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This is Bloomberg day Break Weekend, our global look at the top stories in the coming week from our Daybreak anchors all around the world, and straight ahead on the program, earning season rolls on. We'll take a look ahead to results from the chip maker at the center of the artificial intelligence Boom on Wall Street and Video, which just became the third most valuable company in the S and P five hundred.
I'm Tom Buzber, New York. I'm Stephen Carolyn London. We're looking ahead to London.
Milan and Paris fashion weeks as the luxury sector faces cooling demand for its products.
I'm deg Prisoner previewing the next move from the Reserve Bank of Austria.
That's all straight ahead on Bloomberg Daybreak Weekend, the business news you need to wrap up your week. Available on Apple, Spotify, the Bloomberg Business Appen everywhere you get your podcasts.
Good day to you.
I'm Tom Busby, and we begin today's program with earnings this Wednesday from Nvideo and for more on what to expect, we welcome Bloomberg Technology co host ed ludlow Ed and Video. This past week edging past the market value of Amazon dot Com then Alphabet worth one point eight trillion dollars.
Is this unstoppable?
This company, it seems unstop stoppable. It seems like a juggernaut, right And when you look at what Wall Street expects them to say when they post earnings next week, there are no signs that that will stop. You know that there's a lot of misconception and a lack of understanding about why in Nvidia has been on the tear that
it has. And when we talk about in video in the AI context, what we're literally talking about is that the AI development, the building of large language models, it requires just one hundreds of square miles of data centers, just rat some racks of servers, and those servers are basically lots of big boxes that get stacked up on one another. And those boxes, you can think of them like supercomputers. So you know, the listener at home has maybe a desktop and it's a sort of rectangular shaped box.
Think about something that's ten times the size of that, and then take that box and times it by one thousand. And in Video's role in that is that they provide the brains in that box, the GPU or AI accelerator and all of the money that's flowing into AI to build out that infrastructure. The reality is that you've only been able to build it within video products. Until very recently, there was no one else on the market doing that.
So the numbers are that Wall Street sees revenue growth of three hundred and sixty nine percent year on year in the coming quarter. I'll repeat it, three hundred and sixty nine percent top line growth. And what's so astonishing is that last quarter they had two hundred and eighty percent tope and growth year on year, so it just doesn't seem to be tapering out yet.
And the shares are up two hundred and thirty percent in the past twelve months.
So it's it's yeah.
Everything is just you know, coming up of roses for this company. But who are in Video's biggest customers and who are its top competitors?
Yeah, I mean the question of who the biggest customers are goes right to the explanation I gave on how AI works in the real world, and the short answer is the hyperscalers, the cloud companies that own, operate and control the data centers. For the most part, that means Microsoft Azure and in video powering AWS, which is Amazon's cloud business. The other big player is Google and Google Cloud Platform. But remember Google's done a bit of work
with its own custom silicon. But for the most part, even if you see the news headline like for example, and Thropic, which is a really big a company that makes a generative AI product is powered by Nvidia, we don't mean that that, you know, The CEO of and Propic knocks on the door of Nvidia in Santa Clara and says, hey, can I have a big bag of chips please, and throws it over his shoulder and off
he goes to make AI. The reality is that you're still reliant on a hyperscaler and that Nvidia ships those h one hundreds. They're called to the cloud provider and the data center that they go into, and the AI company never has direct contact with with Nvidia. But it's kind of a triumvirate. You have Nvidia providing the hardware, the hyperscaler that runs, the data centers operating it, and the AI company basically pays for the compute, pays for use of that cloud capacity.
And who competes at that kind of level within video?
Yeah, so for quite a long time now, and when I say that, it actually is not a long time, it's basically two years. Because all of this has happened in two years. Nvidia has been the only name where they're actually building its scale these GPUs graphics processing units, and in very simple terms, a GPU can make lots of mathematical calculations in parallel at once. That's why they're
good for training large language models or building AI. AMD has recently come to the market with a similar products called the mi I three hundred series. But you don't just sort of start building these in huge volumes. It takes a really long time to ramp, and as you know, there's been a chip supply crunch in the post pandemic era which has impacted that. So AMD is slowly ramping. The principal difference between the two of them is that AMD realizes in video has got a real hold on
this market for training large language models. But once you've trained the model and you want to start actually running the technology in the real world, you have consumers using generative AI tools like chat, GPT, or start integrating AI tools into your own software. Move to what's called inference.
