Brendan Larsen: Milford Asset Management expert on the impact of the US Government shutdown

The ongoing US Government shutdown is set to have wide-reaching effects, with economists raising concerns over the impacts.

Missed pay cheques and the absence of billions of dollars of Government services will likely reverberate beyond federal workers and sting the broader public.

Milford Asset Management's Brendan Larsen explained further.

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Episode Transcript

Speaker 1 (00:00):
Now Brendan Larsen Milford Asset Management is with me. Hy
Brendan even he that, Okay, government shutdown in the US
really starting to have an effect because we're currently flying
totally blind when it comes to official data. What's going
on here?

Speaker 2 (00:12):
Yeah, look, there's still certainly a lot of fireworks going
off to spite no official government data. But I think
it is worth sort of stepping back first to understand
why we're actually in this government shutdown. Each year, the
US federal budget needs to be approved by Congress for
spending across key departments. So of Congress and the President
can't agree on a budget, the US government is legally

(00:33):
required to shut down as there's no authority to spend.
So that means non essential government operations stop and essential
services operate without pay.

Speaker 1 (00:40):
Yeah, and why is it that Congress and the President
can't agree on the budget.

Speaker 3 (00:45):
Yeah, So this is a really important point.

Speaker 2 (00:47):
So the Democrats are making healthcare a priority, so they're
wanting to reverse changes made to Medicaid and Trump's Big
Beautiful Bill. So these changes were effectively making it more
difficult to get healthcare cover by changing work requirements and
more frequent eligibility checks. They also want to renew these
ACA tax credits, which really just provide cheaper health insurance

(01:08):
for low income consumers. So the changes were made to
free up spending for other areas of the bill. But
Democrats are really pushing back quite aggressively on this.

Speaker 1 (01:15):
Okay, talk to me about the timing of this and
what the impact is.

Speaker 2 (01:19):
So, yeah, the timing is probably a hard one, but
I'd say that this isn't the first time we've had
a government shutdown. In fact, it's the twenty first funding
gap and the third shutdown under President Trump. The last
shutdown was actually under his administration twenty nineteen and was
the longest.

Speaker 3 (01:34):
In history in that lasted thirty five days.

Speaker 2 (01:37):
We're fourteen days in now, and polymarket odds suggest a
sixty five percent.

Speaker 3 (01:41):
Chance of this one lasting more than thirty days.

Speaker 2 (01:44):
On the sort of economic impact, the shutdown means that
around seven hundred and fifty thousand federal employees have been
placed on furlough, so they're not getting paid. Historically, we've
seen growth slow down in that time period as a
result of that, but a roughly equal catch up and
growth in the sort of following quarter. The difference this
time is that we know, following DOGE and these other

(02:05):
sort of announcements that the Trump administration have wanted to
reduce the size of the government, and so there is
some risk of layoffs of these furloughed employees, and we've
seen sort of Trump make noise of this already.

Speaker 1 (02:17):
Yeah, Now, before I let you go, Brandon Brandan and
I just want to talk to you about the tariff
threats from Trump last week. How's that playing out of
the moment.

Speaker 2 (02:25):
Yeah, Look, the market was clearly focused on this announcement.
We saw a big reaction, but really there has been
ongoing tit for tat over recent months. So the US
had actually been agitating by placing more Chinese companies on
their trade restriction list and banning Chinese carriers from flying
over Russia on US bound flights. In response, China reciprocated
many measures, but more importantly, placed further controls around their

(02:48):
rare earth that are critical to many US interests, including
military equipment and technology as well. And so that's really
what culminated in these threats from President Trump on Friday
of a new one.

Speaker 3 (02:59):
Hundred BIS tariff on top of existing tariffs.

Speaker 2 (03:02):
And so where that goes from here is still unknown,
but President Trump and President g we're supposed to be
having a meeting at the APEX summit later this month,
and so hopefully we get some sort of resolution ahead
of this.

Speaker 1 (03:13):
Yeah very much, Hey, Brett Brandan, thank you very much
for talking us through that. Brendan Lars and Milford Asset Management.
For more from Heather Duplessy Allen Drive.

Speaker 3 (03:21):
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Speaker 1 (03:22):
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