Chalmers says RBA changes coming, auction turnaround, cash still king

Published Dec 15, 2024, 5:00 PM

Monday 16 December 2024

Federal Treasurer Jim Chalmers says changes to the Reserve Bank could start happening today, adding an election early next year is unlikely.  

And more, including:

  • Melbourne, for one of the few times this year, is the strongest auction market over the last week

  • Cash isn’t going anywhere 

  • Plus Rio goes big into lithium and a mega fine for consulting group McKinsey for helping market opioids

And don’t miss the latest episode of How Do They Afford That? - summer side hustles for adults and kids. Get the episode from APPLE, SPOTIFY, or anywhere you listen to podcasts.

Today on Fear and Greed, Federal Treasurer Jim Chalmers says changes to the Reserve Bank could start happening today, adding an election early next year is unlikely. Melbourne, for one of the few times this year, is the strongest auction market over the last week, and cash isn't going anywhere. Plus Rio goes big into lithium and a mega fine for consulting group McKinsey for helping market opioids. Welcome to Fear and Greed, daily business news for people who make their own decisions. It is Monday, the sixteenth of December twenty twenty four. I'm Michael Thompson and good morning, Sean Aylmer.

Good morning, Michael, Sean.

The main story this morning. Federal Treasurer Jim Chalmers says that new appointees to the Reserve Bank Interest Rates Setting Committee could happen as soon as today, as he highlighted the government's economic credentials following last week's drop in the unemployment rate to three point nine percent. Surprise drop, Sean surprise drop. Jim Chalmers was certainly crowing about it yesterday. It was an.

Extraordinary result, really, but he wouldn't be drawn about when the Reserve Bank will cut interest rates. Of course, a lower unemployment rate does nothing to convince the Reserve Bank to cut rates. In fact, it probably does the opposite. On the new interest rate Setting Committee, he said he had had collaborative discussions with his opposition counterpart Angus Taylor yesterday. Mister Taylor wasn't quite so complimentary about Dr Chalmers. This, of course, is a result of the last sitting day of Parliament pushing through legislation that establishes this news interest rate Setting Board for the Reserve Bank. There's a second board called the Government's Board that all kicks off next year. Doctor Chalmers also hosed down speculation of an election early next year, saying that the government is working on a twenty fifth of March budget. Now, if the governments in caretaker mode, if it's called an election, it's not going to hand down a budget. Doctor Chalmers rejested suggestions that the time of the next election could depend on the potential for an interest rate cut in the first half of next year. Yeah, yeah, yeah, yeah. Every politician worth airssualt is interested when interest rates are again to fall.

Absolutely. The other big thing that was being discussed yesday doctor Chalmers wasn't so positive about Opposition leader Peter Dutton's nuclear plans, less.

Positive than he was about the unemployment rate. That is true. A brief recap, the Coalition claims its nuclear power plan will cost three hundred and thirty one billion dollars over the next couple of decades. That's about two hundred and sixty three billion dollars less than Labour's renewable plans over the next twenty five years. Of course, these are the opposition's costings. Opposition leader Peter Dunton released the costings on Friday. It's based on the goal of net zero emissions electricity by twenty fifty. Under coalition's model, renewable energy will still be the dominant source of power by twenty fifty, responsible for fifty four percent of generation in the national electricity market, but nuclear power would provide about thirty eight percent. Under the government's policy, about ninety four percent of generation by twenty five would be renewable energy, the rest coming from gas and storage. It's the costings, though, which is really driving the debate at the moment, with Jim Chalmers saying the only way for the Opposition to achieve its costings would be to shrink the economy substantially. He said the plan assumes a four trillion dollar hit to economic output over the next twenty five years. Basically, he said, it's ludicrous to think that the economy will need less power in the future.

John, do you think anyone's listening in terms of politics at this so late in the year, with Christmas just around the corner, do you think most people on the street are just fed up with politics and this kind of argie bargie over policy and costings into the future. It's just come on, guys, give it a rest, let's pick it up again in the new year. Yeah.