In other words, getting a response from the model you ask, it's something, it gives your response, and AMD is basically saying ours is going to be better because what they all have in common is is incredibly expensive to do both of those functions. And so there's a battle that's brewing now as the market shifts from training models to actually using them in the inference stage. And it'll be interesting to see if AMD starts to take some market share.
So what's next for Nvidia? How do they pivot now?
Well, I think they just keep going. I mean, you guys may have seen that I did an interview with Nvidia's CEO Jensen Huang last week or the end of a couple of weeks ago. And the next big market is what Jensen's calling sovereign AI. So right now, all of the financing and activity behind AI is being done by the private sector, big tech companies. But there is an academic school of thought that, because of how impactful artificial intelligence will be on society, governments should have their
own operations. Right, government should have supercomputers and data centers that they control, that is, training large language models, that is, giving some kind of national level AI competence. And Jensen's been flying around the world to every region, speaking to you the leaders of those nations, and doing deals, you know, saying let's collaborate, we can do something where we sell directly to you that doesn't really show up in the financials yet.
Wow, a lot to look forward to. Well, our thanks to Bloomberg Technology co host ed Ludlow, thanks for being here.
Ed, Thank you very much.
Hapy weekend, And now we turn to the Fed and minutes from the January meeting of the FOMC will be released this coming Wednesday, and policymakers voted to keep benchmark lending rates unchanged at that meeting for the fourth time in a row. So what will they reveal and how soon will the Fed pivot to cutting rates? For some insight, we welcome Bloomberg International Economic and Policy correspondent Michael McKee. So, Michael, what are you expecting to see in these minutes?
You didn't need me, You just answered the question. That's what people want on Wall Street to find out is when and under what conditions will the FED start lowering interest rates? And I'm not sure they're going to get a complete answer. We have heard from a lot of Fed officials since the meeting that they thought the news was good on the economy and things were progressing towards the two percent target, but they're not there yet, and so they want to see more good news, which just
basically means they need more months of data. How many months, Well, they're not sure of that either. They have to wait and see how the data comes in and whether it is in any way confusing. So when you're looking at the minutes, you'll probably see something along the lines of most members agreed that progress had been made, but there's not going to be anybody who says it's time to cut Well.
Boy, well, let's talk about some of the data we have seen, and we've seen a pretty robust labor market, although seen a lot of especially in the tech sector, job cuts nowadays. Consumer demand has been good, spending, you know, not as strong sustained economic growth, the soft landing, I mean, all of that is pretty good.
Well, we've had a week where the data sort of contradicted each other when you're thinking about it. In terms of the FED, they had a strong CPI number, which took a lot of people by surprise and of course raised questions about whether inflation is going to be coming back or not. Inflation could be driven by a strong economy, which we had been seeing, and then we got the
retail sales numbers that showed a lot of weakness. Some of that may have been weather related and it may reverse in the next month, which would be another argument for waiting on the Fed side. But if the economy is weakening, then you would assume there would be less inflation and we'd be more on the path that the
FED wants to see. The jobless claim numbers came in down this week, which is a bit surprising given what we have seen and heard in the layoff announcements, but it does suggest that the labor market is still strong, and as long as the labor markets strong, people will be spending. It's only a question of how much.
Yeah, and the and the high inflation that we're seeing, I mean, that's affecting certainly housing business, you know, borrowing and infrastructure spending.
So what else is it affecting negatively?
Well, this last month's numbers were kind of distorted by the weather, so we know there's some issues in there. But inflation is making a difference in housing definitely, because we've been expecting housing prices to come down in the CPI and the PCE, and they haven't really done that. They actually rose in the CPI numbers, and so FAN officials are a little confused about that, as is everybody.
