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00:00We're looking at the same day to everyone else's, but we've had now two months of the monthly
00:05indicator for the three months of the September quarter. And there's just a couple of categories
00:09that look like they've come through a little bit stronger than we were anticipating. The first of
00:13those is housing. So that's an amalgamation of rents and in particular new dwelling construction
00:19costs. And the second is market services. And those ones are particularly important because they are
00:25core components of the CPI. They will come through in the trim mean. And so we're just
00:28monitoring those two. But given that they've, as I say, they've printed through a touch stronger
00:32than we expected, we think that that will then show up in that full quarterly print that we get
00:37at the end of October. So how much weight do you think the board is going to be placing on that
00:42before deciding its next move? Well, I mean, all data matters. All data is important. Obviously,
00:47inflation data is very important because it's part, you know, it's core to the mandate of keeping
00:52inflation in that two to three percent target band on an ongoing basis. So that definitely gets going
00:56to feature. Of course, we also, as part of the November meeting, we'll be publishing on the day
01:02of the meeting itself, our updated forecasts in our November SMP. So they'll also get that
01:08information as well. Obviously, everyone else will too. And that will give you a real sense of how
01:12we've read the data, whatever it turns out to be and what it means for the outlook.
01:15Yeah, I want to talk about the forecast a little later, but just circling back to that point that you
01:19made about house prices. And this is something we typically see when we're in an easing cycle,
01:23house prices tend to go up, often has an impact on rents as well. So what are the recent pickup
01:30telling you about getting inflation back to target? Yeah. So house prices specifically,
01:34of course, they're not directly in the CPI, but they are one of the first typically domestic
01:41transmission channels for monetary policy. So it's not a surprise that since we started cutting rates
01:46in February, we've seen a little bit of a lift in the momentum in the housing market,
01:50and that's come through in prices. And then we'll expect to see that transmit through into new
01:56dwelling construction activity. So the viability of projects improves and lift in demand for dwellings,
02:03and that will come through into construction over the forecast. And then also, it'll flow through
02:07a little bit into consumer spending as well via a wealth effect. So we're really monitoring that
02:12channel and thinking about what that then means for inflation. We're not surprised that we've seen the
02:16pickup because we've seen it before in cutting cycles. So what we've seen is an out of line with
02:21previous periods. But obviously, we're monitoring it. And it's really, for the board, what they're
02:26really focused on now is keeping inflation around about the middle of the target band, particularly
02:32that underlying trim mean metric, because that's our best lead for where headline inflation will be
02:36over the medium term. How much confidence do you have that inflation will be in the midpoint of that
02:41target band by 2026? Well, look, forecasts, you know, inevitably, you get things a little bit wrong,
02:49at least. Sometimes you get them quite a lot wrong. And so that's the job for me and my team is really
02:54looking at what's happening, updating our forecast, taking on the new information and taking on what's
03:00happening around the world as well and what that actually means for the outlook. Well, obviously,
03:04that's very much what we're trying to achieve. That's what we want to achieve. We've
03:07got to a point now where we had that trim mean inflation was 2.7 percent in the June quarter.
03:12And, you know, the labor market had been, we think, relatively stable in recent months.
03:17We really would like to keep it there, you know, trim mean around the middle of the target band,
03:21headline eventually there too, and the labor market stable. But we've got to respond to what the data
03:26tells us and what else might be happening that we didn't foresee. And you can always get surprised by
03:31shock. So that's the job. And you're forever looking forward and things are always changing. But I
03:36hope that I can come back in a year. And that's what we've achieved. But let's see.
03:39Well, you might be helped along the way because I know you've been putting a lot of work into
03:42getting more detail into the monthly inflation data that we've been receiving. So instead of the
03:48quarterly prints that we've been getting, how significant is that in terms of your forecasting
03:52and helping the board make decisions? All right. Look, it's a it's a fantastic step forward,
03:56a really great step forward. It's not even once in a lifetime. It's once only. So it's incredible to
04:01to see that happening now. So grateful to colleagues at the ABS for all the work that they've done to
04:05to get that monthly, that full monthly CPI up and running. So it will give us more information
04:11in every month. And it will obviously go into our forecasting process from the off.
04:16Having said that, we do know that for just a relatively short period of time, there's going
04:20to be a bit of a transition. The ABS are still working through what the seasonal patterns look like
04:26for all of the components of inflation. That's important because we want to look at inflation on a
04:31quarter to quarter perspective because that gives us the best read on the latest sort of impulse.
