Daybreak Weekend: US Jobs, Winter Olympics, Japan Election

This is Bloomberg Daybreak Weekend, our global look at the
top stories in the coming week from our Daybreak anchors
all around the world. Straight Ahead on the program, we'll
look to the January jobs report and how that could
affect fed policy. I'm Nathan Hager in Washington.
I'm callin Hepga in London, where we're discussing snow, ice
and geopolitics the twenty twenty six Winter Olympics in Italy.
I'm Doug Prisner looking ahead to the snap election in
Japan and what the outcome means for the Japanese economy.
That's all straight ahead on Bloomberg Daybreak Weekend. I'm Bloomberg
eleven three year, New York, Bloomberg ninety nine to one, Washington, DC,
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XM one twenty one, and around the world on Bloomberg Radio,
dot Com and the Bloomberg Business Appo.
Good day to you. I'm Nathan Hager. Let's take a
look now at some stocks making news in the week ahead.
I'm Nathan Hagar with Mandeep Saying, Global head of Tech
Research at Bloomberg Intelligence. Great to have you on is
we're going to be looking ahead to a lot more
big tech stocks in the week ahead. What are we
expecting when it comes to earnings from Google parent Alphabet? Mandy?
Look, I mean what we saw with Meta was you know,
accelerating top line growth, and in the case of Google,
both the search business as well as the YouTube business
have I would say modest expectations going in the quarter,
you know, low to mid teens growth. So, I mean
we've felt double digit growth for Alphabet over the last
few quarters, what was very impressive given you know, the
threat from Chat GPT, But I think Meta has really
raised the bar in terms of digital ad growth in
the fourth quarter. So I would be looking for accelerating
top line growth at least high teens growth for YouTube
and you know, low to maintains growth for the core
search business of Alphabet.
Since you mentioned meta platforms, we should say that the
AI spend from Microsoft seemed to spook a lot of
investors last week. Given that Alphabet has its Google Cloud business,
could that be a concern for investors there when it
comes to AI spend in the cloud?
You're right, I mean what Microsoft Sprint has shown is
you can't really miss the cloud growth numbers. So in
the case of alphabet expectations, our Google Cloud will have
at least thirty five percent growth. And based on the
work that we have done, I mean, Google really has
had some very impressive, impressive deal wins this quarter in
their cloud segments, so chances are they should do better.
And remember Google has their TPUs, so they shouldn't be
as supply constrained as Microsoft probably was in the quarter
with the GPU situation. So my guess is Google Cloud
segment would see sequential acceleration and they should be the
consensus number handedly And.
How do you see Google's TPU processors fairing compared to
the GPUs that we get from Nvidia.
I mean, if there's one theme that we have heard
so far this earning season is AI infrastructure demand remains
insatiable and all these companies are wanting to get as
much you know, compute capacity as they can. So Google's TPUs,
you know, are used both internally for Google overviews and
across their family off apps as well as they're used
on Google Cloud. And so from that perspective, I do think,
you know, Google should be able to show the most
efficiency when it comes to AI infrastructure and that should
get reflected in their growth margins, which I expect to
be better than the rest of the hyperscalers.
We're also going to hear from Amazon this week they
report their earnings. What are you expecting from their cloud
unit aws?
Yeah, I mean you want to see all these cloud
companies show sequential acceleration. It didn't happen with Microsoft, hence
we saw that negative reaction, and in the case of Atablus,
I would say expectations again are like for low twenty
percent growth. So given they are the largest cloud provider,
I mean they should be able to beat those numbers.
But look what we have heard so far is supply
constraints are real when it comes to AI compute capacity
and that may have a bearing on whether ada BLUs
ends up beating those consensus numbers or not.
Is low twenty percent enough to wow investors?