Why we see rent prices falling and that doesn't translate into lower housing numbers because they use the rent numbers to calculate those. If that were to finally take off and go down, then the FED would feel a whole lot better about the inflation picture right now. But the good news is inflation has come down a lot, to the point where now for the last six or eight months,
Americans average hourly earnings have outpaced inflation. That looks like the American people haven't noticed yet, but they're finally ahead of the game and maybe they'll start to notice that soon.
Yeah, someone should tell them that it's looking good. Hey, everybody, Well, our next FMC meeting March nineteenth and twentieth. So what are we going to get between now and then, or what is the FED going to get to come to their decision.
We'll get another CPI reading and we will also get the jobs numbers for the month, and we should get retail sales before that, so they'll have another month's picture. They'll have the February picture before they have to make a decision. We won't have the PCE index, which is the inflation number that they follow, and there's been a wedge between the CPI and the PCE that is partly based on the waiting of the things in the various categories.
PC's been running a lot slower and it's much closer to the two percent goal that the Fed has and they won't.
Have that data.
So expect March to be an on hold meeting. They've kind of signaled that at this point. By the time we get to the meeting after that in May, there should be enough data that they can make a decision. But if it comes in contradictory as it has this past month, they may not be ready then either.
Well, it's a lot to look forward to. Well.
Our thanks to Bloomberg International Economic and Policy correspondent Michael McKee, and coming up on Bloomberg day Break weekend, we're looking ahead to London, Milan and Paris for fashion as the luxury sector faces cooling demand for its products. I'm Tom Busby and this is Bloomberg. This is Bloomberg Daybreak Weekend. Our global look ahead at the top stories for investors in the coming week. I'm Tom Busby in New York.
The biggest fashion brands will be showcasing their designs across Europe in the coming days at the London, Milan and Paris fashion Weeks. These glitzy events are happening at a challenging time for many luxury names. So how are the world's most illustrious fashion houses protecting their profits while also prioritizing style well for more, Let's go to London and bring in Bloomberg Daybreak europe banker Stephen Carroll.
Tom it's a tricky time to be in fashion. Cooling demand for luxury products after the pandemic, along with slowing sales in China and higher inflation, have squeezed some key drivers of growth. This season of European Fashion Weeks are expected to be as glamorous as ever, with the fashion
elite descending on London, then Milan, and then Paris. While luxury giants LVMH and Armez had good stories to tell in their most recent results with strong sales and key brands, there was less good news and the likes of Burbery, which issued a profit warning, wiping the equivalent of almost one hundred and thirty million dollars off its outlook. I've been discussing all of this with Bloomberg opinion columnist Andrea
Felsted and our European luxury reporter Angelina Rascouette. I started by asking Angelina how important Fashion Week events are to these big brands.
These events are very important because obviously you're unveiling and you're you're going to be showing your consumer's WATA will be the trend. And obviously, in the age of social media, you know, you have influencers, celebrities who's got millions of followers. So actually the impact of these fashion shows are huge. And you know, but it's not just fashion shows obviously.
I and if you think just about Miley Cyrus, like recently she was at the Grammars and she was wearing a Gucci you know, at some point she was wearing a Gucci gown with a bag, and that's very important for the brand. You know, you think about Gucci, I'm going to be going to the show and in Milan next week. It's a brand that is in turnaround and he needs all the attention and the visibility can get. They have a new recently new designer. I mean this is going to be his third show, so indeed it's
going to be you know, very important. But remember there's always a lag also between the unveiling of a collection. So his first collection, Sabato at Gucci, was in September and it's now only hitting the stores right now, so there's always a lag of course, So the financial impact cannot be assessed obviously right away. Right away, what you can assess is you know, the bus you know, if a video goes viral, that's pretty much what you can assess.
Andrea, that brings us very neatly something you've been writing about recently when it comes to Gucci as well. Just the headline from your piece Gucci can be revived, but it won't go viral. Tell us more about how you're thinking about the series of fashion weeks.
Yes, obviously Gucci, as Angelina mentioned, it's it's moving from its bold maximalism that it had before to this new much sleeker esthetic in line with quiet luxury. This this trends that emerged around a year ago at the at the shows early last year, which sort of set the direction of fashion.
