Already and this is the Daily This is the Daily OS. Oh, now it makes sense. Good morning and welcome to the Daily OS. It is Wednesday, the seventh of August. I'm billy, I'm zara. The last few days have seen significant volatility in global stock markets. Here in Australia. On Friday and Monday, the stock market had its worst two days since the onset of the pandemic. It all came after the US posted higher than expected unemployment numbers, raising concerns that the world's biggest economy is slowing and a recession is on the horizon. If you've been seeing headlines about this and trying to understand what has gone on, but it's all seemed a bit like gibberish, well you have come to the right place. In today's deep dive, I'll be speaking to Greg Jericho, who is the chief economist at the Australia Institute, to explain all of it to us. But first, Lara, what is making headline today.

Already and this is the Daily This is the Daily OS. Oh, now it makes sense. Good morning and welcome to the Daily OS. It is Wednesday, the seventh of August. I'm billy, I'm zara. The last few days have seen significant volatility in global stock markets. Here in Australia. On Friday and Monday, the stock market had its worst two days since the onset of the pandemic. It all came after the US posted higher than expected unemployment numbers, raising concerns that the world's biggest economy is slowing and a recession is on the horizon. If you've been seeing headlines about this and trying to understand what has gone on, but it's all seemed a bit like gibberish, well you have come to the right place. In today's deep dive, I'll be speaking to Greg Jericho, who is the chief economist at the Australia Institute, to explain all of it to us. But first, Lara, what is making headline today.

The Reserve Bank of Australia the RBA, has left the cash rate on hold at four point three five percent. The figure, which is often referred to as interest rates, influences the cost of borrowing across the economy. The RBA said it kept rates on hold for the sixth consecutive month as part of its plan to return inflation to within its two to three percent target. Inflation is currently sitting at three point eight percent. Federal Treasurer Jim Chalmers welcomed the RBA's decision, saying it recognizes the progress being made on inflation and also quote the very substantial global economic uncertainty that we're seeing play out in the markets around the world. We've got an explainer on that topic coming in the Deep Dive, so just hold that thought.

The Reserve Bank of Australia the RBA, has left the cash rate on hold at four point three five percent. The figure, which is often referred to as interest rates, influences the cost of borrowing across the economy. The RBA said it kept rates on hold for the sixth consecutive month as part of its plan to return inflation to within its two to three percent target. Inflation is currently sitting at three point eight percent. Federal Treasurer Jim Chalmers welcomed the RBA's decision, saying it recognizes the progress being made on inflation and also quote the very substantial global economic uncertainty that we're seeing play out in the markets around the world. We've got an explainer on that topic coming in the Deep Dive, so just hold that thought.

The Australian Federal Police has seized the Brisbane home of a married couple alleged to be a pair of Russian spies. A forty year old woman who is a former Australian Army private and her six two year old husband were arrested on spying offenses last month. The Russian born Australian citizens have been accused of accessing sensitive information about the Australian Defense Force on behalf of Russian authorities. Police have also sees their bank accounts, superannuation funds and other personal assets. The couple are facing up to fifteen years behind bars.

The Australian Federal Police has seized the Brisbane home of a married couple alleged to be a pair of Russian spies. A forty year old woman who is a former Australian Army private and her six two year old husband were arrested on spying offenses last month. The Russian born Australian citizens have been accused of accessing sensitive information about the Australian Defense Force on behalf of Russian authorities. Police have also sees their bank accounts, superannuation funds and other personal assets. The couple are facing up to fifteen years behind bars.

The UK government has introduced a raft of new policing measures as the country enters its seventh day of riots. Newly appointed Prime Minister Kirstana said a standing army of police will be deployed in an effort to tame violent crowds. Far right riots erupted across the country following a mass stabbing attack last month that left three girls dead and others injured.

The UK government has introduced a raft of new policing measures as the country enters its seventh day of riots. Newly appointed Prime Minister Kirstana said a standing army of police will be deployed in an effort to tame violent crowds. Far right riots erupted across the country following a mass stabbing attack last month that left three girls dead and others injured.