No, but you want to see that sequential acceleration. So
I mentioned about the size of Atablus, So that's almost
one hundred and thirty five billion dollar dollar rundrate business
for Amazon. Contrast that with Microsoft, which is more one
hundred billion, and Google Cloud is like sixty billion rund
rates so given their size, I mean, low twenty percent
would be in line, but anything more than that would
be impressive, and I think that would help those dock.
And along with Amazon and Alphabet. Another a in big
tech reports this week advanced micro devices. How's the computer
chip business looking right now? Mandy?
I mean, look, Meta just told us they plan to
spend up to one hundred and thirty five billion dollars
in CAPEX, which is a seventy percent increase from what
they spent in twenty twenty five. So we were modeling
like fifty percent increase in CAPEX from hyperscalers going into
twenty twenty six. Chances are that number will be revised upward,
and so it will trickle down to the likes of AMD,
which is is the you know, the second biggest GPU
provider after Nvidia, and so to my mind, AMDs deal
with open ai and some of the other business that
they have won over the last few months should help,
you know, exceed expectations when they print their results.
Does a m D need to show more market share
compared to Nvidia.
I think this is such a big market that everyone
is realizing that you don't need to, you know, win
market share from Nvidia as long as you have a
good product that you know companies are interested in buying,
and open Ai has that deal with a m D.
Now that is a big leap of faith in terms
of MD's capabilities to supply you know, six gigawatts of
power that has all a m D chips, and I
think that should help them win more prize business over time.
Appreciate this man deep as always. That's Mandeep Saying, Global
head of Tech Research at Bloomberg Intelligence. We move next
to some key economic data in the US. Our first
full look at the labor market for twenty twenty six
so far comes out this Friday at eight thirty Wall
Street time, and we get non farm payrolls for January.
Ahead of that. We're joined by Michael McKee, our international
economics and policy correspondent for Bloomberg Radio and Television.
Mike.
The theme we keep hearing from the data leading up
to this report is this is a low, higher, low
fire labor market. So are we expecting to see that
reflected in the Big Daddy report coming out this week?
That is what we are expecting to see. The interesting
thing about this report, of course, is it's the first
one since the government shutdown ended. That isn't going to
be distorted by the government shutdown. It's a full month
of data collected and the normal processing time. So to
the extent that it tells us something about where the
labor market is, it should be relatively accurate. The Fed
last week, in their assessment of the economy at their
meeting said that while we were still seeing low hiring,
the unemployment rate seems to have stabilized, so they seem
to think that things are getting a little bit better.
Okay, so how could we see that reflected in the
data itself. Where are we seeing signs of studying in
the labor market.
Well, the biggest is in the unemployment rate. It fell
last time last month for the December number to four
point four percent, and we're not expecting that to change.
According to the economists survey by Bloomberg stays at four
point four percent, so a sign of stability there. And
the interesting thing is the December payrolls report was only
fifty thousand. Obviously we will get some sort of revision,
but right now we're looking at seventy thousand is the
forecast by economists for January, so that would be a
little bit stronger and we saw in the month before.
But still pretty subdued compared to where we've been historically.
So what could this mean for the Federal Reserve going forward?
Well, the FAT doesn't know, and that's one of the
things that they're going to be looking at. The whole
question surrounds all of these low numbers. Is it because
companies don't want to hire right now? Or is it
because they don't have people to hire? In other words,
has the administration's cracked down on immigration and the ejection
of people from the economy and scaring people into staying
home from work. Does that mean that there are fewer
people to hire? And that's one of the big reasons
that we're not seeing the same kind of payroll growth,
and it's going to take a while to figure that out.
We do, however, Nathan, get an update on the population estimates.
This comes once a year in January, and that should
change that should that will make December and January numbers
not quite comparable, and it does figure to change the
labor force participation rate perhaps a little bit. So we'll
be starting fresh, but also having some sort of idea
of what's going on.
Yeah, there's also the big question about whether artificial intelligence
is playing a role in labor market dynamics as well.
We've heard that from a number of Federal Reserve speakers.
Where's the thinking on that right now?