Now.
The worry is that We're having a bit of quiet luxury fatigue, so this could be potentially awkward for Gucci. I'm not sure that the that the new Gucci is really is distinctive enough to stand out in the way that the past designer Alessandro and Mikayley did. It's also going to take a while, as Angelina said, to come through, So yes, this will we really want to.
Watch Miley cyrus not enough to revive an entire brand. Andre I wanted to ask you though about Burbery as well, because they made us bash in the last season of Fashion Weeks in September with their takeover of Barn Street Station, for example, but the company still saw a profit warning its recent earnings report. Is this going to be a difficult showcase for Burbery? Do they need to turn around the vibes?
I think it's going to be just as sort of confident and exciting as September was, because what Birbury needs to do is, as Angela Andlina mentioned, it's all about creating a buzz, creating a halo effect, and Burbury really needs to do that. So it's got some quite nice products some coming through. It's got a lot of nice bags, you know, Daniel Lee is really pumping out the products. There's a new trench bag which is canvas, very much
in line with the nylon bag trend we've seen. There's been a lot of narrative that Burber has been putting the prices up and that's putting people off. That's missing the point. You know, what you need is brand desirability. It's starting to happen. Burbery is starting to move there's a list index of the most in demand brands that people are searching for and buying started to move up gradually.
I'm seeing some young people with the Burbery check bags, Barberary check scarves, often vintage, so that's really good size. What it needs to do is it really needs to pump up that desirability. It needs to get those bags out to influencers so that we can follow and see them in you know, Instagram, pos, TikTok videos, Pinterest boards. And I think when that happens that that could be good for Birbary because I feel that a lot of the turnaround stories a lot of the brands are kind
of they've been around for a while. I mean, Gucci was exploding around eight years ago. The Mew Mew turnaround is and the product turnaround are pretty well established now. I feel that there is room for something new and exciting and if Barberie can get it right, that can be Actually can tell I'm the lone Barbary.
Ball Anthony, I wonder do you have a contrarian view on on on Birbary From what Andrea was talking about, is that the big highlight from London Fashion Week that you'll be looking at.
For Yeah, so for sure, Burbery is definitely the most famous brand coming out of London Fashion Week. And uh and the tricky uh bit with Birberies that obviously being a publicly listed company and it's not a group, it's only one brand, right, so so so it has to report results on a quarterly basis and that's scrutiny. Sometimes it's very difficult for a brand that's in turnaround mode. I mean, you know Andreas right, you have to be
confident and you know that about the designer. You know he wasn't named less than two years ago and it doesn't happen overnight. So so that's the tricky bit. And Burbery in comparison to all the other groups, you know that you know if so is part of one group. Loueve is part of a group, so so you don't get the granularity of their performance on a quarterly basis.
And that's that's actually the challenge for for Burbery because of course LVMH another company that you cover, Andrelia is an absolute mammoth in this area and and kind of covers a lot of ground in terms of brands as well.
Does that allow for more space for underperformance and of certain brands, yes, I.
Mean, you know, and and and they're not. You know, they have some mega brands like Viviiton and Christian and some brands who who who started from a very small and you know, with very small sales numbers and now we know that they've actually grown a lot in the past five to ten years. You know, if you think about a brand like Louieve with the designer Jonathan Anderson, he's an Irish designer trained at the London College of
Fashion and he's done Wonders at WAVIN. We don't get the numbers of Louve, but we know he's done Wonders and they're very happy with him. And it's the same thing with Celine with its slimann again, we don't get the numbers, but we know these brands have fair very well.
And actually another brand that that was at some point problematic, I mean he said it in I think it was more than five or six years ago in results that you know, Mark Jacobs was struggling and they managed to turn it around and they're very happy with the turnaround that they managed to do so. But being part of this wider group where you only have numbers by unit,
not by brands, that is very helpful. That gives breathing room for the brands and for the managers who are in charge and the designers as well.
Andrea, can you give us since we're talking about London fashion making then you know the European tour that follows with Malan and with Paris. What's your feeling abound the British fashion industry post breaks?
It has that.
Post challenges to it. Is that something that's led to a shift?