04:35So once they're doing that and just figuring those things out, we're also going to keep paying
04:40attention to and really focusing on the quarterly trim needs. We're going to use them both together
04:44through to at least the middle of 2027. That's our transition period. But looking beyond that into
04:50the medium long term, this is an incredible step forward. We'll make our jobs certainly more
04:55information. I'm not going to say easier, but we'll have more information to work with. And that's
04:58that can only be a good thing. Always helps with forecasts. And in terms of forecasts,
05:02can you tell us a little bit more about your growth expectations and some of these unknown factors
05:06as well in terms of the risk around the global backdrop? Yeah. So well, starting with the global
05:12backdrop, it's certainly still uncertain and unpredictable. We've seen just in the last few days
05:17a reemergence of some of the trade tensions that we thought maybe were a bit closer to resolution.
05:23So we're clearly paying very close attention to that and to seeing what's happening in other
05:27countries around the world. You know, we can see the US labor market, for instance, looks like
05:31potentially it's softening and the uncertainty impacts may be playing through there. So that's
05:36certainly one aspect that we're paying attention to. In terms of the domestic outlook, I mean,
05:41we thought back in August that GDP growth would get up to around about 2% a year by the end of this
05:46year and sort of hold at that rate through the forecast horizon more or less. And that's really consistent
05:53now with our updated assessment of what we think the sustainable pace of growth is. So that's the
05:58pace the economy can manage without generating inflationary pressures. And so really, if we can
06:02achieve that and we keep inflation round about the midpoint of the target and the labor market,
06:07you know, in balance, then that's what we're looking to do. So we think that that's what we thought
06:13in August that we'd see for an outcome. But obviously, we're working through things for the
06:16November release. And linked to growth, the question of productivity, and this is something
06:20the Treasurer talks about a lot. And in fact, everybody talks about a lot in Australia. Do you
06:24feel the settings are right to improve productivity? And what's your outlook around that?
06:28Yeah, well, so in terms of the settings, obviously, there's a lot of focus on it at the moment,
06:33and it will be really important to see what comes out of that and what changes can be made,
06:39not just by government, but by the private sector as well. In terms of our assumption at the moment,
06:45so we just recently downgraded our medium term assumption for productivity growth to 0.7%
06:51a year from 1%. But I want to stress that that's our assumption for the next two,
06:56two and a half years through to N27 is our current forecast horizon. And the reason we focus so near
07:02term, short term, if you like, is because that's the horizon, the monetary policy has an impact.
07:06But a lot of what we're talking about in terms of changes to productivity settings,
07:10they have an impact three, five, 10 years down the track. That's true of the rollout of AI. It can
07:16be true of some of the changes that might be made around regulations and planning and all those sorts
07:21of things. So we're going to be revisiting this assumption on an ongoing basis. We're not saying
07:25anything about what productivity growth could be in 2030, 2035, 2040 or anything like that. We'll be
07:31updating and we'll all learn as we go about what that outlook looks like going forward from here.
07:36But just in the recent past and we think for the next couple of years, it's a little bit softer
07:40than it has been previously. Well, of course, another part of the RBA's mandate is the labor
07:44market. And it's kind of telling that we've left this right to the end. And does that suggest things
07:49are really under control? You're comfortable with how things are looking in the jobs market?
07:53We it's it's certainly very pleasing to see that we've been able to bring inflation down,
07:58you know, say to 2.7 percent for underlying with not too much of a lift in the unemployment rate.
08:04We know that, you know, that softening is challenging for some people and we're alive to that.
08:08But it is really good that we've been able to to preserve those gains in the labor market.
08:13So the question from here is where does the labor market go relative to inflation? That's something
08:17we're really working our way through at the moment. But certainly, as the governor has said,
08:23it is really good to see that we've still had very strong employment growth over the last couple of
08:27years and a relatively small lift in the unemployment rate. And we will get some labor market data
08:32tomorrow. We do. Yes. Just finally heading into 2026 looking into your crystal ball. What's the biggest
08:38risk Australia faces? Oh, what a good question. I mean, it is a bit hard, I think, to walk away from what's
08:44happening internationally and the many different ways that might play out. So I think we'll be very
08:48focused on there through 2026. I think domestically, the risk, you know, definitely quite balanced at
08:55the moment. There's reasons to think, you know, maybe the pickup in consumer spending we've seen
09:00isn't sustained. That's something a risk that we're certainly focused on. Equally, we've already
09:03talked about, you know, that sort of upside, potential upside to inflation and, you know, risk to the
09:10upside that might occur there. So we're looking on both sides of the ledger, as we always are.
09:14But those are, I guess, three of the things I'm certainly looking at from here.
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