Well, the thinking is is that artificial intelligence will take
a larger and larger share of the labor force, but
we're not completely clear on where it is. The logical
answer is that we'll see lower paid, lower skilled people
lose their jobs to computers. But of course people are
talking about folks in the finance industry or folks in law,
especially at the lower ends, the beginning, the interns, they
would lose their jobs because then the computer can do
it all. So we are expecting some sort of change,
but the question is how fast. And that's where some
people at the Fed are concerned that maybe we're getting
ahead of ourselves in terms of the in terms of
the impact on today's jobs reports, because companies are starting
to adopt this stuff, but they haven't had a lot
of time to figure out who they don't need anymore.
And of course there's a lot of question, a lot
of focus at the White House on job growth, the
whole idea of trade policy coming out of the Trump
administration is that it's going to boost manufacturing jobs. Are
we seeing any signs that that is starting to take hold?
No.
Since the president came to office, we've lost manufacturing jobs,
and that's been one of the flaws in their whole argument.
We are not seeing manufacturing payrolls go up. Now, we
don't have an estimate yet for the change in manufacturing payrolls.
That'll come later in the week as we get close
to the release. But in December we lost eight thousand
manufacturing jobs. So there's still a lot of concern about
where this all goes and whether or not we're going
to see an increase in manufacturing jobs, because what tends
to happen is that if a company builds a new factory,
they put a lot of machines and robots and things
in there, and so you don't get the additional jobs
that you thought you might.
Thanks for this, Mike, As always, that's Michael McKee, Bloomberg
International Economics and Policy correspondent, head of the non farm
Payrolls Report for January. This Friday at eight thirty Wall
Street Time, and coming up on Bloomberg Day Break weekend,
we'll look ahead to the twenty fifth Winter Olympic Games
in Italy. I'm Nathan Hagert, and this is Bloomberg. This
is Bloomberg day Break weekend, our global look ahead at
the top stories for investors in the coming week. I'm
Nathan hager in Washington. Up later in our program, we'll
look ahead to a general election in Japan and we'll
focus on a policy decision from the Reserve Bank of Australia.
But first, the twenty fifth Winter Olympic Games kickoff in
Italy in the next few days. Though the event promises
fireworks on the sporting stage, could diplomatic tensions between the
US and Europe threaten to upstage the proceedings for more.
Let's go to London and bring in Bloomberg Daybreak europe
Banker Caroline Hepger.
Nathan, I'm tempted to say that delivering the Milano Cortina
twenty twenty six Winter Olympics maybe as tricky as pulling
off one of those wild stunts in the freestyle big
air competition. The Olympics is meant to be unifying, of course,
but it can also serve to highlight geopolitical tensions between
countries with concerns often about sportswashing. Then there's the issue
of delivering the event, including all the venues in the Alps,
on time and in some ways sustainably. For this Olympics,
which begins on the sixth of February, followed by the
Paralympics a month later in March, there has been considerable
attention and protests by Italian officials over US plans to
deployed some ICE staff to this year's event. Bloomberg understands
that ICE agents will be in Italy as part of
the security details for the Vice President JD Vance and
Secuy of State Marco Rubio, according to an official from
the US Secret Service, but the agency's role in an
immigration crackdown at home is stirring opposition overseas.
Now.
This year's Olympics is also said against the backdrop of
increasing division between the United States and Europe. Recently, the
NATO Secretary General Mark Rutter told the European Parliament that
the Transatlantic Alliance is vital to the region's survival.
So when President Trump is doing good stuff IV operation,
and I don't mind him publishing text messages, and if
anyone thinks here again that the European Union or europerson
Hall can dissent itself as out to us, keep on dreaming.
You count, we count, We need each other.
That was NATO's Mark Rutter speaking there so well. Italy's
Winter Olympics feature more ice than they bargained for. Joining
me now to discuss is Bloomberg's Milan bureau chief Tomaso
eb Haarts. Tomaso, let's start by thinking about these Winter
Olympics taking place in the Alps in the next few days.