It really has. The loss of those tax breaks for overseas shoppers in London has really hurt the London fashion fashion demand, particularly Berbery. It's another headwind that Burbery has to deal with. But across the across the board, there are hopes that might be revived. It was difficult for the government to say we are giving luxury shopping a tax break when we had the cost of living crisis going on. Optically it didn't look very good. But now
that seems to be subsiding. There are hopes that that can be reversed and that can breathe life back into London fashion sales.
Ay, and I wonder when you think about the other shows that you'll be going to, in the other brands that you'll be monitoring, what are their highlights are you looking out for?
I mean, obviously with Too is always a big it's a big moment because it's the biggest luxury fashion brand. And uh so last month in January it was the Men's Worst Show. So that was Pharrell Williams. Uh third show for the brand since it's been named, second show
in Paris. So now, you know, it'll be interesting to see what Nicola offers for for for for ladies and you know they, you know, we you know, when Forarrell Williams was named, you know, people are saying, oh, maybe he's going to like take all the spotlight away from from from from Nicolajeska, but actually Nicola, you know, he's been at Veton for ten years and they just renewed his contract. So it's a vote of confidence for Nicolai and uh and so for sure, I'll be I'll be
looking forward to that one. I'm still hoping to get my invite. But uh and then uh, and then hermess as well, I mean hermess is the you know, Andrew was sort of mentioning the quiet luxury armess is you could put it in that basket. I mean, it really caters to the most to the ultra high network individuals. And uh. And you know, for many, many years we associated l Mess with the leatherboods, with handbags and with you know, but actually they've done tremendously well when it
comes to ready to wear. And they have these two uh designers, uh you know, two ladies, Uh, one for men's wearing, one for for women's wear, and they've done wonders.
Uh.
So you know, but that but I'm one of of course it is you know, you it's it's it's less you know, on logos, it's less on bold maximalism that that Andrew was talking about. It's more on the the the quiet but uh, you know, the the think about you know clothes that you can you know their their viability will last for over a season. Let's put it this way, and then otherwise, uh, you know, is always
an important one of course. Uh Maria gras acuity, she's been she's been with the brand for for many years and actually she's done Wonders as well for commercially.
Andrea, final thought from you, it's the fortieth year of London Fashion Week, so it's a bit of a milestone as well. Have you have you kind of a particular view unwhere of about the next forty years might be taking London fashion.
I'm London's always been very innovative in fashion. When we think about you know, many designers come through some Martins, for example. London can be quite edgy as well, so I think that it's important to keep that, you know, experimentation, edginess, to have a different point of view from some of the bigger capitals. And I think if Barbery can get it right, it can really reinforce that.
That was Bloomberg Opinion columnist Andrea Felsted and our European luxury reporter Angelina Rascouette. I'm Stephen Carroll in London. You can catch US every weekday morning here for Bloomberg Daybreak Europe, beginning at six am in London and one am on Wall Street, Tom.
Stephen and coming up on Bloomberg day Break weekend, the Reserve Bank of Australia releasing minutes from its latest policy meeting, and we'll get a preview. I'm Tom Busby and this is Bloomberg. I'm Tom Busby in New York with your global look ahead at the top stories for investors in the coming week. In the week ahead, the Reserve Bank of Australia releases minutes from its latest policy meeting. That's when the RBA left its benchmark rate on hold after
lifting it thirteen times since twenty twenty two. Bloomberg's Doug Christner and Paul Allen from the Daybreak Asia team on what it all means.
Tom. We know how rampant inflation was in many developed economies during the pandemic, and central bankers responded with aggressive rate hikes. In a last year, the stories seemed to shift to immaculate disinflation, but that's no longer a given, as the recent USCPI data show clients have stalled and it's forced an adjustment to expectations for the number of rate cuts from the FED and how aggressive the FED may be.
Other central banks facing a similar dynamic, and this week we might get inside into how the RBA have used the inflation story. Minutes from the last meeting of the Reserve Bank of Australia schedule for release on Tuesday for a look ahead, we're joined by Swati Pandi, Bloomberg Australia Economy Government Reporter and Swati We've got a big piece of the puzzle with the January unemployment numbers ticking up
to four point one percent. I believe that's the highest in two years, one hundred thousand full time jobs lost. A little bit more is that it can we say that tightening's now off the table for the RBA.
