00:00I think global macro is dominant, and that's not unexpected given the events of not only the last year, but even the last week.
00:10And then key semantics from a sector perspective would be AI, obviously.
00:16Once again, we have very strong interest in real estate across both commercial and residential real estate sectors.
00:23And I'd say the consumer and the outlook for the Australian consumer is also of interest.
00:30Yeah, I want to pick up on a couple of those points, and I'll just start with the AI one that you mentioned.
00:35In terms of what Citi is doing with its adoption of AI tools, what are you looking at in this space?
00:40Yeah, we've rolled out AI tools across the organization, and it's been an interesting sort of journey for us.
00:49But also if we look at it from a client perspective, whether it be through banking, but also in how it impacts the economy.
00:58So our global equity strategists have put out a recent report on how the impact of AI is feeding through into markets, through the economy, and through individual companies.
01:09So there's much to assess, but I certainly know from personal experience that my efficiency has improved since the rollout of those tools.
01:18Yeah, there's some very useful tools in the sweep, for sure.
01:21You also mentioned the macro instability and uncertainty and volatility that we've seen.
01:26Against that backdrop, where are Citi seeing opportunities in Australia and New Zealand?
01:31Yeah, well, we're actually quite positive about Australia.
01:33We've recently upgraded our growth forecast for Australian GDP.
01:38We've seen the RBA ease interest rates three times this year.
01:42We only expect one more rate cut.
01:46And I think there's a risk around that in terms of, you know, they might be done for this part of the cycle.
01:54What we've seen is we've seen a pickup in the consumer, and relating to my previous comment.
02:01And in terms of growth forecast, and why we've uplifted that growth forecast, is finally we're starting to see a shift from public-side-driven growth to the private-side-driven growth.
02:16And that's something that certainly the Australian government would be pleased with, but also means it's a more sustainable footing for that growth.
02:23And so we're quite optimistic about the Australian economy, and in turn we'd see a number of opportunities through the business.
02:30That's something the Treasurer Jim Chalmers has talked about before, is that a lot of the growth we've seen has really just been courtesy of government spending.
02:38But he also speaks a lot about his concerns around productivity in Australia.
02:42What are you seeing on that front, and are you optimistic that that could improve?
02:48Look, it's been the most talked-about topic in the domestic economy this year.
02:53And obviously, following the roundtable, you know, there's been some announcements, but we're probably expecting further follow-through.
03:01I think what's going to be interesting is how much can the technology in the Australian economy improve productivity.
03:08If we look at the US, what we're seeing is that sales growth is increasing, even though employment growth is not.
03:15That gives you an indication that the forward-looking productivity landscape is actually quite positive.
03:22That should feed through also the different parts of the Australian economy.
03:26But, you know, productivity reform, clearly it's on the Treasurer's agenda.
03:32We would love to see some really concrete steps in that direction.
03:36So you mentioned you are optimistic, and you spoke about optimism around the consumer as well.
03:40But how much of that optimism is due to central bank easing, and how much of it is due to genuine reform?
03:48Oh, well, I think clearly the three rate cuts have helped.
03:51In fact, I think people may have underestimated how much impact three rate cuts might have had.
03:57And since then, we've seen some winding back of the expectations of further rate cut easing.
04:04So I think it also comes at a time when aggregate fiscal expenditure still remains high.
04:12And so we've got quite a strong fiscal impulse.
04:16We've got a strong monetary impulse.
04:18And if you compare that to, say, over the other side of the Tasman to New Zealand,
04:22whereby we've seen a very aggressive easing of monetary policy, but the fiscal policy remains tight,
04:28you can see that when both work in unison, you can see pretty substantial improvements in growth.
04:36Typically, when we see a rate-cutting cycle in Australia, though, we very rapidly afterwards see another spike in house prices.
04:44Is that something you anticipate this time around?
04:47And does that suck the energy out of the economy in other areas?
04:52No, not necessarily.
04:53I think we've already seen a pick-up in housing prices.
04:58And, you know, the demand for CEOs from real estate firms here at this conference today
05:04sort of reinforces the fact that it's not only feeding through to residential housing prices,
05:09it's also sort of helping feed through to commercial real estate,
05:13which is also a very strong thematic of the conference.
05:16Does it suck the juice out of other parts of the economy?
05:20No, I don't necessarily think so.
05:22So the consumer pick-up that we've spoken about a couple of times illustrates that.
05:27So we think that we're getting close to neutral.
05:31I think it was a tight monetary policy.
05:34We're moving towards neutral.
05:36Given the amount of fiscal impulse and the natural sort of pick-up in the economy,
05:40we don't necessarily think that we need to go to easy monetary policy,
05:44but we think it's reasonably well-balanced at the moment,
05:47and certainly we welcome that private sector pick-up.
05:50In terms of some of the macro disruptions that you mentioned,
05:53you know, we're seeing a re-ignition of the trade dispute between China and U.S.
05:57with rare earths at the center of it.
05:59Now, Anthony Albanese is going to meet President Trump next week,
06:03and we are anticipating some sort of agreement around rare earths,
06:07of which Australia has significant reserves.
06:09Is this an area that you're excited about for Australia?
06:12I think Australia, look, the thing about when we've thought about tariffs for Australia,
06:17I think it's important when we think about the tariff implementation in a relative sense.
06:23And Australia has always been on, let's call it the more positive side of the tariff implementations
06:29in terms of lower tariff levels.
06:31But what I would also say is globally,
06:34and this comes out in our macro sessions here at the conference,
06:38is that the global economy is being remarkably resilient
06:41in the face of increasing tariffs over the last 12 months.
06:45In fact, global trade is higher this year than what it was previously last year,
06:50and global growth is relatively steady in the last 12 months,
06:55despite all the disruption.
06:57So we would say that there's a general global economic theme of resilience.
07:03In the local market, I think there's absolute opportunities
07:07from a geopolitical perspective and also from a trade perspective
07:11for the Prime Minister when he's in Washington next week.
07:15So we'll watch that closely.
07:17I've got a few business-specific questions for you as well,
07:20mainly around pension funds in Australia.
07:22You're also looking more and more for FX hedging capabilities.
07:26Is that a business that's growing for you at the moment?
07:28It's been growing for a long time.
07:31It's a clear opportunity for us,
07:34but it's also a clear challenge for the superannuation funds,
07:38and we spend a lot of time with them working on different hedging strategies
07:44and also liquidity strategies around that program.
07:49The proportional dollar from Australian superannuation funds
07:53is going into offshore markets,
07:55and that requires more thought around, one, the hedging strategies,
08:00but also the liquidity requirements of that fund.
08:03How about the prospects for equity capital markets
08:06and equity block trading business?
08:08What are you looking at there?
08:09Yeah, I think, look, still the IPO markets
08:13and the equity capital markets in Australia,
08:19we could do with more activity.
08:22They have been relatively nascent.
08:25However, the M&A cycle has been relatively strong,
08:29and our participation in some key transactions around that
08:33in the last 12 months has been a real positive.
08:39I think given where equity valuations are,
08:42we would expect that activity to improve into 2026.
08:46Mm-hmm.
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