I suppose the first big question, and maybe it's always
the case for the Olympics, are all the venues going
to be ready?
So those games will be spread all over the north
of Italy, not just on the Alpso the main city
where the opening ceremony will be Friday is Milana. And
then you're going to have the different sports to be
held in different locations. Fortina where you're going to have
the women's ski races, You're going to have in Lombardy, Bormeo,
You're going to have games also in the Suti Role region.
So what is interesting is that somehow to reduce the
cost of the Olympics, they have been spread ref location
where essentially most of the venues were already built and ready.
For example, the Vietnam will be held in anter Holz,
which is already one of the most famous locations in
the Alps for this kind of sport. There are some
new venues, especially one Milan for highs hockey, which was
just completed. There were just some criticism about how is
it built, about the quality of the eyes, but it
looks like it's almost ready. If you walk around the
city in Milan, you see a lot of temporary building
that will be used for the Olympics. While what I'm hearing,
for example that in Cortina Adam Pazza on the Alps,
not all everything that was meant to be built for
the Olympic is rady, but for sure the infrastructure there
was a huge investment in infrastructure. This is what probably
was the most important investment for those Olympics.
It's also really interesting Olympics because it's one of the
first times in a long time that a Winter Olympics
is going to be sort of within easy reach of
US scheduling. And yet maybe a lot of the build
up to the Winter Olympics is going to have been
dominated by this spat, this disagreement around ice agents maybe
or staff being involved in the Winter Olympics somehow, maybe
just to protect high ranking US officials who are going
to be visiting. But there's been quite a lot of
pushback about it. Can you describe how the Italian government's
been handling it?
In the last week was a high hab on the
debate in Italy the involvement of ICE in the Olympics.
There were some Italian official or protested but vigorously, including
Milian Mayor Giusepe Sala who, following the latest involvement of
ICE in the US I, said they're not welcome in Milan.
Then for days Italian official somehow tried to keep the
situation under control until there was a meeting between the
Italian Interior Minister and the US embassy in Rome. After
that it was clear that ICE agents will be involved
just within their domestic offices, so that means they will
be deployed in the US consulate and this somehow as
a calme a.
Little bit attention.
Some Italians are protesting clearly, and the Italian government had
larified which will be the involvement of ice in the
in the Olympics, And I have to say that clearly.
The news great a lot of attention.
Yeah, and Georgia Maloney of course, that the Prime Minister
is often seen as a Trump ally. I suppose there's
also maybe a question that whilst the Olympic officials want
to present this, want to present sports, as is so
often the case, as a kind of unifying message, there's
a danger that it will highlight the divisions between Europe
and the US that we've seen, you know, geopolitically. That's
going to be surely quite hard to handle.
Clearly, Maloney is seen as one of the European leader
closer to Trump. She is a key figure at the
moment in europea also because of the hair closer ties
and other with the Trump. That doesn't mean that they
are always on the same bench. For example, on Greenland,
Maloney was aligned with the rest of the European leaders
while answering to Trump's request. I think that what you
said is clearly an interesting aspect during Olympics, not only
the Olympic committee, but you know, the buzz should be
on sport and not on a geopolitical tension. But you know,
we're living quite i would say, a very interesting time
in terms of geopolitical news. If you want to call
them interesting and so clearly this is part of the
public debate and will be also during the Olympics. For sure,
the eyes of the world will be on Milan for
the opening ceremony and then on the out for the Olympics.
No doubt, I'm sure people are also getting very excited
about it to watch. I mean, what are usually just
spectacular events, aren't they The acrobatics and the kind of
area display snowboarding and skiing and so on, which sort
of brings me to snow. The other aspect of this
is that climate change is affecting the Alps so deeply,
and there's been a lot of anticipation about how much
snowfall has been arriving. You know that there's been in
the days leading up to this, and the creation obviously
of fake snow you know where you kind of generate
it for the ski slopes. Climate change is also huge
good news.