It was a surprising piece of data and a very important one as well, because the RBA has been looking at the jobless rate and that was also one of
the reasons why they have been hawkish. But the ABS has tried to play it down that report by saying there is a lot of c reasonality in December and January, January being a very popular month for people to go on holidays, and also there have been some people who were marked as unemployed, but they were actually in between jobs, so we could see a revision in the unemployment rate,
maybe going back down in February. So I would say it's probably too early to say that we are in a market where the labor where the labor market is easing. There are tentative signs, but overall the RBA's assessment is that the labor market is still tight and demand is still exceeding supply.
That said, the labor market data did get the market's attention. We spoke earlier in the week with Charlie Jamison, he is the CIO of Jamison Coot Bonds. Here's what he had to say.
We need to be generating more employment in order to keep those numbers designable. There has been a lot of loss of momentum in the me as we said, and that's certainly, you know, different to what you guys are saying in the United States at the moment, where the economy seems to have accelerated a little bit in the in the first part of the looking at employment and inflation data.
So it's brought forward now the notion of rate cuts from the RBA. SWATI, is it too soon to talk about rate cuts.
It's actually not too soon. But if you ask Reserve Bank Governor Michelle Velock, she would say it is too soon because they are still not ruling out interest rate hikes. That was her commentary last week, So they are not ruling anything out for that matter. But she's still sounding hawkish. Since she's still talking hard on inflation, markets are now expecting some probability of an August rate cut. There are
some economists who are expecting a June rate cut. A Bloomberg economist is also expecting a rate cut around May June. So yes, it's it's still three months down the track. I would say, wa'ts.
The inflation story telling us right now.
Inflation is still well above the RBA's target, still has a four handle to it. ARBs target is two to three percent. They are targeting the midpoint two point five percent. So it is still at a level where a Michelle Bullock is really uncomfortable, and that is one of the reasons her vague guidance, I would say, is for interest rates to remain elevated for longer. The RBA's forecast does not show inflation in the midpoint until twenty twenty six.
I was reading comments earlier in the week from Maryan Coller, the head of Economic Analysis from the RBA, and one of the things she was cautioning is that inflation may be sticky. Paul, give me your perspective. You live in Sydney. What is it like, you know, the cost of living right now? What are common people kind of dealing with in in their everyday affairs.
Yeah, this is an interesting one that you raised, because we have Michelle Bullock last week speaking to Parliament about this and questions about businesses using the cover of high inflation to start pushing up prices were raised. And look, certainly from an anecdotal point of view, and I'm sure Swaty will back me up here, is if you just go on your regular grocery shop, you're just out and
about doing things. Inflation's running, it's, you know, something above the RBA's target window, but you're buying things that might be higher by fifty, sixty, even one hundred percent than what they were a year ago. Now, the two big supermarket chains in Australia, Coals and Woolworth, start coming under fire as well for this type of thing. They're defending
themselves against this accusation of price guarding. But you know, it's a hot subject in Australia at the moment, isn't it smitty just how much consumers are paying for things and how that doesn't really square away with the official inflation rate.
That's absolutely right. Haircuts have become very expensive and it's eating out. Restaurants have raised their prices. I still would say that when you're out and about in Sydney, if you go to a pub on Friday, it's still buzzing, still teaming with people. So we are not really seeing that impact on every day kind of lifestyle. Yet we've not had a big impact on people really cutting down
drastically on their budget at an aggregate level. I'm sure there are people at either ends of the spectrum who are very deeply affected, but if you are going out and about, it just feels like a normal day. During Boxing Day. In fact, around Christmas, shopping malls were chocolate block. They were huge queues of cars waiting to park, and that was the time we were talking about a hard landing soft landing, so it just did not feel like a recession is coming for that matter.
You know, it's interesting because I think we have just in listening to the conversation here, I think we have to discriminate between services inflation and goods inflation. And I recently saw that the IMF was recommending that the RBA needed to raise rates to tame inflation. Is the IMF looking more at the services side than the good side?
