Business Now | 30 January

Published Jan 30, 2025, 8:37 AM

Donald Trump slams the Chair of the US Federal Reserve for not cutting rates... Jarden Chief Economist Micaela Fuchila explains why rates were kept on hold. Plus, Credit Corp CEO on how the firm lifted profit to $44 million.

This is Business Now with Edward Boyd.

Hi, and welcome a Business Now thanks to your company today. I'm Edward Boyd. We're standing by to take you live shortly to a press conference at Reagan Airport in Washington, DC, where officials are expected to give a briefing about the passenger jet that collided with a helicopter earlier today.

So as soon as that happens, we'll take you there.

But coming up on Business Now, the Aussie stock market surge us to an all time high on speculation the Reserve Bank will cut interest rates next month for the first time since twenty twenty. Jardin chief economist Mikayla Fuchilla, we'll explain those details. President Trump has launched an extraordinary attack on the US Federal Reserve for failing to cut interest rates. Overnight, fedshaired Jerome Power has gone on the defensive, saying he hasn't spoken to Trump and has already reduced the cash rate one percent over the past year plus. Ossie debt collector and short term lender Credit Corp. Lifted its profit during the half year thanks to a surge in lending to American customers. Its chief executive, Thomas Bareggi is on the program that's all coming up on Business Now. Other stories today you should know about. National Australian Bank has brought forward its rate cut forecast from May to February, joining its Big four rivals who already have the February board meeting locked in. NAB's economics team made the change after the December CPI numbers confirmed that inflation has moderated faster than the RBA expected, putting pressure on the central Bank to cut rates.

The RBA has kept.

Rates on hold at four point three five percent for more than a year and will hold its first board meeting of the year on February seventeen and eighteen. Interest rate probability forecast has assigned a seventy two percent chance to rates being cut next month. The AX rate indicator implies a ninety five percent chance of a change. NAB economists expect the RBA to gradually reduce rates to three point one percent by February twenty twenty six. Now, as a potential February rate cut looms, we've seen a few business groups today release their pre budget submissions to Treasury. The Australian Chamber of Commerce in Industry has made forty recommendations on behalf of its members, calling its campaign put Business on the Agenda Now. As part of that agenda, AKI is calling for a cap on public spending to no more than twenty five percent of GDP. It also wants to create a new Tax and Federation Reform Commission, with hopes that it could lead to a lower company tax rate. It asks for the definition of a small business to the increased from under fifteen employees to less than twenty five, as well as the permanent introduction of the instant asset right off with the threshold increase to fifty thousand dollars. Another group, for the Australian Restaurants and Cafes Association, also put out its submission today. It's asked for the removal of fringe benefits tax on hospitality businesses, freezing the increase to the alcohol excise for two years, pausing income tax on tipping and gratuities, and the introduction of a ten thousand dollars digit tax rebate to offset the costs of technology for small businesses. Let's see how the stock market finished up today. The local market opened high this morning, led by retailers, energy stocks in the banks, all sectors were in the green ASX two hundred Its surged past eight and a half thousand points during the middle of the day, reaching a new all time high. It did dip back down at the end, finished up almost point six percent. Fuel refiner and retailer Viva kept lifting after its quarterly report earlier this week. Treasury wind Estate surged after it was upgraded by two brokers. The data center builder Megaport continued to bounce back after that deep seek selloff on Monday Tuesday.

Sorry.

The gaming company as Aristocrat Leisure was up to along with diversified minor South thirty two by now pay Later companies. ZIP got hammered today despite posting strong revenue results for the December quarter. The market clearly expected more. It's fell more than twenty five percent. The lender and debt collector Credit Corp dropped sharply after its profit results. The CEO will join us later in the program. Data scrubbing company Appen was sold off to the fund manager Magel and slumped after announcing a series of executive appointments. And metal recycling SIMS was down about three and a half percent. And that's today's market update.

In partnership with Comsek.

We've had a big day for earnings in the US and for more I'm joined by Laura Bezzerati from Comsek. Laura, Meta came through late after trade this afternoon. What did the market think of those results?

Hello, and well it was clearly very well received, receiving metas share price up over two percent in after hours trade. Seeing that investors are clearly pleased. But it wasn't so much its results that caught the attention of investors, but rather comments from CEO Mark Zuckerberg as he talked about the long term plans for the company. He said twenty twenty five will be a really big year and went on to say he expects Meta's AI assistant will become the most widely used in the industry, certainly not showing any signs of concerns after that news about deep Seek a couple of days ago.

Yeah, there are also some results out from Microsoft and from the electric vehicles manufacturer Tesla.

Did they leave up to expectations?

Well, look, these results were mixed. So starting off with Microsoft, it shares a down roughly forty four and a half percent rather in after hours trade, despite exceeding expectations, but revenue guidance for the current quarter actually fell short. Then Tesla it shares over four percent higher in after hours trade, again not its actual results because profits actually fell and they missed on a number of metrics. But Elon Musk said it would be an epic period of growth, which seemed to be enough to reassure investors. So look from here tonight, we will have.