In the last couple of week there has been heavy
snow falls on the Alps and on the Dolomites that
were still start in summer mood until a few days ago,
So there will be white Olympics. It's quite happy, but
for sure, as it happens nowadays quite often in the
Alps that most of the snow which was prepared for
the Olympics was the snow that is also been prepared
for tourists, because you know, the ski industry and the
tourist industry is crucial. The atmosphere is changing, the altitude,
snow is usually expected and it has some costs because
if you want to ski and the reason not no,
then you have to make the investment. And this is
clearly a consequence of the higher temperatures we are seeing
lastly Tomas.
So what do you expect in terms of the economic
impact of the games. There's also been this idea of sustainability.
How do you make the Olympics every four years, whether
it's frankly winter all summer, a bit more sustainable. You've
sort of talked about that with the reuse or the
using of current venues, but the economic impacts, what do
you think?
So one of the main aspects of these Olympic Games,
this winter edition is that to avoid building new venues
just for the Olympics that you won't be used anymore.
That's why the games will be held in almost ten
different locations where you already had the infrastructure ready in Italy.
We headed the Olympics, the Winter Olympics in two thousand
and six in a Turin and the Piedmont region, and
there are some venues, especially one for the bob was
not being used since those Olympics. So the plan has
been since the beginning to avoid this reason. That's why
you're going to have the games in very different locations,
so the cost will go down, and there is also
a matter of sustainability. The impact of the games. We're
talking about five billion euros revenue and investment for the Games.
The impact in this country is that essentially the Games
were used to create new infrastructure, for example, road infrastructure
to go to Cortinada and pets. A couple of new
chunnels were just in agreat a few days before the
Olympics are starting. So it's a way somehow to boost
infrastructure in Italy, which is one of the main issues
of the country.
Yeah, absolutely great. Britain sending fifty three athletes the United
States more than two hundred. Italy has actually got close
to two hundred athletes are going to be going there.
But as you say, tourism numbers will be something that
will be watched closely. It's a huge platform, isn't it
for Italy. Tomaso, thank you so much for being with
me being interesting few weeks. Thank you, Jow Bloomberg's Milan
Buia chief Tamaso Ebhart, and we'll be bringing you any
interesting news stories from the Olympics sixth of February to
the twenty second of February, of course, in the coming
few days. I'm Caroline Hepka here in London. You can
catch us every weekday morning for Bloomberg Daybreak. You at
beginning at six am in London. That's one am on
Wall Street.
Nathan, Thanks Caroline, and coming up on Bloomberg day Break weekend,
we'll look to Japan, where a general election is set
for February eighth. I'm Nathan Hager, and this is Bloomberg.
This is Bloomberg day Break weekend. Our glob will look
ahead at the top stories for investors in the coming week.
I'm Nathan Hager in Washington. We go to Japan next,
where a general election is set for February eighth. Prime
Minister Takaichi's Liberal Democratic Party is likely to increase seats
and gain a majority in the lower House. For a
look at what the outcome could mean for the Japanese economy.
Let's go to Bloomberg's Doug Krisner, host of the Daybreak
Asia podcast Nathan.
In late January, Japanese Prime Minister take Ichi dissolved parliament
and called for a lower house election. It is now
set for February eighth. Now, markets have already expressed a
bit of unease. To help us understand what's at play,
let's bring in Bloomberg's Paul Jackson. Paul as a member
of the Eco gov team looking at Japan in South Korea.
Thank you for being here. Can we begin with a
backstory on how we got here and why take Ichi
called for this snap election.
The ruling party in Japan, the Liberal Democratic Party, has
been struggling to hold on to power in recent elections.
