00:01We heard over the weekend, right in the middle of the weekend, that Karg Island was attacked
00:05by the Trump administration.
00:07Now, why that's important is because of retaliation from that.
00:11It's a major terminal for Iran.
00:14Iran pipes through oil, big ships come in to take oil from that island and they send
00:19it through the Strait of Hormuz.
00:21So if there's any kind of retaliation from that, there was an expectation that there
00:25would be even more pressure on ships to not be able to move through the Strait of Hormuz.
00:29As it stands, Kath, there are no ships or very few ships going through the Strait of
00:34Hormuz.
00:35That needs to ease.
00:36Now, just on that, we had a short time ago, President Trump speaking on Air Force One and
00:43indicating that he was going to get a coalition of countries together with the help of defence
00:49support to escort ships through the Strait of Hormuz.
00:53Now, if you can do that, and it's a big ask, then there will be a relief or pressure off
00:59suppliers of oil, remembering that 20 percent of oil goes through the Strait.
01:04Now, a lot of people say, what about the other 80 percent?
01:06But that 20 percent is crucial.
01:08So if there is an indication that that will be successful, that that operation will be
01:14successful, is expected to be announced later this week.
01:16There will be significant pressure taking off the price of oil.
01:20As it stands, really interestingly, the price of oil has remained relatively flat today.
01:26It moved up at the open of trade.
01:27It has remained relatively flat, which indicates that the market itself thinks there is some
01:31hope that the Trump administration's request by these countries will be successful.
01:38But as I say, as it stands, the Strait of Hormuz remains effectively shut at the moment.
01:43OK.
01:43We know that in other big news this week is the Reserve Bank.
01:47They began meeting today.
01:48We'll hear a policy decision tomorrow.
01:50All of this will be playing into that, one would presume.
01:53Where are they likely to go with rates?
01:55Well, I mean, you're 100 percent saying presume because, you know, ultimately, if the price
02:00of oil spikes and it hurts fuel prices and, you know, motorists struggle to pay for petrol,
02:05they're going to cut back on other expenditure.
02:07So longer term, there's a question about whether it will actually hurt spending, which will produce,
02:12which will result in the Reserve Bank cutting rates.
02:14But at the moment, just for now, yes, the expectation is both from Treasury and economists that it could
02:20send the inflation rate upwards of four and a half, five percent, which would demand that the Reserve
02:25Bank hike interest rates.
02:27Really interestingly, Kath, just in the last hour, Paul Bloxham from HSBC has come out to say that he
02:33thinks that the economy needs a downturn in order to get inflation back to the Reserve Bank's target
02:40of two and a half percent.
02:41Now, he did use the word recession, but what a downturn looks like is anyone's guess.
02:46But what he's saying is that inflation is going to creep up too high and that the Reserve Bank
02:51will need to hike interest rates to crimp overall demand and that that will lead to lower prices.
02:56But it's pain that no one wants.
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