And today's good news, researchers are a step closer to figuring out how the ancient Egyptians built the pyramids. A team of engineers and geologists have uncovered evidence of a complex hydraulic lift system in Egypt's oldest pyramid, thought to have been built some four five hundred years ago. According to findings in the scientific journal Plos, researchers have discovered clues that a complex water system was used to power an elevator inside the pyramid, which could have been used to float heavy stones up through the middle of the structure.

And today's good news, researchers are a step closer to figuring out how the ancient Egyptians built the pyramids. A team of engineers and geologists have uncovered evidence of a complex hydraulic lift system in Egypt's oldest pyramid, thought to have been built some four five hundred years ago. According to findings in the scientific journal Plos, researchers have discovered clues that a complex water system was used to power an elevator inside the pyramid, which could have been used to float heavy stones up through the middle of the structure.

So Billy, over the last couple of days, I have read headline after headline about the state of the stock market, and I must confess I'm not the most well versed when it comes to the stock market. And we were talking in the office yesterday about how no one's actually explaining anything. They're just saying what is happening, but there's no explanation.

So Billy, over the last couple of days, I have read headline after headline about the state of the stock market, and I must confess I'm not the most well versed when it comes to the stock market. And we were talking in the office yesterday about how no one's actually explaining anything. They're just saying what is happening, but there's no explanation.

Yeah, I think if there's any time for the Daily OS, it's a story like this when it literally feels like it's in a complete other language. But Zara, you and I are not experts on the global stock market.

Yeah, I think if there's any time for the Daily OS, it's a story like this when it literally feels like it's in a complete other language. But Zara, you and I are not experts on the global stock market.

No, we accept our shortcomings and we head to the expert.

No, we accept our shortcomings and we head to the expert.

We tried, but yes, we thought that we should speak to an economist, and so we went straight to the chief economist at the Australian Institute, Greg Jericho, to break down all of the headlines that we have been seeing. I thought that he broke it down in a way that I could understand. He was really effective. Here is that chat, Greg Jericho, thank you so much for joining the Daily OS.

We tried, but yes, we thought that we should speak to an economist, and so we went straight to the chief economist at the Australian Institute, Greg Jericho, to break down all of the headlines that we have been seeing. I thought that he broke it down in a way that I could understand. He was really effective. Here is that chat, Greg Jericho, thank you so much for joining the Daily OS.

No problem was Billy.

No problem was Billy.

So we have seen global stock markets go down quite significantly. How did this all start?

So we have seen global stock markets go down quite significantly. How did this all start?

Yeah, it all started in America when their July unemployment figures came out and the unemployment rate went from four point one to four point three percent, and that kind of just triggered off a massive amount of panic around the world as everyone sort of looked at us and thought, olds, something's going bad there, and everyone just really started panicking very quickly.

Yeah, it all started in America when their July unemployment figures came out and the unemployment rate went from four point one to four point three percent, and that kind of just triggered off a massive amount of panic around the world as everyone sort of looked at us and thought, olds, something's going bad there, and everyone just really started panicking very quickly.

And why is it that unemployment figures would trigger such a worldwide reaction.

And why is it that unemployment figures would trigger such a worldwide reaction.

Yeah, it seems a bit surprising, But really what it comes down to is a US economist called Claudius arm she'd been looking at recessions and she was trying to come up with a way of measuring recessional kind of warning that economy is going to recession a bit quicker than the traditional method. The traditional method you have to look at GDP figures, which are the entire economy. You have to wait for two quarters in a row, which is six months, so in a sense traditionally, Kindos was saying, oh, yes, an economy is in a recession and it started six months ago. And she was like, well, that's a bit useless. How about we look at unemployment rates and see if we can work out there, and what she sort of did a lot of good research and worked out that actually, when the unemployment rises by half a percentage points, so like about four point zero to four point five percent, when it does that in twelve months, that means you're basically in recession town. And the thing was where the unemployment came out at four point three percent, everyone was going, oh, wait on, that's got up by more than a half a percentage point a year.

Yeah, it seems a bit surprising, But really what it comes down to is a US economist called Claudius arm she'd been looking at recessions and she was trying to come up with a way of measuring recessional kind of warning that economy is going to recession a bit quicker than the traditional method. The traditional method you have to look at GDP figures, which are the entire economy. You have to wait for two quarters in a row, which is six months, so in a sense traditionally, Kindos was saying, oh, yes, an economy is in a recession and it started six months ago. And she was like, well, that's a bit useless. How about we look at unemployment rates and see if we can work out there, and what she sort of did a lot of good research and worked out that actually, when the unemployment rises by half a percentage points, so like about four point zero to four point five percent, when it does that in twelve months, that means you're basically in recession town. And the thing was where the unemployment came out at four point three percent, everyone was going, oh, wait on, that's got up by more than a half a percentage point a year.