Votess are very unhappy about inflation. It's the first time
they've been experiencing inflation in a generation. It's putting a
lot of pressure on households and they're wanting the government
to kind of take control of this. Also, we have
a country that's surrounded in Asia by various security concerns,
and since she became prime minister just three months ago,
she's been riding high in the opinion polls. Now you
could think it's a bit cheeky to go straight to
the electorate when less than a quarter through your leadership,
but she's clearly trying to take advantage of those high
opinion poll ratings and the idea that look, I am
a leader with identity. I can be more assertive as
a leader in Japan, and I can make Japan more assertive,
give more identity to Japan, and really Takeichi is gambling
on this personal appeal to the electorate in the style
of formerly like Shinzo Abbe and Junicio Koizumi, to appeal
directly to the electric rather than through the party and
get people to vote for her. And she's put her
career on the line because imagine if she doesn't extend
a razor thin majority that she's got at the moment.
I mean, she's she's literally one seat majority at the
moment on two three three in the more powerful lower house,
and she said that the goal is to extend that majority,
and if she doesn't, then she's likely to step down.
So among her objectives you mentioned how inflation is affecting
the average consumer in Japan. She has proposed a tax
cut on food. Is that right? Is that a part
of the strategy?
That is a part of the strategy. And the ruling
party has been very reluctant to go down this path
in previous elections, even though pretty much all the opposition
parties have been calling for this or something similar related
to the sales tax. Instead, she's embracing it and saying no, no,
let's do this. We'll do it temporarily, We'll do it
for two years, and it's to reduce an eight percent
tax on food down to zero during that time. Now
that sounds okay so far. There's going to be a
loss of revenue. This is not on the scale of
some kind of like the former UK Prime Minister Liz Trust.
It's not that kind of scale of loss of revenue
or tax breaks, but it is a significant amount of
It's five trillion. How are you going to pay for that?
Now?
The problem is for two years that doesn't sound too bad.
But can you then politically raise or return the tax
back to eight percent? Now that's something policymakers have had
difficulty doing in the past, and I think that's why
markets have been on edge about the outcome of this.
Election, So you alluded to a little bit of the
geopolitical tension in the neighborhood. Right now, I'm thinking of
Takiichi's comments regarding Taiwan and how that offended Beijing. When
it comes to the issue of military spending, I know
that Japan has a passivist constitution. Is this something that
we should look for that there may be a little
bit more money allocated to defense.
I think it's certain that Takeichi, she wins, will continue
to ramp up defense spending in Japan. One of the
first things she did when she became Prime Minister was
to bring forward a target of making defense spending a
two percent of annual GDP. Now that figure is based
on twenty twenty two GDP, so it's a little bit
out of date, but she brought forward that target by
two years, so she's already ramped up defense spending and
is essentially promising more. We've just had elbertge Colby in town,
and obviously he's one of the main advocates for US
allies ramping up their spending, and the kind of message
that Takaichi has been delivering is kind of music to
the ears to the current US administration. I'd say, what.
About the issue of immigration and the growing presence in
Japan of non Japanese.
Well, we have a record number of foreigners now working
in Japan. The numbers have gone up again, and this
is a concern for those pockets of Japan where you
have large concentration of foreigners working either in manufacturing as
also much wider use of foreign workers in retail as well.
And for some voters this has put them in a
position of uncomfortableness. The sudden influx of people from other
countries while they're feeling that their kind of take home
pay with the inflation, and that the costs of that
are running the households each month is getting tougher and tougher,
and yet people are coming in from abroad and getting work.
So for a certain segment of Japan's population is making
them feel very uncomfortable and beleaguered and like, hey, wait
a minute, what's going on. Don't forget We've also got
forty two million people visiting Japan last year, a record
number of foreigners entering the country and go to all
the tourist sites and clogging up some of the main cities.
For some Japanese, this make them feel really awkward, and
they've been voting for some other parties, including the far
right Sanseto on that specific issue. So TAKH has been
giving some more robust kind of policy views on what
to do in terms of regulations and rules concerning entry
and foreigners in Japan and also the key element of
regulations on buying property by foreigners in Japan.
