that's separate from the RBA, but generally speaking, does it appear as though Australia could be headed for some sort of soft landing.

It's very interesting recently we've heard from the Treasure of Australia Jim Chalmers, who was saying that he's cautiously confident that maybe the government can bring in a soft landing. Now I know that that's separate from the RBA, but generally speaking, does it appear as though Australia could be headed for some sort of soft landing.

Well, it really depends on how you how you characterize a soft landing. Right, so we will see the economy avoid a technical recession. But that's because as I said, that very very strong surgeon growth. So on a per capita basis, it's GDP is not on a soft landing at all. We're already in a hard landing. You know, economy, as I said, it's got the biggest grays on its knee since the nineteen ninety ninety one recession on that per capita basis. So that soft landing, that migration story has really kind of helped deliver that soft landing, not really necessarily anything that the government themselves has done. As we move through though it, you know, if the RBA does begin to ease up at the end of this year or early next year, we should see that economy continue to grow and so by that big perspective, that's a soft landing.

Well, it really depends on how you how you characterize a soft landing. Right, so we will see the economy avoid a technical recession. But that's because as I said, that very very strong surgeon growth. So on a per capita basis, it's GDP is not on a soft landing at all. We're already in a hard landing. You know, economy, as I said, it's got the biggest grays on its knee since the nineteen ninety ninety one recession on that per capita basis. So that soft landing, that migration story has really kind of helped deliver that soft landing, not really necessarily anything that the government themselves has done. As we move through though it, you know, if the RBA does begin to ease up at the end of this year or early next year, we should see that economy continue to grow and so by that big perspective, that's a soft landing.

All right, James, thanks very much, and we know you've said that you do expect the next rate move will be a cut. It's just a matter of when. And now we've been chatting with James McIntyre, Bloomberg Australia and New Zealand economists.

All right, James, thanks very much, and we know you've said that you do expect the next rate move will be a cut. It's just a matter of when. And now we've been chatting with James McIntyre, Bloomberg Australia and New Zealand economists.

This has been the Bloomberg Daybreak Asia podcast, bringing you the stories making news and moving markets in the Asia Pacific. Visit the Bloomberg Podcast channel on YouTube to get more episodes of this and other shows from Bloomberg. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business app.

This has been the Bloomberg Daybreak Asia podcast, bringing you the stories making news and moving markets in the Asia Pacific. Visit the Bloomberg Podcast channel on YouTube to get more episodes of this and other shows from Bloomberg. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business app.