There was going America is in a recession. So so that pretty much was what it was. It was just this sense of everyone realizing, oh gosh, that's not good.

There was going America is in a recession. So so that pretty much was what it was. It was just this sense of everyone realizing, oh gosh, that's not good.

Do you think it was an overreaction at all?

Do you think it was an overreaction at all?

Unfortunately, if you look at the history, the rise in unemployment fits really well with recessions. And I think it's a good method because, I mean, who cares about GDP going up and down? All you care about is are you able to get a job? Are you getting paid well for your job? You're getting good out, So unemployment is a good indicator. And I think it really does suggest that the American economy, because it's had, like here in Australia, high interest rates, is really starting to struggle mightily.

Unfortunately, if you look at the history, the rise in unemployment fits really well with recessions. And I think it's a good method because, I mean, who cares about GDP going up and down? All you care about is are you able to get a job? Are you getting paid well for your job? You're getting good out, So unemployment is a good indicator. And I think it really does suggest that the American economy, because it's had, like here in Australia, high interest rates, is really starting to struggle mightily.

And can you just explain why what happens in the US economy impacts the rest of the world so significantly.

And can you just explain why what happens in the US economy impacts the rest of the world so significantly.

Basically, it's because the American economy is the biggest economy in the world. It's still much bigger than China, and it's massively bigger than anyone else. And so you know, the old adage was when America sneezes, everyone catches a cold. Now it's not quite as bad, but certainly it's a case, especially in places like Japan, where when America struggles, that means they're going to have a real tough time because America imports a lot of stuff from a lot of countries, and if people are losing work there, well, they're not going to buy as much stuff, and that means they're not buying as much from other countries.

Basically, it's because the American economy is the biggest economy in the world. It's still much bigger than China, and it's massively bigger than anyone else. And so you know, the old adage was when America sneezes, everyone catches a cold. Now it's not quite as bad, but certainly it's a case, especially in places like Japan, where when America struggles, that means they're going to have a real tough time because America imports a lot of stuff from a lot of countries, and if people are losing work there, well, they're not going to buy as much stuff, and that means they're not buying as much from other countries.

Right, And hearing you talk, it all sounds quite scary and quite bad for someone listening who is not too familiar with global stock markets. How much of this is just part of, you know, the normal fluctuation of a share market or is this really completely out of the ordinary.

Right, And hearing you talk, it all sounds quite scary and quite bad for someone listening who is not too familiar with global stock markets. How much of this is just part of, you know, the normal fluctuation of a share market or is this really completely out of the ordinary.

Yeah, this was a big one, especially in Japan, and because it was just so widespread. But we've seen today already in Australia there's a bit of a recovery. You know, it's not like we're having a Wall Street crash. But I think more it's a case of there's been a lot of markets and investors going along with a sort of almost a rosy eyed view that, oh, it seems like we're going to get rid of inflation, but not go into recession like we normally do, like we did in the ninety nineties, like we did in eighties, and they're all thinking, oh, good times ahead, and then this was a bit of a wake up call that actually there's probably going to be a bit of slowing in the economy, purely because we've had interest rates high that stopped everyone being able to go out and spend. So I think it was more of a bit of a wake up call, and hopefully that's all it is, but it certainly does I think bear warning for what might be ahead in the next six to twelve months.

Yeah, this was a big one, especially in Japan, and because it was just so widespread. But we've seen today already in Australia there's a bit of a recovery. You know, it's not like we're having a Wall Street crash. But I think more it's a case of there's been a lot of markets and investors going along with a sort of almost a rosy eyed view that, oh, it seems like we're going to get rid of inflation, but not go into recession like we normally do, like we did in the ninety nineties, like we did in eighties, and they're all thinking, oh, good times ahead, and then this was a bit of a wake up call that actually there's probably going to be a bit of slowing in the economy, purely because we've had interest rates high that stopped everyone being able to go out and spend. So I think it was more of a bit of a wake up call, and hopefully that's all it is, but it certainly does I think bear warning for what might be ahead in the next six to twelve months.

