August 3, 2025 • 12 mins
Last week, the Australian Bureau of Statistics revealed the annual inflation rate is at its lowest level in four years.
It has triggered many economists to predict there will be a cut to the interest rate next week when the Reserve Bank of Australia meets.
If you’re wondering what all of this means, you’ve come to the right place.
Today we're talking to the Australia Institute’s Chief Economist Greg Jericho about what this all means.
Guest: Greg Jericho, Chief Economist of the Australia Institute
Interviewer: Billi FitzSimons
Producer: Orla Maher
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Before we jump into today's deep dive, we have a
quick ask of you to ensrol this podcast remains relevant
and useful to you. We want to learn more about you,
the listeners. We have put a short survey in today's
show notes and we would be so grateful if you
could fill it out. Thanks in advance for helping TDA.
And now on to today's episode. Already, and this is
(00:24):
the Daily Art.
Speaker 2 (00:25):
This is the Daily.
Speaker 1 (00:26):
Ohs oh now it makes sense. Good morning and welcome
to the Daily Os. It's Monday, the fourth of August.
I'm Billy fitz Simon's and no one else. It's just
me this morning, steering the ship. Now, last week the
(00:46):
Australian Bureau of Statistics revealed the annual inflation rate is
at its lowest level in four years. It has triggered
many economists to predict there will be a cut to
the interest rate next week when the Reserve Bank of
Australia means. If you're wondering what all of this means
and also what it means for you, you have come to
the right place. Today. I'm talking to the Australia Institute's
(01:08):
Chief economist Greg Jericho about what all of this means
Greg Jericho, thank you so much for joining the Daily OS.
Speaker 2 (01:19):
Nowhere is Billy great to be here.
Speaker 1 (01:21):
Now we are talking today because last week we got
new inflation data. For anyone who missed it, what did
those inflation numbers tell us?
Speaker 2 (01:31):
What it showed was that inflation is really slow, quite dramatically. Now, inflation,
of course, is the pace of price increases. We're always
talking about prices going up. All we're worried about is
how fast are they going up? And in the year
to June this year, overall prices the consumer price Index
(01:52):
went up two point one percent. Now, the Reserve Bank
likes to aim for inflation being between two percent and
three percent, so if we're at two point one percent,
we're getting really close to the bottom of that range.
And even more kind of stark about that is that
in five of the capital cities inflation grew actually slower
(02:16):
than two percent. It was only in Brisbane and Perth
where inflation was above two percent. But if you didn't
have that, inflation would have been actually below two percent
around Australia. And that's pretty slow.
Speaker 1 (02:29):
If it gets to below two percent, is that bad?
Is it bad? If it's too slow?
Speaker 2 (02:35):
Yeah, it's one of these things that people are thinking, Oh,
if prices are going really slow, then that's good. You know,
the cost of me buying stuff isn't going up much.
But the problem is the reason why prices are going
up slow. If prices aren't rising fast, that means actually
people at out there shopping much. We're not buying a
(02:55):
lot of stuff, We're not using a lot of services.
And as a result, businesses don't feel like they can
raise their prices because they're not getting many people in
the door, and if they raise prices, they're going to
get even fewer.
Speaker 1 (03:08):
When we posted about the inflation numbers on the Daily Ods,
the number one question we got from the audience is
if inflation is at this four year low, then why
is the cost of living still so high? So can
you just explain why falling inflation doesn't mean falling prices.
Speaker 2 (03:29):
Yeah, it's when people talk about cost of living, they're
generally not thinking so much about prices rising. They're thinking
about how much prices have got up since, you know,
they can kind of remember, and I always think of
a good example is kind of like milk. We can
all remember the two dollars milk and we all know
milk is not two dollars.
Speaker 1 (03:49):
I do not remember two dollars milk.
Speaker 2 (03:51):
You can't remember. Gosh, all right, there used to be
two dollar milk because coals and woolies were basically having
this fire where they were putting two dollars milk to
try and get people in. You know, it was the thing.
And they stopped doing that. Prices went up and then
they kind of flatlined. And so the prices of most things,
(04:13):
when they go up, they stay up. They don't go down.