Maybe it's such an important debate. I think it's really good that the opposition has a different energy plan to the government because you can actually choose between the two, and it's I mean, I think the debate is whether you want nuclear or not. It's not about how much it's going to cost. I think that's the first debate, and then we should worry about the costings. But as you say, Michael, probably most of us are tide by this time. Our last week here at fear and greed, at least our last week of full shows, so yeah, I'm getting bit tired of it, No doubt.

We've got something quite special coming up over Christmas and a couple of weeks. It's just something a little bit different, something a little bit fun, but something that is really must listen podcasting.

Ah for summer must listen.

Got not over selling it here, am I sean? No? No, possible, not at all. All Right, let's talk property. Things are winding back and you're not going to tell us what it is. No, I'm teasing, but I'll give you a clue. There is a lot of really exciting stuff. If you are interested in investing, if you are interested in property, if you are interested in markets and companies and getting some ideas and some tips on everything that you might need to be looking for at twenty twenty five, then do not miss a moment of fear and greed over the next few weeks.

And the best way to not miss it is follow us. Whatever your podcast provider is. Hit follow. You're going to get every show, yeah, well said, sometimes there's two shows today.

Oh yeah, yeah. Anyways, you sound so excited about this, John, It is going to be great, So make sure we do hit follow. Let's talk property. Things are winding back for the summer break in the auction market, though John, there were still more than two thousand homes up for sale last week, and I think that the kind of standout feature for me was that it's a reversal for most of the most of the year because Melbourne is now looking stronger than Sydney.

Yes. In fact, just this based on just this week's auction preliminary clearance rate, Melbourne was better than any other city in the country. I don't think from memory, I don't think that has happened. So, you know, for Melbourne, people leaving the best to last. Adelaide to town that seems to always have a high clearance rate sort of high seventies, sixty three percent last week, below Melbourne sixty nine percent world on Melbourne that's where I Reckoncidey was also sixty three percent. As we said last week, the market is ending the year with a whimper, but still prices have risen five and a half percent over twenty twenty four nationally according to core Logic. It really does show that the housing market is more was based on more than just interest rates and what's happening there. We've got higher interest rates but we have five and a half percent growth in house prices now in the last two months. Mostly that's been about a lack of supply, also population growth. You put those two together, it's kept pressure on prices all year. Been a fascinating year in the auction market and the housing market.

Yeah, it certainly has been. Just tell us quickly, Sean before we go to a break about the interview that you have coming up after the show. You're speaking with Libby Newman from Vanguard.

We talked to Libby all about the value of a financial advisor, and everyone knows that fear and greed. We are big fans of financial advisors. Always take advice if you can before making investment decisions. I ask some of the myths around advisors whether they're worth it, you know, they're trying to sell me something, all that sort of stuff. So it's a really interesting chat with Libby, who takes those myths, hurdles, challenges head on.

Yeah, it is a great conversation. It is coming up after the show. We still have plenty to get through, Sean. We're talking lithium. We're talking about cash. Why cash is still king or at very least a senior Royal. Still we've got a bumper edition for you Monday. We'll be back in a moment with the rest of the day's business news. Sean cash isn't going anywhere, with the Reserve Bank saying it is committed to lowering merchant card payment costs and ensuring cash is a viable means of payment for shoppers and businesses.

I mean, I think debit cards are king now. Maybe this is like a prince once removed. The thing is like those princes, once removed, they're always going to be hanging around. And that's the point. Last week, Reserve Bank Assystem Governor Financial System Brad Jones says Australia's payments system systems are world class, but a concerned effort will be needed to keep it that way. He said cash remains an important means of payment for many people in the community, including more vulnerable members of society. Mister Jones said it remains an important store of value, particularly during periods of economic uncertainty, and aids the resilience of the overall payments system. That's a really important thing about cash. If people don't have debit cards and credit cards, you still can have cash. So the actual payment system is much better when you've got all different parts of it. For those reasons, the Government Reserve Bank remained committed to supporting access to cash. A big issue with cash at the moment is actually getting it around the country. On Friday, the competition watchdog the HBC issued a draft determination to grant the Australian Banking Association, major banks, major retailers and super markets, Ozsie, Post and other industry participants basically the right to collaborate to ensure the future continuity of cash in transit services. The Hill see, it's all about making sure there's enough competition in the market. It's always picking people for not being competitive. Quite the opposite of this case says this is such a critical issue. You guys can all work together now.

