Productivity panic dominates after RBA interest rate cut
RBA CUT NOT THE MAIN STORY
So the Reserve Bank’s board finally got around to making that interest rate cut — unanimously, no less — and the reaction to the central bank’s decision has topped most publications overnight.
On Tuesday the RBA cut interest rates by 0.25 percentage points to 3.6%. The cut is the third of the year and takes the cash rate to a level last experienced in April 2023.
The AAP reports the central bank’s governor Michele Bullock yesterday also raised hopes of more rate cuts to come, saying: “You’ll note that in the forecasts, we have inflation coming back down to target and the unemployment rate remaining where it is with a couple more cash rate cuts in there. That’s the best sort of guess, but things can change.”
The newswire points out that despite the hope of further cuts, traders aren’t overly optimistic that one will happen next month, pricing it at a one-third chance.
However, it is not the rate cut or the predictions of when the next one may occur that have dominated the news coverage; it’s the concerns the RBA revealed yesterday for the country’s productivity.
As an example, Capital Brief leads this morning with “The RBA’s most important move today wasn’t on interest rates”, The Sydney Morning Herald’s headline says: “Rate cut brings rapid relief but RBA’s statement contains sting in the tail”, The Australian’s lead story states: “Living standards crisis: Reserve Bank lays it down on the table”, The Australian Financial Review tells us “RBA bombshell exposes grim reality for Chalmers” and The Nightly reckons the “RBA issues grim warning on living standards and productivity”.
The “table” mentioned above is of course the government’s endlessly hyped Economic Reform Roundtable, which starts on Tuesday (the AFR leads this morning on Phil Coorey’s read on Prime Minister Anthony Albanese and Treasurer Jim Chalmers’s private meetings last week to discuss how to rein in public expectations around the event…).
Anyway, as the ABC reports, the RBA has “significantly lowered” its forecast for future productivity growth, from around 1% per annum to 0.7%.
The Nine papers report Bullock “was keen to point out the new assumption [on productivity] was a way of resolving a ‘puzzle’ surrounding the bank’s key forecasts”.
The bank noted on Tuesday: “Slower productivity growth implies that the rate of wages growth that can be achieved over the long run without generating inflationary pressure is lower.”
The Australian reckons Chalmers is “under pressure to secure long-term reform outcomes” at the roundtable “after the Reserve Bank slashed its productivity assumptions and warned of slower growth in living standards”.
Responding to the RBA’s comments yesterday, the treasurer declared: “Our productivity challenge has been structural. It’s been a feature of our economy now for the last couple of decades. It’s a very serious challenge. We’ve put it at the very centre of our economic strategy, turning around this poor productivity performance.”
He added: “If you could fix one thing in our economy over the medium and long term, it would be this productivity challenge, which has been a feature for too long. Our economy is not productive enough.”
Capital Brief points out Bullock tried to keep the focus on her bank’s interest rate cut yesterday, declaring: “The main news here is actually the reduction in interest rates … breaking out of the productivity slowdown is a matter for the government that they are taking on.”
She added: “There’s nothing the Reserve Bank can do. All the Reserve Bank can do is make sure we have low and stable inflation, and if we have full employment, both of those things are very stable environments for businesses to think about how they might improve productivity, how they might produce more for the same amount of labour and capital input. So nothing we can do about it.”
As the headlines above and The Commentariat below highlight, her hope that the productivity concerns would play second fiddle to the rate cut announcement was rather wishful thinking.
AUSTRALIA CALLS FOR AID TO ENTER GAZA
The ABC and many other publications this morning report on the joint statement issued by Australia and its allies urgently calling for Israel to let aid into Gaza.
The national broadcaster says Australia and 23 other countries, including the UK, Canada, Japan and some European nations, said the humanitarian crisis in Gaza had reached “unimaginable levels”.
The statement, signed by Foreign Affairs Minister Penny Wong and her counterparts, states: “Famine is unfolding before our eyes. Urgent action is needed now to halt and reverse starvation. Humanitarian space must be protected, and aid should never be politicised.
“We call on the government of Israel to provide authorisation for all international NGO aid shipments and to unblock essential humanitarian actors from operating. Immediate, permanent and concrete steps must be taken to facilitate safe, large-scale access for the UN, international NGOs and humanitarian partners.”
“All crossings and routes must be used to allow a flood of aid into Gaza, including food, nutrition supplies, shelter, fuel, clean water, medicine and medical equipment. Lethal force must not be used at distribution sites, and civilians, humanitarians and medical workers must be protected.”
The joint statement follows the announcement from Prime Minister Anthony Albanese that Australia will recognise a Palestinian state at the United Nations next month.
As the ABC points out at the end of its piece, and The Conversation leads with, the Coalition has this week vowed to revoke the recognition if elected at the next election.
The Nine papers report this morning that the White House has said US President Donald Trump won’t criticise Albanese’s announcement. “As the president stated, he would be rewarding Hamas if he recognises a Palestinian state, and he doesn’t think they should be rewarded. So he is not going to do that,” a White House official said. “However, the president is not married to any one solution as it pertains to building a more peaceful region.”
Yesterday, Albanese also accused Israeli Prime Minister Benjamin Netanyahu of being “in denial” over the consequences of the war in Gaza. The Labor PM stated: “The stopping of aid that we’ve seen and then the loss of life that we’re seeing around those aid distribution points, where people queuing for food and water are losing their lives, is just completely unacceptable. And we have said that.
