Already and this is the Daily This is the Daily ohs oh, now it makes sense.
Good morning and welcome to the Daily OS. It's Thursday, the fifth of September.
I'm emma, I'm zara.
The latest figures on Gross Domestic Product that's GDP show Australia's economy is growing very slowly, so slow in fact, the Australian Bureau of Statistics says it's just recorded the softest annual economic growth in over thirty years outside the pandemic. So why is that and doesn't mean Australia is heading for a recession. We've got lots of questions and unless you're an economist, these data releases can be a bit tricky to unpack. So that's why we've brought in an
expert for today's episode, independent economist Nikki Hutley. We'll talk you through the latest figures in the deep Dive.
The Federal government has announced a new plan to regulate the use of artificial intelligence. The ten new guard rails for organizations and businesses include cybersecurity and transparency standards based off similar overseas models like AI standards used in Japan and the EU. The strategies aimed at helping organizations, which could range from corporations to education institutions, to harness the benefits of AI and address concerns about its potential harms.
The guardrails are voluntary, but Minister for Industry and Science at Husick so the Government is considering legislation to make the new AI standards mandatory.
The National Fire Authority has warned large parts of the country could be in for an early start to the fire season if current dry conditions persist. It comes as parts of WA and South Australia experience record high temperatures, heightening the risk of bushfire acting in those areas. The newly released Spring Outlook from the National Council for Fire and Emergency Services said parts of South Australia, Victoria and Tasmania were most at risk of early fires heading into summer.
Authorities are advising communities to stay vigilant and prepare survival plans.
Shares in AI chip giant in Vidia have fallen by nearly ten percent. That's marking the biggest value loss ever recorded for a US stock. A two hundred and seventy nine billion US dollar drop in in Vidia's market value has been attributed to growing concerns from investors about emerging AI technologies. In Vidia technology is used by some of the world's biggest tech companies that includes Microsoft, Google, Meta, Tesla and Amazon to train generative AI models and to develop new software.
And today's good news, Olympic gold medallists Jess and Miami Fox are being honored in their Western Sydney home town, with part of Penrith's Whitewater Stadium to be named after them. The sisters want to combine three gold medals across the kayaking and canoeing events in Paris. An artificial island in the center of the Whitewater Sporting Facility, newly dubbed Fox Island, will be on the world stage next year when the
stadium hosts the Canoe and Slalem World Championships. The New South Wales Minister for Sports, Steve Campus, said there is no doubt that the Fox family are the first family of paddling in Australia. The contributions that each of them has made, he said, have lifted the sport to new heights. We'll be back with the deep dive right after this. GDP for the June twenty twenty four quarter shows a thirty year low growth rate for the economy as the
government blames high inflation and high interest rates. But with both of those concerns not really expected to ease for months or even years to come, what's in store for Australia's financial future? Are we actually headed for recession this time? To answer all your questions, I'm speaking with someone who knows a lot more about what GDP means that I do, and that's independent economist Nikki Huntley.
Hello, Nikki, Hello, Thank you for having me.
Before we get stuck in to those latest figures, could you take us through the broader idea of GDP. What does it actually mean? Why are these numbers significant?
Yeah, so GENDP interesting well, interesting to economic serves anyway, is actually a concept that's not quite one hundred years old. But it was in the dark days after the depression that we decided we had to have some way of capturing how to measure the size of the economy. How did we know whether things were getting better or getting worse?
And so some writespart came up with the idea that we would measure all the money that we spend, all the money that we invest and save everything that we produce, and we have these three different measures of what we call GDP or gross domestic product. But essentially, if you think about the economy as a kind of pie where we're all contributing to it for the way we work and what we produce, is that pie getting bigger and is our individual share of that pie getting bigger as well.
Australia's economy grew by zero point two percent in the three months to June. What does that mean?
That means that our economy is really weak. Now, that's kind of what you'd expect given that we've had thirteen interest rate rises over the last couple of years. The Reserve Bank of Australia wanted to slow the economy down because that's the only way that they can get in flesh. And those big price rises we've been seeing back under control.