Sean. Rio Tinto will spend nearly four billion dollars to expand its Ringcon Ringcon. I'm assuming it's ring Coon. I'm not very far with Argentinian mind names. It is the big lithium project for Rio in Argentina and it's really highlighting its faith in the commodity that is so vital for batteries.

Yeah, fascinating what Rio is doing. The Board's approved spending two and a half billion US that's about it's almost four billion Aussie to expand the project. It comes after Rio closes in on arcadium lithium. That was a six point seven billion dollar acquisition that's going to through the processes and hurdles. At the moment, the mining giant wants to become a world leadium leading lithium producer, and it's investing in assets at a time when lithium prices are really low. If you're big enough, not a bad idea to do that, Rio said. Argentina's economic reforms provide a favorable environment for investment, offering benefits such as lower tax rates, accelerated depreciation and regulatory stability. If successful taking over arcadium, it means Rio will have three lithium Brian supersites in Argentina. It also wants to build projects in South America and Canada that it will pick up from arcadium. So what Rio, of course huge in iron ore in this country at least in copper as well, wants to push into lithium just quickly.

Local markets, where did we finish up last week?

The local share market filled were four week low on Friday morning, after a week leading from Wall Street. It made up some ground and ended up down about half a percent to eight to ninety six points. For the week, the market was down a couple of percent. The big miners led the market lower. On Friday. The banks were mixed. Energy index outperformed a couple just worth mentioning. Westpac held its annual general meeting, the last route gooing CEO Peter King. At that meeting, mister King said the bank is well positioned and knows that more needs to be done to tackle climate change. Of course, one of the big shareholders in westpak Ethical Australian Ethical. Oh, Michael, I've forgotten.

The name Australian Ethical.

Thank you. I didn't forget it. Australian Ethical. It had put in a protest vote at the AGM. Also, South thirty two fell more than a percent despite receiving the backing of Western Australia's Environment Minister to extend the life of its Warsley illuminate project.

We need to talk about another story from markets on Friday. Sean, the biggest IPO on the ASX this year, had really rather an inauspicious opening, didn't It was shares down ten percent on Friday it's first day of trading.

It's a property company called did gCO Infrastructure, valued at two billion dollars, biggest to IPO in more than six years, which just goes to show how small the market is. Of the mark for IPAs is in Australia. It owns three data centers that once another twelve in Australia and North America. Investors thought the offer price of five dollars to share was just a bit rich, hence the selloff. It is the biggest IPA. Of course. The biggest transaction was Blackstone buying air Trunk earlier this year for twenty four billion dollars, but it wasn't on market. It was a private deal anyway. The digit COO Infrastructure not a good day one no.

Speaking of deals, though, Sean financial services group Insignia Financial on Friday received a two point seven billion dollar takeover bid from private equity group ban Capital.

That cent it's share price up eight percent. Used to be known as IF Holdings. Insignia did has a bunch of financial planners, office super innovation product, about two undred eighty eight billion dollars worth of funds and management. It's a decent company at least in terms of size, The bid is a thirty premium to the closing price on Wednesday, That was ahead of media reports of the bid.

Sean I mentioned before the break about AMP getting into bitcoin. They've invested twenty seven million dollars in bitcoin. The first time that a major superannuation fund has purchased the asset class.

Really interesting. It isn't a huge portion of the group's fifty seven billion dollars in funds under management, but it was done earlier in the year. It's been lucrative. The purchase occurred when the cryptocurrency was around sixty five thousand US dollars a unit. Today it's trading over one hundred thousand US dollars a unit. IMP chief investment Officer n Shelley is quoted in the fin Review as saying it's part of the group's diversification strategy. Some small SMSF hold cryptocurrencies, but not the big funds. Thus far, no other major supergroup seems to be coming out and saying yep, we're going to enter that market. Interesting though, that AMP.