“I spoke with PM Netanyahu. He again reiterated to me what he has said publicly as well, which is to be in denial about the consequences that are occurring for innocent people.”
The BBC reports Gaza City came under “intense air attack” on Tuesday following Netanyahu’s declaration that he wants to take control of all of Gaza. Al Jazeera cites the Health Ministry in Gaza as saying at least 89 Palestinians, including 31 aid seekers, have been killed in Israeli attacks across Gaza in the past 24 hours.
ON A LIGHTER NOTE…
Nine-year-old Ethan Wargo sets up a stall outside his home every morning and offers compliments to any passerby who stops to have a chat with him.
The Washington Post reports young Ethan set up his table last month and can spend up to five hours a day in place.
He first put up his sign offering “free compliments” next to his twin sister Claire, who has been selling her artworks.
“I didn’t want people to pay to be happy. Paying for something like that is very silly,” he said, adding: “Once I got my first customer, I thought, ‘I should keep doing this’.”
After a month, Ethan is still offering up compliments and reckons it’s been “going really well”.
The newspaper documents some of the compliments Ethan has given, such as to a neighbour nervous about starting a new job (“I don’t think you should worry about it; you can do it”) and someone starting a home school centre (“Wow, I really hope that goes well for you and I hope you have a great day”).
Say What?
We’re about to do a fucking podcast.
Taylor Swift
Regardless of your musical tastes, you’ll have done well to miss the fact the American singer has announced the release of her 12th studio album, The Life of a Showgirl, during an appearance on her boyfriend Travis Kelce’s podcast. The NFL star is himself on the front cover of GQ magazine this month, bare-chested and hugging an alligator, as you do.
CRIKEY RECAP
Australia’s belated Palestine recognition was Made In France. Macron’s now left to lead the free world
Fine words, but that sets up an expectation that recognition simply won’t address: how to make Netanyahu comply with Israel’s legal and ethical obligations in Gaza; how to force Israel to protect civilians, provide food and medical supplies, and stop the permanent and forced displacement of civilians. A Palestinian state is not the solution to what Netanyahu’s extremist government is currently doing on the ground in Palestinian territory.
Recognition will thus only be a brief pause in the political pressure on the government to move to sanctioning Israel for its atrocities. At the same time, the Netanyahu regime, the pro-Israel lobby in Australia, the Coalition, News Corp and other supporters of Netanyahu’s atrocities will attack Labor for “rewarding Hamas”.
How Australia’s rationale for the teen social media ban has subtly, but crucially, shifted
Australia’s shifting rationale for its teen social media ban has landed on a more compelling case for government intervention. But this clarity of purpose makes it even more obvious that the ban in its current form, without exemptions that compel the tech companies to change the design of their products, is still just a punitive policy punishing these companies for their past sins with no chance for redemption. It misses an opportunity to reform in favour of revenge.
Nine columnist’s curious sources, News Corp’s AI tête-à-tête, and the kids crave Hawke-Keating bromance
The Sydney Morning Herald’s star conservative columnist Parnell Palme McGuinness appears to have an… interesting reading list.
As a tipster alerted us, McGuinness’ most recent column — “The end of men? We need to put an end to that” — links to a 2017 article by Mark Tapson in the right-wing blog Intellectual Takeout titled “Raising Sons in the Age of Trump”.
Intellectual Takeout is a project of the Minnesota-based Charlemagne Institute, which in 2019 fired its senior fellow John Elliott for having Nazi sympathies. From 2015 to 2018, Elliott organised “hateups” (group meetings to discuss racism) among his associates in an email group called “Morning Hate”. He encouraged members to use code words for antisemitic and racist epithets, including “Hawaiians” as a stand-in for a slur referring to Jewish people, “Alaskans” in place of a common slur relating to black people, and “our good friend” in reference to Adolf Hitler.
READ ALL ABOUT IT
Victoria’s new anti-protest laws to be watered down amid pushback from human rights groups and unions (Guardian Australia)
Epic says Fortnite is coming back to iOS in Australia (The Verge)
Mahmoud Abbas: Palestine’s future president – or yesterday’s man? (The Sydney Morning Herald) ($)
Alaska summit with Putin will be ‘listening exercise’ for Trump, White House says (BBC)
Perplexity makes longshot $34.5 billion offer for Chrome (The Wall Street Journal) ($)
THE COMMENTARIAT
Rate cut brings rapid relief but RBA’s statement contains sting in the tail — Shane Wright (The Age): If only “some firms” realise that global economic history since the industrial revolution has been driven by technology, then there is a problem in the mindset of Australian business that no three-day love-in around the federal cabinet table is going to solve.
Bullock and the bank have drawn attention to a problem that’s been festering away in the back of the Australian economy like six-week-old bread.
No amount of fine oratory from Albanese and Chalmers at their economic roundtable will cut through that stink. They’ll need a proper clean-out.
Productivity downgrade catches up with reality — Tom Dusevic (The Australian): All is not lost in the short term or beyond, the RBA says, “if the fundamental drivers of productivity become more favourable, such as faster adoption of technologies like AI or increased economic dynamism”.
Of course, that’s not the territory of the central bank, which is increasingly confident that it has got underlying inflation heading back to target and the economy is close to full employment.
Easing the cost of borrowing absolutely will help many families with a mortgage, as will the fall in inflation.
Yet our living standards are stuck in a ditch, and unless we collectively lift our game, Australians will not only feel poorer, the place will be less dynamic and social harmony vulnerable to populist assaults.