Apple results released out of time. Sorry.

Thanks.

US President Donald Trump has lashed out at the US Federal Reserve and its chairman Jerome Powell for failing to cut interest rates over nine Mister Trump posted on his Truth social platform a short time after the FED kept rates on hold at the range of four point two five percent to four and a half percent. Some extracts from his post include j. Powell and the Fed failed to stop the problem they created with inflation, and the FED has done a terrible job on bank regulation. It's worth noting that mister Trump appointed mister Powell back in twenty eighteen during his first presidency, and mister Powell's term as chair is scheduled to finish in May twenty twenty six. Mister Powell was peppered with questions at his press conference today, and here's how he responded.

I'm not going to have I'm not going to have any response or comment whatsoever on what the President said. It's not appropriate for me to do so. The public should be confident that we will continue to do our work as we always have, focusing on using our tools to achieve our goals and really keeping our heads down and doing our work, and that's how we best serve the public. Could you just come around, whether it's physically commune, Gamers demand view have had no contact.

The Fed has cut one percentage point off the cash rate in America since last year, and has now entered a weight and sea phase where it will assess the impact of the Trump administration's policies on inflation and the economy before.

Making further changes to the cash rate. Well.

For more on this, I'm joined by Mikayla Fitzchilla, Jarden's chief economist for Australia.

Mikayla, thanks so much for your time.

Look, let's start with the FED rates on hold in America, and really it seems due to uncertainty around the Trump administration its policies, they could be on hold for quite a while.

Yes, and it's mostly to where the economic data has been recently, particularly over the last six months, we have seen inflation stabilizing around two and a half percent, and the FED really wants to see inflation at two percent. In addition to that, growth has to remain extremely resilient. Their consumer has to remain resilient, and their labor also, so it's really not a strong case to continue to ease.

What are the big risks that you can see from inflation rising in the US is tariffs. The main thing that the Chairman of the FED is a bit worried about.

In any other cycle where we saw tariffs globally, they tend to be looked through by central banks given that there is one shock to inflation, and that generally gets looked through just like a subsidy. But the other way around, what I think is a big concerning is the rise in shipping costs, which will keep tradeable inflation in the US or those exposed to the currency a little bit more concerning, but in saying that the US dollar has kept extremely strong, so it shouldn't be a major problem. The labor market might be the main one to highlight. Considering employment growth has remained very robust, and the unemployment rate is around the cheap point sorry, four percent level, which is quite strong considering where the rates have been in discycle.

Yeah, same time you have President Trump calling for rates to fall and Jerome Power saying we're holding Does this seem like a bit of an economic overreach from the President to sort of give orders to the head of the US Federal Reserve.

Yes, And I think the Fed has been quite consistent and independent to try to make their decisions on the back of data. They've been quite down on dependent regardless of those risks. You know, trade und seventy measures are at record high since Trump was elected, but there hasn't been anything really delivered just yet. So what we think is going to happen is as we see prices moving, either output down or the labor market pulling down a little bit, growth potentially rolling over, the FED will start to respond to that data over what's going on on their political side.

All right, turning to Australia.

Did the inflation numbers yesterday do you think they took most economists by surprise?

Suddenly they took me by surprise. Early on the non tradable side, we've talked about this before when I when I was on this on this program, that inflation on the services side was quite sticky and there were a lot of problems that was needed. Yesterday's data was actually quite encouraging. There was even declines on the housing component, which makes up about a third of the basket. That's the first time we've seen that in Nahwau and it was driven by the cost of construction declining for the first time, so that's quite encouraging for the RBA to see. We also saw, you know, lucky petrol prices went down. Staff cities are still playing in the in the headline level, so it's had to read what the inflation momentum is. But overall, what we can see is over the last six months inflation has actually called down. So it was great news.

Yeah, trim mean inflation now at three point two percent in the December quarter. So how likely is it for the RBA to cut interest rates next month?

I think very likely. So at the meeting, at the last meeting, they introduce a very modest easy bias, meaning that they're more confident that inflation is moving in the right direction, and that means they can is the rate we don't expect a very deep ease in cycle, but we think is very likely to start in February.

And how many rate cuts do you expect this year?

We expect three. That will take the cashwret to three point six, which means it is slightly restrictive, and that will make sure the RBA remains on the coucial side in terms of inflation, but as well coming back down from that really high level at four thirty five that is now.

And I guess from the RBA board's perspective, when they don't want to make any mistakes here when they start cutting rates, they want to continue cutting rates right. They don't want to have to put them up again if they make some sort of error.

Well, that depends on what's driving the decline. If we are responding to our shock, then the RBA will do our deep ease in cycle and it will continue to cut back to back. But in this particular cycle, it's mostly about where the level of rate is and how consistent or inconsistent is relative to the fundamental So we have growth very weak at the moment of point eight percent, but the labor market actually is telling us that the economy doesn't need that much support with unemployment so low relative to history, so I think the RBA will be we would err on the coursial side in the cypoint and cut very very slowly.