A few things, you know, petrovs and bounces around. You know,
you will actually see petrol prices go down. On some
things like electrical goods, you might see prices going down,
but generally on most things, once they go up, they
stay up. And so that's what really I think hits
(04:35):
most people, and certainly for the listeners. You know, we're
still seeing for example, you know, I'm saying two point
one percent inflation, but rent prices were about four point
eight you know, in some places even higher than that,
and so you might be thinking, oh, the overall average
of everything we buy is two point one. But on
the things that really matter, and especially for younger people
(04:59):
who are renting, they are still feeling that pinch, and
also on the other side of the equation their income,
their wages mightn't have been going up certainly that much,
and so you're feeling the impact of the increase in
rents increasing prices, and you're not getting the benefit so
much of the increasing wages that kind of cancel it out.
Speaker 1 (05:20):
And so the big question in terms of what happens
now is whether this new inflation data will impact the
Reserve Bank of Australia's next cash rate decision. Before we
get to what these inflation numbers could mean for that decision,
can you just remind us exactly what the cash rate
is and how it's connected to inflation.
Speaker 2 (05:41):
Yeah, the cash rate is basically the interest rate that
the Reserve Bank lends to banks. It's a way that
actually helps fund banks so that they can then lend
to us. And what it really does is it gives
a real indicator to the banks about what they should
be lending money out. So the cashuret at the moment
(06:02):
is three point eight five percent. Now that's not an
interest rate you're going to get offered anywhere by any bank.
The banks get a lot better rate than we do.
But generally when the Reserve Bank does increase or decrease
the cash rate, people's mortgage rates will go up or down.
And also the rates that you get charged for deposits
(06:24):
will you actually get given. It doesn't always go up
exactly the same amount or code down exactly the same amount,
but generally there is a pretty good link. And so
when we talk about the cash rate and the Reserve
Bank lowering the cash rate, what we're hoping is that
all the banks will follow. They will lower their mortgage rates,
they'll lower the small business loan rates, and that means
(06:47):
people feel more confident to be able to go out
and invest, whether that's buying a house or if you're
a small business, to be able to invest in equipment,
invest in material, and that sort of generates more economic activity.
People were buying stuff, people were investing, and it gets
money flowing.
Speaker 1 (07:05):
And so we are expecting the RBA to make another
cash rate decision on the twelfth of August, well, not
expecting it will happen that they will make another decision.
What do you think that they will decide?
Speaker 2 (07:17):
Oh gosh, I mean, they really threw a spanner into
the works in July when they didn't cut the cash rate,
and everyone thought they would. It was it was the market.
The market actually can basically bet in a sense on
what the cash rate is going to do by buying
and selling bonds and things, and they do on the
futures market, and everyone pretty much it was about a
(07:39):
ninety five per cent chance that they were going to
cut the rate, and they didn't. Now, one of the
reasons they said they didn't is they were wanting more information,
more data, and one of the big things they were
wanting was this inflation figure. So the fact that it's
coming really low, the fact that the core inflation, which
is basically inflation without the big jumps and big falls, counted,
(08:01):
so it kind of just gets the middle part that
also came down, So it suggests that this isn't just
a one off blip, that this is actually sort of
a long term trend. So that's a good sign. But
also since the last decision by the Reserve Bank, we
had the unemployment figures come out that showed an increase
of zero point two percent, so a real quite a
(08:23):
significant jump in unemployment. So it's a real sense of
we got low inflation, we've got unemployment rising, when that's happening, generally,
that's a good time for the Reserve Bank to cut rates.
I'd be shocked if they don't, but I was shocked
a month ago where they didn't.
Speaker 1 (08:42):
Yep. Just lastly, the last time I spoke to you
was just after US President Donald Trump had announced the
tariffs for the first time for all countries and things
in the world economy seemed really uncertain, and I'm interested
now if you had to give a general assessment as
to how the world economy is going, what would you say.
Speaker 2 (09:03):
Well, it's a little bit more certain than it was.