We've seen it particularly.
In consumer demand, so the things that we buy, whether it's goods or services, going to the vet at the supermarket. We've been spending a lot less money, but businesses have been investing less as well.
We're building fewer houses.
It's basically the government spending and not just one government or governments.
And also our exports that are.
Kind of holding the economy in place, but also the fact that we have more people in the economy because our population through natural birth but also migration has been increasing and of course the more people you have, the more toothbrushes you need to sell.
Nikki the as Head of National Accounts Catherine Keenan yesterday said the latest GDP figures were the lowest annual growth scene since nineteen ninety one ninety two outside the COVID years. So it's easier for us to understand why the economy slowed during the pandemic, But what is it about twenty twenty four, about this quarter?
So there's a couple of things going on here.
One is an underlying economic malaise if you like that. The Australian economy before COVID was quite stagnant. We had very low growth in incomes productivity with sluggish and we had this sense that we needed to build back better after the COVID downturn, but we didn't really put.
In policies in place that allowed us to do that.
Unfortunately now, of course, once we had the pandemic, we had huge amount of growth that led to very high inflation which was picked up too slowly by central bankers, and of course then they had to slam on the brakes by raising interest rates and that's brought the economy down.
So there's two things.
There's one is that structural weakness that we had before we even went into the pandemic. And on top of that, we've had this, you know, really really short, sharp and very strong increases in interest rates.
Never had that many rate rises that quickly before the Reserve Bank.
It's a slow economy because otherwise we don't get the inflation genie back in the bottle. The question then is what is Australia's future, And I think Australians have a bit of trouble thinking about what that looks like. The truth is we're actually a services based economy, you know, things like healthcare, age care, education, which is a see the export for us as well. It's not all about
necessarily sexy high tech jobs where our future is. It's not just about building new renewable energy projects.
We've got a shortage of lawyers who know how to do the deals.
We've got a shortage of educators who can train the people who need to work on those projects. Every single area where these projects go up still needs teachers and doctors and nurses and everybody else to support the population. We do, I think can do a lot better with regional Australia really misses out at the moment, and I think, you know, we need to think more broadly how we can engage all Australians in the growth story.
The language around GDP figures at the moment. You know, we've heard the treasureressay words like soft and subdued. It's a very kind of, I guess demure approach to speaking about economics. But should we be concerned when we hear the economy described as quote unquote soft.
Well, we absolutely should, because when the economies, it means there's fewer jobs being created, and that means unemployment is rising. We've already seen that it means it's not only harder to find a job, but then it becomes harder to get a decent wage increase.
From a financial well.
Being point of view, we need economic growth to make sure that we are improving our standard of living.
So there is that growth, albeit slow. What are we predicting to come next? This is sort of looking back at those months, the three months to June, where in September now, so are we heading for a recession.
Yeah, look, it's way too early to say the our word. But the big question is what do the policymakers do. And there's two sets of policy makers. One's the Reserve Bank and they can use interest rates, and the other is governments, and they of course can do things like the tax cuts that we've already had, or giving people other types of incentives to help them with the cost of living and other pressures. Keep the economy. They can
invest in more infrastructure, build more roads. They're already doing a lot of that. That's kind of what's helping the economy go at the moment. So the big question really is what happens with interest rates, And it always takes interest rates a long time to work. You can see interest rates started rising back in May twenty twenty two, so more than two years ago, and we're still feeling the effects. We still haven't seen all of that come through.
The big question is if the Reserve Bank waits too long, If they wait right up until that point when everything's slow and inflation's back where it needs to be, if they don't cut interest rates before then, then they risk us going into a recession because that downward pressure is on the economy, so everything will come down to timing on the first rate cut. So far, the governor's saying not this year. I think it's probably a little bit
too early. There's too many risks going both up and down to rule anything in or out at this point in time. In fact, I would think that it's more likely that we should have an interest rate cut before the end of this year, maybe in November, to just start getting things moving.
Otherwise you'll slow the economy.