Yeah, you mentioned economic growth a point eight percent. When do you expect it to really start picking up again?

Oh, we see an improvement already. So the quarter four data, which is not available until February, real time indicators for quarter four show that potentially the worst is behind, especially if the consumer. We saw a pickup in spending into quarter four on the back of our heavy discounts around you know, Black Fridays, holidays, Christmas period. That gave us some hope that the worst has it's behind. We don't think growth is going to return to trend, which is around two point five two point seven percent until twenty twenty six, but it's moving towards one point five is out forecast with the end of the year.

MICHAELA. Fachilla from Jarden, Thanks so much for your time.

Now after the break, profit reporting seasons underway in Australia. Debt collector and short term credit provider Credit Corp released its results this morning. Its CEO is up next. Welcome back and we're standing by to take you to that plane crash conference press conference in the United States shortly at first. The ASX listed Credit Corp increased its underlying profit by thirty two percent during the half year to about forty four million dollars. The company, which collects debts and offers short term loans, said it's American business grew twelve percent over the six months to December. So how does a company like Credit Corp assess the strength of the Aussie economy and the consumer I caught up with its CEO, Thomas Pereggi earlier today.

I look from our point of view specifically talking about our business. Conditions for us have not been fantastic, but they're not necessarily indicative of conditions being necessarily that poor. So we haven't really seen any degradation or any significant degradation in the position of the consumers that we deal within Australia over the last few years, so we're not necessarily expecting anything to change very rapidly. The consumers we deal with, of course, are not the mainstream consumers. They're generally people who've had trouble with debt, and they're people who might struggle in good times as well as poorer times, so we're not necessarily the best people to know what's happening to sort of your mainstream consumer in Australia.

Yeah, well, the past few years we've had an elevated level of interest rates in Australia, but the Reserve Bank looks now it's pretty likely to cut rates in February.

Is that good.

News for you or does it make your job tougher and reduce margins?

Well, look, we have seen you know, some consumer humans at the margin, you know, struggle to maintain the sort of repayment arrangements that they have been able to sustain in the past. We don't see because our customers are people who've had trouble with unsecured credit. They generally won't have a home mortgage, so they're not so interst rate sensitive themselves, but they are responsive to sort of employment expectations and employment conditions. So when rates are high and business activity is reducing and hiring intentions lower than the consumers we deal with, they're going to be more nervous about their future prospects for sustained employment, and they'll be more circumspect about making repayments, you know, seeking to keep a bit for a rainy day, I guess. But yeah, lower interest rates. If that stimulates activity and improves hiring intentions, in proves the sort of hours that many of our customers who might be in casual or part time employment are getting, then that's a positive for us.

Yeah, and for our viewers.

Just explain the main sectors of your business and how they work. I know you've got lending, but you've also got debt buying as well.

Yeah. So our lending business is lending to consumers relatively small amounts, a few thousand dollars over a few years, unsecured fast access. So we're generally dealing with people who can't walk into a bank and get an unsecured loan, either through credit circumstances or the fact that they haven't been in employment for long or they might not have built up much of a credit file. So that's our lending business. Our our debt buying business deals with the other side of the coin, people who have historically borrowed from banks and finance companies or incurred obligations to telcodes and utilities, but have had trouble repaying and their debts have been charged off, defaulted and then sold to ourselves, and so we'll take ownership of that debt and we'll try to work with the customer over a period of time to make repayments and recover the amount outstanding. And so that's our business in Australia. We we undertake that debt buying activity both here in Australia and of course in New Zealand and the USA.

Yeah.

I know in Australia you've got the wallet Wizard short term loan product here, and I believe you're launching a digital credit card later this calendar year. Who's that product going to be targeted at.

Yeah, Look, that product is targeted at a similar customer will appeal not so much to that immediate cash need, while at Wizard is all about needing cash for something that's happening today, whereas the credit card is more focused around convenience. I might need to use it in the future. I might pay it off very quickly, or I may need to run a balance in the same way that a traditional credit card would operate. But it's tailored so that it will accommodate again people who might have had trouble with credit in the past and don't have a great credit record or people on lower or less secure income, So it'll provide access to the convenience of a credit card for that proportion of the population who can't presently get access to such a product from mainstream issues like banks.

And just explain why in the past couple of years you've been restricting loans to the used car market and is the outlook for that used car sector starting to improve.

Well, look, for us, we hope it starts to improve. So we've pulled back on our used car lending. Through that COVID period when there were restrictions in supply of new vehicles, used car pricing shot up by around fifty percent, and you know, from our point of view, it just made financing those cars too expensive for our customers and therefore fell outside our kind of risk parameters, what we call our risk appetite, and so we've had to restrict lending.

We're going to take you live now to that press conference in Washington at Reagan International Airport to hear from US officials about the plane crash from earlier today.

Let's listen in

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