We've just had Trump come out with basically here's all
the new tariffs, and Australia is still at ten percent,
New Zealand's at fifteen percent, Europe's at fifteen percent, Canada
is even high. I think it's thirty five percent. It's
quite bizarre how if it was just if Trump was
(09:27):
just going from zero to announcing all these tariffs right now,
it would be the most absurdly large increase in tariffs
by any country for basically a century. But because we've
had the last sort of five months of Trump threatening
massively high of numbers, now the's come out of these
(09:48):
sort of fifteen to twenty five percent, people are oh,
that seems okay, but others are stepping back going you
do realize that this is still an incredibly big increase
on tariffs, so it's a lot less confusing and a
lot less uncertain than it was, but we still are waiting,
I think for all the flow through of the slowdown
(10:11):
in America that's going to come because of this. The
good news, though, is because Australia is at ten percent,
kind of bizarrely, we're actually better off because everyone else
has got worse. Whereas before we were all on a
level playing field. You know, everyone was kind of on
the zero tariffs. Now we're on ten percent. That's not good,
but others are fifteen and twenty five thirty five. So
(10:33):
if you're an American importer and thinking do I buy
something from Australia or Japan or Europe, we're actually Australia's
got lowest tariff, so we're actually he's done us a favorite.
It's truly bizarre he's done us a favor. He's not
doing Americans a favor at all. He's making things more
expensive for them. But I think the scares for Australia
(10:54):
about what might happen. Much reduced now than they were
a few months ago. We still are worried about what
he might do about pharmaceuticals and the PBS, but we
know the government's not going to budge on the PBS,
so things kind of look okay for austraight at the moment.
But as with Trump, who knows he could wake up
and he's decided to do something completely different.
Speaker 1 (11:17):
So interesting. Greg Jericho, thank you so much for coming
back on the podcast to explain all things finance to us.
Speaker 2 (11:23):
Nowah, is Billy really great to be here.
Speaker 1 (11:26):
That is the end of that chat. I hope we
were able to break down some of the economic jargon
that is out there. Thank you so much for listening
to this episode of The Daily Oz. We'll be back
this afternoon with some evening headlines, but until then, have
a great day. My name is Lily Maddon and I'm
(11:47):
a proud Arunda Bungelung Cargottin woman from gadigl Country. The
Daily oz acknowledges that this podcast is recorded on the
lands of the Gadighl people and pays respect to all
Aboriginal and Torres Strait Island and nations.
Speaker 2 (12:00):
We pay our respects to the first peoples of these countries,
both past and present.
Before we jump into today's deep dive, we have a
quick ask of you to ensrol this podcast remains relevant
and useful to you. We want to learn more about you,
the listeners. We have put a short survey in today's
show notes and we would be so grateful if you
could fill it out. Thanks in advance for helping TDA.
And now on to today's episode. Already, and this is
(00:24):
the Daily Art.
Speaker 2 (00:25):
This is the Daily.
Speaker 1 (00:26):
Ohs oh now it makes sense. Good morning and welcome
to the Daily Os. It's Monday, the fourth of August.
I'm Billy fitz Simon's and no one else. It's just
me this morning, steering the ship. Now, last week the
(00:46):
Australian Bureau of Statistics revealed the annual inflation rate is
at its lowest level in four years. It has triggered
many economists to predict there will be a cut to
the interest rate next week when the Reserve Bank of
Australia means. If you're wondering what all of this means
and also what it means for you, you have come to
the right place. Today. I'm talking to the Australia Institute's
(01:08):
Chief economist Greg Jericho about what all of this means
Greg Jericho, thank you so much for joining the Daily OS.
Speaker 2 (01:19):
Nowhere is Billy great to be here.
Speaker 1 (01:21):
Now we are talking today because last week we got
new inflation data. For anyone who missed it, what did
those inflation numbers tell us?
Speaker 2 (01:31):
What it showed was that inflation is really slow, quite dramatically. Now, inflation,
of course, is the pace of price increases. We're always
talking about prices going up. All we're worried about is
how fast are they going up? And in the year
to June this year, overall prices the consumer price Index
(01:52):
went up two point one percent. Now, the Reserve Bank
likes to aim for inflation being between two percent and
three percent, so if we're at two point one percent,
we're getting really close to the bottom of that range.