I would say the IMF is looking at the services side because that is something that Michelle Bullock and earlier Marion Kohler mentioned as well, that that is that part of inflation is quite sticky, and their concern is that it will remain elevated for some time. And another concern
that they have is inflation expectations. So if you allow inflation to remain higher or above the target band for a long time, it will unanchor or do more inflation expectations as well, which right now is at two point five mid point.
Well, we mentioned that Michelle Bullock the ABBYA Kevin I was speaking with senators last week in Australia. She took questions on this. What was she saying about it?
She actually said that the IMF is not particularly talking about Australia. She said this is something they are talking about in general for developed economies. Because inflation continues to remain a concern. But also as far as goods inflation is concerned, it's still too early to say that we have won that battle because we have conflicts going on in parts of the world. There are supply chain disruptions that have again happened with the attacks in Red Sea.
So even as far as goods inflation is concerned, Michelle Bullock is not willing to say that we have won the battle there.
So my understanding is that the RBA during its tightening cycle raised rates thirteen times for a total of four hundred and twenty basis points. The policy rate now is at four thirty five. Paul helped me understand how that connects to the mortgage market in Australia.
The big four banks here often cop a lot of criticism for being incredibly quick to pass on increases to the cash rate to people who are borrowing money off them. And in a country like Australia where house buying auctions practically a national sport, the tax regime has also set up very generously for people who want to buy investment properties. These sorts of interest rate moves really get people talking.
There is a fair bit of competition. But if you're taking out a mortgage in Australia, yes, you do pay a lot more than you were a couple of years ago during the depths of the pandemic, when interest rates were very very low and we saw property prices just absolutely taking off. Now a lot of people took out loans when rates were at those low levels. Those rates have since increased, but we haven't seen a huge amount
of mortgage stress. There's been a very few for sales, and certainly none of what was predicted the time seems to have come to pass. Is that your observation, Swati?
Yes, absolutely. I would also like to add there that Australians are among the most indebted household in the world, so we have a debt to income ratio of roughly one hundred and eighty five percent, and that is one of the reasons it was expected that households would be very,
very deeply hit by these interest rate hikes. But we had earnings from Commonwealth Bank of Australia earlier this week and they had like five billion dollars in profits, So clearly we are not seeing that impact in defaults and non performing assets for banks at least.
So Swati. I'm wondering whether or not when we get these minutes from the last RBA meeting on Tuesday, whether we're going to be able to learn anything here, whether it's going to be kind of a level of understanding that the market will have, or do we need to say that because of this very very disappointing employment report, that it's essentially all bets are off now, we're starting almost from a clean slate.
So Doug, we will have monthly inflation report next week that is going to be critical for markets, and if that is showing a softer number, I think rate bets will will be brought forward more convincingly than now. As
far as the minutes are concerned. The Reserve Bank Governor held her first press conference after the rate decision last week and that went on for almost an hour and a lot of the questions around her views on interest rates, inflation and economy were answered, and then she also appeared into parliamentary appearances. So I think as far as the RBA's thinking is concerned, we already have a lot of
information from them. So not sure how much more the minutes are going to show, but definitely markets will be looking out for that monthly inflation number.
And Doug, I'm not sure if you're aware we're actually in the presence of history here because that was the first ever press conference by an Ibya governor and Swatty got to ask the first ever question, so that caused a little bit of consternation among the media pack.
Swatty, thank you so much for making time to chat with us. Swati Pondie Bloomberg Australia Economy and Government reporter, and of course Paul Allen in Sydney, who is a member of the Daybreak Asia team. Thanks to you both, I'm Doug Prisner. You can catch Brian Curtis and myself weekdays here for Bloomberg day Break Asia beginning at nine in the morning in Hong Kong eight pm on Wall Street.
Tom our thanks to Doug and Paul. And that does it for this edition of Bloomberg day Break Weekend. Join us again Monday morning at five am Wall Street Time for the latest on markets overseas and the news you need to start your day.
I'm Tom Buzby. Stay with us.
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