[CC may contain inaccuracies] What do you make of it so far. Well I think it was the only credible decision that the RBA
really could have made after last week's action in the bond market. I don't think that they could have come out today and
not gotten rid of that yield target of point one percent on the April 20 24 bond. And I think that the statement is very much in
line with the RBA still saying that it's going to be patient on raising interest rates and clearly assigned to the market that
that the central bank thinks the market's going too far in terms of market pricing. I mean within the next year the market's
pricing in about three and a half rate hikes from here. I'm just looking at that's too aggressive as well. But that tends to be
what the market does that it either stops pricing in too many rate cuts or too many rate hikes at different points in the
cycle. So they're still saying a rate rise is a long way off as you
just mentioned that we had a 20 24 year penciled in the tablet. Does this move the dial in any way.
I think for the full cost of being likely to publish on Friday in a statement on monetary policy they will have to revise up
the short term inflation forecasts for the next one maybe to 18 months or so.
And that's just on the basis of the fact that we've had this huge increase in German goods prices across the world from the
supply chain issues that are very well known high energy prices as well. So the central bank will of course have to respond to
that like the market has like economists have as well. And maybe there'll be some near-term upward revisions as well to that
growth forecast for Australia because the reopening in New South Wales Victoria has gone better than expected. When we think a
few months ago to the beginning of the Delta outbreak both of those economies were in a much stronger position. But I don't
think that the central bank is in any rush to raise interest rates away at HP Capital think that they'll be all that the
central bank will have to start hiking rates at the end of next year. But clearly the central bank don't think that the
conditions are warranted for any hikes within the next year. I'd say
he was talking about the wage pressures as well. Wage price index increasing 3 percent over twenty twenty three two and a
half percent over 2022. What. Where do you see the trajectory of inflation now. Are you thinking that wage pressures are going to
be less subdued. And where does that leave the RBA maybe in the next coming months or years when it comes to pricing in those
higher rate of rate hikes as you mentioned. Well Australian wages haven't responded as fast as you've seen
in the US economy for example in the US. You've had both inflation and wage pressures. But in Australia you've run.
You've really seen inflation coming through. Wage pressures is still very much subdued as Kathleen was saying only running
about 2 percent per annum at the moment. And the RBA wants to save close to 3 percent. I think the risk for wages is still a
maybe even to the downside a little bit. The risk here is really when you start to see an inflow of migrants coming back into
Australia because we had close borders might actually see some downward pressure on wages in the short term maybe the next 12
months as the inflation story starts to get more white and it starts to become more apparent in the economy. I think that
there will be more of this wage inflation spiral but nothing too. There are no indicators to say that wage growth is going to
get out of control in Australia. Not like it is in the US. We have seen very strong wages growth across all income quintiles.
Really. So the pushback when it comes to rate hikes. But at least they
have scrapped that yield curve target. Would you see this as a significant U-turn from the RBA or a significant policy shift.
I think it's a significant policy shift because the central bank is just like the market or any other commentator where they have
to be data dependent and they have to move their thinking based on how things are progressing. And we've seen most other central
banks around the world across the developed world move to become a little bit more hawkish and looking to either remove policy
accommodation which was very accommodative over the coronavirus pandemic to move some implementation or even to tighten interest
rates as we've seen from some central banks around the world. And the RBA is just responding to that. I always thought that
the yield curve target that we made pigeonholed them a little bit. It. It can be a little bit difficult to explain. And it
always meant that at some stage you would either have to get rid of the yield from Target or you would have to move to
potentially price to target a shorter dated bond. Instead of targeting a three year bond you'd have to target a two year bond
or something like that. So it is a little bit of a complex policy and probably one of the other major central banks chose
not to adopt a yield curve target just going down the path of doing quantitative easing or rate cuts.
House prices certainly on the way up again. And this is often one of the things that the Reserve Bank has to weigh up in its
decision making. What are they. And of course it's out of the hands of the RBA.
But why doesn't the administration do something to further reform negative gearing or maybe scrap it altogether to get them
out of the mire that this actually creates. I will say the headache it creates for the central bank that.
Well that was attempted to be done in our federal election which was a few years ago. Low party win with the policy to try and
scrap negative gearing capital gains tax discount and they didn't perform very well in the polls. And that's when the
Liberal Party was not forecast to win. But they actually did win that election
because at the end of the day I think that a lot of households positively
impacted by housing market movements here in Australia because it's obviously reflected a lot of superannuation balances and in
a lot of investment. So you know the day not many people want to see the value of their
home falling which I think why wasn't a very very popular policy here in Australia. I don't see them doing
any changes to those taxation impacts on the housing market. We've already seen some changes by aperture serviceability and
that may continue. Deanna I have two questions in one. How does this decision today
do anything to repair the credibility issue that a lot of people were saying when it comes to the RBA. How are they going to do
communication moving forward. And does today's decision have global implications for central banks out there.
Well just on the second point I think maybe other central banks will look at the yield curve target and see some of the issues
that have risen to the RBA in terms of doing a yield curve target see some of the difficulties and maybe not want to go
down that path. Japan still has a yield curve target in place but I think the market is a little bit different to something
like the US or in Europe. And in terms of the first point the credibility they're putting
out a during a press conference I saw in that segment at 4 o'clock today. So maybe the low. Yeah we'll try and explain the
thinking that the RBA was going through. It is very strange that they decided to not make a decision about this last week or not
to come out with some kind of press commentary about this last week. But in the long term I don't think it. The obvious
credibility here in Australia.