And even more kind of stark about that is that
in five of the capital cities inflation grew actually slower
(02:16):
than two percent. It was only in Brisbane and Perth
where inflation was above two percent. But if you didn't
have that, inflation would have been actually below two percent
around Australia. And that's pretty slow.
Speaker 1 (02:29):
If it gets to below two percent, is that bad?
Is it bad? If it's too slow?
Speaker 2 (02:35):
Yeah, it's one of these things that people are thinking, Oh,
if prices are going really slow, then that's good. You know,
the cost of me buying stuff isn't going up much.
But the problem is the reason why prices are going
up slow. If prices aren't rising fast, that means actually
people at out there shopping much. We're not buying a
(02:55):
lot of stuff, We're not using a lot of services.
And as a result, businesses don't feel like they can
raise their prices because they're not getting many people in
the door, and if they raise prices, they're going to
get even fewer.
Speaker 1 (03:08):
When we posted about the inflation numbers on the Daily Ods,
the number one question we got from the audience is
if inflation is at this four year low, then why
is the cost of living still so high? So can
you just explain why falling inflation doesn't mean falling prices.
Speaker 2 (03:29):
Yeah, it's when people talk about cost of living, they're
generally not thinking so much about prices rising. They're thinking
about how much prices have got up since, you know,
they can kind of remember, and I always think of
a good example is kind of like milk. We can
all remember the two dollars milk and we all know
milk is not two dollars.
Speaker 1 (03:49):
I do not remember two dollars milk.
Speaker 2 (03:51):
You can't remember. Gosh, all right, there used to be
two dollar milk because coals and woolies were basically having
this fire where they were putting two dollars milk to
try and get people in. You know, it was the thing.
And they stopped doing that. Prices went up and then
they kind of flatlined. And so the prices of most things,
(04:13):
when they go up, they stay up. They don't go down.
A few things, you know, petrovs and bounces around. You know,
you will actually see petrol prices go down. On some
things like electrical goods, you might see prices going down,
but generally on most things, once they go up, they
stay up. And so that's what really I think hits
(04:35):
most people, and certainly for the listeners. You know, we're
still seeing for example, you know, I'm saying two point
one percent inflation, but rent prices were about four point
eight you know, in some places even higher than that,
and so you might be thinking, oh, the overall average
of everything we buy is two point one. But on
the things that really matter, and especially for younger people
(04:59):
who are renting, they are still feeling that pinch, and
also on the other side of the equation their income,
their wages mightn't have been going up certainly that much,
and so you're feeling the impact of the increase in
rents increasing prices, and you're not getting the benefit so
much of the increasing wages that kind of cancel it out.
Speaker 1 (05:20):
And so the big question in terms of what happens
now is whether this new inflation data will impact the
Reserve Bank of Australia's next cash rate decision. Before we
get to what these inflation numbers could mean for that decision,
can you just remind us exactly what the cash rate
is and how it's connected to inflation.
Speaker 2 (05:41):
Yeah, the cash rate is basically the interest rate that
the Reserve Bank lends to banks. It's a way that
actually helps fund banks so that they can then lend
to us. And what it really does is it gives
a real indicator to the banks about what they should
be lending money out. So the cashuret at the moment
(06:02):
is three point eight five percent. Now that's not an
interest rate you're going to get offered anywhere by any bank.
The banks get a lot better rate than we do.
But generally when the Reserve Bank does increase or decrease
the cash rate, people's mortgage rates will go up or down.
And also the rates that you get charged for deposits
(06:24):
will you actually get given. It doesn't always go up
exactly the same amount or code down exactly the same amount,
but generally there is a pretty good link. And so
when we talk about the cash rate and the Reserve
Bank lowering the cash rate, what we're hoping is that
all the banks will follow. They will lower their mortgage rates,
they'll lower the small business loan rates, and that means
(06:47):
people feel more confident to be able to go out
and invest, whether that's buying a house or if you're
a small business, to be able to invest in equipment,
invest in material, and that sort of generates more economic activity.
People were buying stuff, people were investing, and it gets
money flowing.
Speaker 1 (07:05):
And so we are expecting the RBA to make another
cash rate decision on the twelfth of August, well, not
expecting it will happen that they will make another decision.