So let's turn to Australia. Now, what has happened in the Australian shair market.

So let's turn to Australia. Now, what has happened in the Australian shair market.

Yeah, the Australians share market also took a bumper when this news came out, and it often happens you follow what's going on in America, in Japan and Hong Kong, they sort of see what's going on there, and there is a bit of a herd mentality amongst brokers.

Yeah, the Australians share market also took a bumper when this news came out, and it often happens you follow what's going on in America, in Japan and Hong Kong, they sort of see what's going on there, and there is a bit of a herd mentality amongst brokers.

But it has sort of recovered.

But it has sort of recovered.

In this sense that certainly Australia is not as exposed as perhaps Japan is, but we certainly know that there are concerns within Australian investors and Australian economists about Australia's own economy and whether we're going to go into recession because and this is something I've been tracking on our version of unemployment rate, we're also sort of tracking towards going up by that half a percentage point in a year, and if that happens, yeah, we're kind of looking like being in a recession. So you know, there is a fair bit of concern still even in Australia.

In this sense that certainly Australia is not as exposed as perhaps Japan is, but we certainly know that there are concerns within Australian investors and Australian economists about Australia's own economy and whether we're going to go into recession because and this is something I've been tracking on our version of unemployment rate, we're also sort of tracking towards going up by that half a percentage point in a year, and if that happens, yeah, we're kind of looking like being in a recession. So you know, there is a fair bit of concern still even in Australia.

I want to look at recession in a second, but first I just want to look at interest rates, which was a big topic of conversation yesterday with the IBA's announcement that it will keep the cash rate on hold. Firstly, can you just explain what is the relationship between cash rates and the stock market? How do they link?

I want to look at recession in a second, but first I just want to look at interest rates, which was a big topic of conversation yesterday with the IBA's announcement that it will keep the cash rate on hold. Firstly, can you just explain what is the relationship between cash rates and the stock market? How do they link?

Yeah, I mean the cash rate is in a sense the reserve banks setting the interest rate that it charges banks to borrow from them, which they then charge a bit more to us so we can take out loans. So it's a good guide of what's happening with interest rates. And you think, if you're an investor, you can do two things. You can invest in the stock market and hopefully the stocks will go up and you'll get you'll get a good return. Or you can in bonds, which is in a sense taking out loans, and if the interest rate is going up, well, then it's a good time to invest in bonds, not a good time to invest in the stock market. So the Reserve Bank keeping interest rates on hold. Everyone is kind of the view the next move will be a cup rather than a rise. And it seems like all our concerns over the past sort of six months of we're going to have higher interest rates seem to be on the way, and purely because the Reserve Bank, like everyone else, is looking around the world and going geez, things are getting a bit dicey over to America and dicey japaired. These are big export markets for us. Let's not try and kill our economy if we've got bad things coming our way.

Yeah, I mean the cash rate is in a sense the reserve banks setting the interest rate that it charges banks to borrow from them, which they then charge a bit more to us so we can take out loans. So it's a good guide of what's happening with interest rates. And you think, if you're an investor, you can do two things. You can invest in the stock market and hopefully the stocks will go up and you'll get you'll get a good return. Or you can in bonds, which is in a sense taking out loans, and if the interest rate is going up, well, then it's a good time to invest in bonds, not a good time to invest in the stock market. So the Reserve Bank keeping interest rates on hold. Everyone is kind of the view the next move will be a cup rather than a rise. And it seems like all our concerns over the past sort of six months of we're going to have higher interest rates seem to be on the way, and purely because the Reserve Bank, like everyone else, is looking around the world and going geez, things are getting a bit dicey over to America and dicey japaired. These are big export markets for us. Let's not try and kill our economy if we've got bad things coming our way.

Two more questions. Firstly, for people listening who don't invest and who don't own a home, so the cash rate or the interest rates don't directly impact them, how could what has happened affect them?

Two more questions. Firstly, for people listening who don't invest and who don't own a home, so the cash rate or the interest rates don't directly impact them, how could what has happened affect them?

Oh look, it's not directly.