Has now turning to international news and a big legal story out of the US. This is fascinating and going on for some time now a consulting giant, McKinsey will pay six hundred and fifty million US dollars that's what about a billion Aussie dollars to end a criminal investigation by the US Justice Department into the company's role in bolstering sales of addictive pain pills.

In what officials described as a landmark case, US attorneys and Massachusetts and Virginia fold charges of conspiracy to misbrand a drug and obstruction. It comes from McKinsey's work advising Perdue Farmer on how to turbo charge sales for the blockbuster opioid Oxyconton. Officials said. State and federal officials alleged Purdue helped kickstart the nation's opioid crisis in the late nineteen nineties two thousands by aggressively marketing the drug to doctors while downplaying its diction risk. It marks the first time a management consultant company has faced criminal charges related to work with the opioid industry. According to a report in The Washington Post, the agreement adds to more than nine hundred and ninety eight million US dollars that McKinzie has already agreed to pay to set a lawsuits from states, local governments, school districts, health insurers, and benefit plans. In a statement, McKinsey said, somewhat an understatement, I would say it should never have worked with Purdue.

Yeah. Maybe Now finally, Sean, I love this story. Bloomberg has put together its annual edition of the Richest Families in the World, and unfortunately the Aylmers and the Thompsons were not on the list, Sean, but back at number one after an eighty percent rally in the price of retail giant Walmart this year is the Walton family.

Sixty two years after the first Walmart was opened, the family is now worth four hundred and thirty two point four billion US dollars now. Sam Walton died in nineteen ninety two. He divided his fortune among his children to ensure that family control was maintained and the wealth would keep growing. And Walmart has had a great year you mentioned, is up eighty percent. What it's done It owns a huge audience, lots of people go and shop at Walmart, and sexually being able to find new revenue streams for that audience. A reinvention of the world's biggest retailer and its share price has gone through the roof. Hence the Waltons are number one.

It's interesting, isn't it that they've just never been able to kind of crack into Australia. And we've talked in the past. A couple of years ago, we spoke to an expert, basically a retail expert who had studied the Walnut story and efforts previously to kind of feel out other markets like Australia and just in the end couldn't just doesn't work, but clearly clearly a success in the US.

Yeah, yeah, amazing. Number two is last year's number one, the al Nayan family from Abu Dhabi. The family has presided over the oil rich emirate for three generations. Sheik Muhammad bin Zayed al Nayan is the country's president. Number three, the Alfahani family from Qatar oily game. Number four, Thejmez family, the French plan famous for luxury goods. I had no idea they were that rich. There you go. Randing out the top five are the Kosh family, four brothers who inherited their father's oil firm. Now they are all sorts of things, but very very involved in politics. The Kosh family in the US.

Yeah, great story. Finally to wrap things up, Sean, much going on in international markets.

It's a big week this week in the US. The Federal Reserve is expected to cut interest rates again. Brent krude prices were higher over the weekend, Gold was a bit lower. The Aussie dollars buying sixty three point four US cents, and one bitcoin is fetching one hundred and two thousand US d all.

Right. Up next Sean is Fear and Greed the week Ahead, featuring our resident economist Stephen Kocoulis, who was very excited, obviously about everything that happened last week. Yeah.

I mean, there's not a lot going on this week in the economy, but we have a i mean just a great chat with Stephen about where we end the year, particularly after last week's labor force figures and in recent weeks we've had inflation figures with an economic growth figures. So it's fascinating to listen to Stephen to give us his view on where we are as we get into twenty twenty five.

Yeah, it's coming up next, followed by the Daily Interview Fear and Great Daily Interview with Libby Newman from Vanguard Vanguard a great supporters of Fear and Greed, so plenty good listening in the Fear and Greed playlist on your podcast platform or at Fearangreed dot com dot au.

Thank you very much, Sean, Thank you, Michael.

It is Monday, the sixteenth of December twenty twenty four. Make sure you're following the podcast that is most important and join us online as well on LinkedIn, Instagram, x TikTok and Facebook. I'm Michael Thompson and that was Fear and Greed. Have a great day.

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