Too much and instead of having that soft landing that the policy makers like to talk about, we could have a crash landing, and that's something that nobody wants to see.
So the IRBA has said there's not going to be any rate cuts before Christmas, or they want people not to expect that. But based on what you're telling us, maybe the idea is that we need a decision before that point in order to affect change around the end of the year, that the decisions we make now actually take a while to influence the economy.
Yeah, that's exactly right.
In fact, if they cut interest rates in November this year, we won't see that for quite a long time. There are some things that are going to help the economy. Obviously the tax cuts, although it kind of looks like everybody's saving those rather than spending them, but it will help households. Things like the energy rebates that just take
a little bit of pressure off the bills. Some state governments are doing a fair bit of spending as well and helping helping out, so that will offset some of the pressure from interest rates, but not enough at the moment to stop the economy from slowing further. So, you know, this is what the Reserve Bank and economists do. They look further out. They're not looking in the rear view mirror. They're saying what's going to happen in six months or
twelve months, and they're adjusting their policy. The question is do they get the forecasts right? And there's a lot of uncertainty these models. It's not like doing a physics or chemistry experiment where you know, you drop the two chemicals in the beaker and they react exactly the way you know every single time under the same conditions. Economies are made up of people, and people don't always behave in the same way, so it becomes very hard to predict.
You've mentioned big government spending initiatives and their influence on stimulating economic growth. But there's another factor that has been discussed on how immigration is helping us economically for the better.
So there's been a lot of research done around the economic impacts of migration and the answer is it depends, but by and large, overall it doesn't have that big an impact on GDP, the economic.
Growth per se.
What it does do though, is there's some research done that shows that like in regional Australia, it can have a really meaningful impact to bring more skills into particular areas where they might otherwise have been have been missing. But essentially, you know, there are something that we kind of refer to as the three p's of growth, and that's the things that drive the economy, which is population.
Of course, migration is a big part of that participation, so how many people are actually working and then productivity. Now we know productivity actually went backwards again this quarter, which is not great.
It's been very soft for a long time.
The participation rates very high, but it's probably getting close to its levels. So really we're looking at the population growth to drive economic growth. But when you have population driven economic growth, the pie gets bigger, but it doesn't necessarily mean that we're all better off. And in fact, if you look at this last quarter's National accounts, household incomes went backwards, our spending went backwards. And this is where you've got to be so careful at just talking
about GDP and talking about average numbers. GDP is a particular construct. It is useful for some things, but it doesn't tell us all the story. And particularly when we think about the impacts of migration, we shouldn't just think about it as well that's the way to boost GDP, because migration has all sorts of other impacts, and the ones we're most interested in from an economic well being are we lifting productivity, Because it's productivity that's really going to boost our lifestyle.
So if we have skilled migration, that's going to be the most.
Important thing that we can consider when we're talking about the economic impact of migration.
As an economist, what do you think our approach needs to be to support the transition to net zero and make sure that doesn't impact the economy or risk a recession.
I think everybody is thinking about green steel, we're thinking about can we economically make green hydrogen?
The jury is still a bit out on that, but that's a very important part of the equation.
But of course perhaps more difficult for Australia will be that transition away from fossil fuel exports. You know, exports are twenty percent of our GDP our economy and fossil fuels, unfortunately are a very big portion of that. So we have to find things that are going to replace them of equal value so that we don't find our economic
pie is shrinking again. That's why there's so much focus, you know, from industry, from researchers, from government to say, well, what's the next thing, what can we support, what are the things that need to be put in place to help that transition happen.
Thank you so much for listening to another episode of The Daily OS. That's all we have time for today, but if you learn something from today's episode, you can hit follow on Apple or Spotify, or if you're watching us on YouTube you can hit subscribe. We'll be back again tomorrow, but until then, have a great day.
My name is Lily Maddon and I'm a proud Arunda Bungelung Calcuttin woman from Gadighl Country. The Daily oz acknowledges that this podcast is recorded on the lands of the Gadighl people and pays respect to all Aboriginal and Torres Straight Island and nations. We pay our respects to the first peoples of these countries, both past and present.