What do you think that they will decide?
Speaker 2 (07:17):
Oh gosh, I mean, they really threw a spanner into
the works in July when they didn't cut the cash rate,
and everyone thought they would. It was it was the market.
The market actually can basically bet in a sense on
what the cash rate is going to do by buying
and selling bonds and things, and they do on the
futures market, and everyone pretty much it was about a
(07:39):
ninety five per cent chance that they were going to
cut the rate, and they didn't. Now, one of the
reasons they said they didn't is they were wanting more information,
more data, and one of the big things they were
wanting was this inflation figure. So the fact that it's
coming really low, the fact that the core inflation, which
is basically inflation without the big jumps and big falls, counted,
(08:01):
so it kind of just gets the middle part that
also came down, So it suggests that this isn't just
a one off blip, that this is actually sort of
a long term trend. So that's a good sign. But
also since the last decision by the Reserve Bank, we
had the unemployment figures come out that showed an increase
of zero point two percent, so a real quite a
(08:23):
significant jump in unemployment. So it's a real sense of
we got low inflation, we've got unemployment rising, when that's happening, generally,
that's a good time for the Reserve Bank to cut rates.
I'd be shocked if they don't, but I was shocked
a month ago where they didn't.
Speaker 1 (08:42):
Yep. Just lastly, the last time I spoke to you
was just after US President Donald Trump had announced the
tariffs for the first time for all countries and things
in the world economy seemed really uncertain, and I'm interested
now if you had to give a general assessment as
to how the world economy is going, what would you say.
Speaker 2 (09:03):
Well, it's a little bit more certain than it was.
We've just had Trump come out with basically here's all
the new tariffs, and Australia is still at ten percent,
New Zealand's at fifteen percent, Europe's at fifteen percent, Canada
is even high. I think it's thirty five percent. It's
quite bizarre how if it was just if Trump was
(09:27):
just going from zero to announcing all these tariffs right now,
it would be the most absurdly large increase in tariffs
by any country for basically a century. But because we've
had the last sort of five months of Trump threatening
massively high of numbers, now the's come out of these
(09:48):
sort of fifteen to twenty five percent, people are oh,
that seems okay, but others are stepping back going you
do realize that this is still an incredibly big increase
on tariffs, so it's a lot less confusing and a
lot less uncertain than it was, but we still are waiting,
I think for all the flow through of the slowdown
(10:11):
in America that's going to come because of this. The
good news, though, is because Australia is at ten percent,
kind of bizarrely, we're actually better off because everyone else
has got worse. Whereas before we were all on a
level playing field. You know, everyone was kind of on
the zero tariffs. Now we're on ten percent. That's not good,
but others are fifteen and twenty five thirty five. So
(10:33):
if you're an American importer and thinking do I buy
something from Australia or Japan or Europe, we're actually Australia's
got lowest tariff, so we're actually he's done us a favorite.
It's truly bizarre he's done us a favor. He's not
doing Americans a favor at all. He's making things more
expensive for them. But I think the scares for Australia
(10:54):
about what might happen. Much reduced now than they were
a few months ago. We still are worried about what
he might do about pharmaceuticals and the PBS, but we
know the government's not going to budge on the PBS,
so things kind of look okay for austraight at the moment.
But as with Trump, who knows he could wake up
and he's decided to do something completely different.
Speaker 1 (11:17):
So interesting. Greg Jericho, thank you so much for coming
back on the podcast to explain all things finance to us.
Speaker 2 (11:23):
Nowah, is Billy really great to be here.
Speaker 1 (11:26):
That is the end of that chat. I hope we
were able to break down some of the economic jargon
that is out there. Thank you so much for listening
to this episode of The Daily Oz. We'll be back
this afternoon with some evening headlines, but until then, have
a great day. My name is Lily Maddon and I'm
(11:47):
a proud Arunda Bungelung Cargottin woman from gadigl Country. The
Daily oz acknowledges that this podcast is recorded on the
lands of the Gadighl people and pays respect to all
Aboriginal and Torres Strait Island and nations.
Speaker 2 (12:00):
We pay our respects to the first peoples of these countries,
both past and present.
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