Oh look, it's not directly.

If you're working, you've got money in superannuation and superannuation funds invest in the stock market, but you really don't have to worry, especially if you're young. You're nowhere near retiring, and stock markets go up and down and in thirty years time, you won't even remember what happened this week. But it does suggest if they're keeping them steady, it means they're not trying to slow the economy more. And that's a good thing because it means that they are actually worried about unemployment rising, and so they were already thinking about, okay, what can we do to make sure unemployment doesn't go up, you don't lose your job, and the economy keeps sort of growing nicely.

If you're working, you've got money in superannuation and superannuation funds invest in the stock market, but you really don't have to worry, especially if you're young. You're nowhere near retiring, and stock markets go up and down and in thirty years time, you won't even remember what happened this week. But it does suggest if they're keeping them steady, it means they're not trying to slow the economy more. And that's a good thing because it means that they are actually worried about unemployment rising, and so they were already thinking about, okay, what can we do to make sure unemployment doesn't go up, you don't lose your job, and the economy keeps sort of growing nicely.

Now, lastly, you've mentioned recession a number of times, which we know is when there are two negative quarters of GDP in your expert opinion, how likely do you think a recession is in Australia?

Now, lastly, you've mentioned recession a number of times, which we know is when there are two negative quarters of GDP in your expert opinion, how likely do you think a recession is in Australia?

Oh, look, I mean GDP has been not growing very well. I mean the last GDP growth in a quarter was just zero point one percent. I mean that's basically an error away from going backwards. The risks are certainly there. It's always a bit tricky with Australia because our exports in one quarter can give us a boost and then the next quarter don't. That's why I like looking at the unemployment rate as well, and that has been moving up, so hopefully we won't see that. The risks is very much there. If the Reserve Bank had increased interest rates, the risk would have, I think, become a huge warning bell and sirens would be going off everywhere. I think they're very mindful of it and hopefully we can avoid it. But again, if America goes into recession, if Japan struggles, then you're going to see struggles in China. It's very difficult to miss that. But I wouldn't be predicting we're going to go in a recession, but certainly the risks are pretty high.

Oh, look, I mean GDP has been not growing very well. I mean the last GDP growth in a quarter was just zero point one percent. I mean that's basically an error away from going backwards. The risks are certainly there. It's always a bit tricky with Australia because our exports in one quarter can give us a boost and then the next quarter don't. That's why I like looking at the unemployment rate as well, and that has been moving up, so hopefully we won't see that. The risks is very much there. If the Reserve Bank had increased interest rates, the risk would have, I think, become a huge warning bell and sirens would be going off everywhere. I think they're very mindful of it and hopefully we can avoid it. But again, if America goes into recession, if Japan struggles, then you're going to see struggles in China. It's very difficult to miss that. But I wouldn't be predicting we're going to go in a recession, but certainly the risks are pretty high.

We'll be keeping a close eyewn it. Greg Jericho, thank you so much for joining us.

We'll be keeping a close eyewn it. Greg Jericho, thank you so much for joining us.

Noah's Billy really good to chat.

Noah's Billy really good to chat.

This feels like one of those times that our slogan, oh now it makes sense really does apply. After listening to that conversation, I now truly understand what is happening with the stock market. If you feel the same way, please press follow on whatever platform you are listening or watching this podcast on. Every follow helps us grow and we'll be back again tomorrow see ya.

This feels like one of those times that our slogan, oh now it makes sense really does apply. After listening to that conversation, I now truly understand what is happening with the stock market. If you feel the same way, please press follow on whatever platform you are listening or watching this podcast on. Every follow helps us grow and we'll be back again tomorrow see ya.

My name is Lily Maddon and I'm a proud Arunda Bungelung Calcuttin woman from Gadighl Country. The Daily oz acknowledges that this podcast is recorded on the lands of the Gadighl people and pays respect to all Aboriginal and torrest Rate island and nations. We pay our respects to the first peoples of these countries, both past and present.

My name is Lily Maddon and I'm a proud Arunda Bungelung Calcuttin woman from Gadighl Country. The Daily oz acknowledges that this podcast is recorded on the lands of the Gadighl people and pays respect to all Aboriginal and torrest Rate island and nations. We pay our respects to the first peoples of these countries, both past and present.