Is there a robust debate when it comes to how
tourism can benefit the economy.
I think that since both the time of Koizumi and Abbe,
the idea that an increase in tourism Japan can help
the economy has been one of the key kind of
elements as a growth, not the main one, but certainly
a significant one, and we've seen that really escalate in
recent years.
Paul will leave it there. Thank you so very much
for helping us preview the election in Japan. Bloomberg's Paul Jackson.
He is a member of the ECOGUV team looking at
Japan in South Korea. So the other event on our
radar for the week ahead is the policy decision for
the Reserve Bank of Australia. To provide some insights, let's
bring in Bloomberg's James McIntyre James as an economist for
Australia and New Zealand at Bloomberg Economics. Thanks for being here.
Can we set the stage by looking at the story
on inflation down Under in the last week, the market's
got a very hot reading on CPI. Do you think
that's going to impact the thinking of the RBA.
We've got a very very strong CPI outcome that came
through for the final quarter of twenty twenty five. What's
been happening in Australia is that the Statistics Bureau was finally,
after many many years of effort, moved to a monthly CPI.
But we've got a transition going on in this data
and it's resulting in a lot of very volatility and
sticky moves. So it's going to be a tough one
for the RBA to analyze and take on board. But
what they do if we look at the headline figures
out of it, especially this trimmed mean measure, which is
taking out some of the volatility out of the data,
and it's the measure that the RBA has reinforced that
they will be looking at the quarterly trimmed mean measure
for the RBA came in at zero point nine quarter
on quarter in three point four year on year, and
that's above the top of the RBA's target band. Two
to three percent is inflation angling for two and a
half percent midpoint is what the RBA is targeting, and
inflation has come in at three point four percent. Instead
of gradually moving back, it's ticked up. It's resulted in
market pricing and expectations shifting from maybe the RBA entertaining
a hike. At this meeting, we're a little bit more cautious,
but that's really set the scene for what the decision
is going to be at the RBAS for every meeting.
So, James, what was driving the increase in inflation in
terms of the factors here involved? Can you kind of
pinpoint a couple of the key problem areas.
One bucket of problem areas within the inflation basket is
the thing that local Australian economists refer to as administered prices.
So what is that.
Well, it's prices within the economy that are influenced by
government decisions and regulatory dictates and the like, So things
like electricity prices, school fees, these sorts of things are
sort of set either quarterly or annually. You know, the
cost of a posted stamp. They're regulated by the government.
And what we're seeing here is that we're seeing market
driven inflation, the parts of the inflation basket that are
a bit more responsive to private decisions and supply and
demand within the economy that's continuing to edge downward, but
a lot of these government related or administered prices really
spiking up. And so what's happened in the third quarter
and in the fourth quarter is that we've seen a
bit of a bump. The RBA referred to it as transitory,
but it's going to test their patients. We've seen a
bump in electricity prices, We've seen a bump in property rates,
and a couple of other things that have really pushed
that administraive prices basket way up.
So if there is now greater risk of perhaps a move,
maybe not next week, but at some point in the
near future, that we could see a rate hike from
the RBA, what might that do to the overall performance
of the Australian economy.
Well, if the RBA does decide that they want to
react to this and take out what could be described
as an insurance hike to make sure that the inflation
genie does sort of go back into the bottle, because
it looks like it's poking its head out just a
tiny bit. What it would mean is it would see
a renewed, I guess, suppression of the recovery on the
private sector side of the economy. But what an RBA
hike would do is it would just put a little
bit of a wet blanket on that another thing that's
potentially weighing a bit or dampening the economy. It might
be one of the reasons the RBA might be a
little bit circumspect and be prepared to look through what
it sees as this transitory inflation spike is the currency.
It's the Aussie dollar has shot up quite a bit
some of it. You know, there is this big divergence
between market pricing for the RBA and market pricing for
the FED, and the currency is responding to that along
with the general US dollar story underway. Commodity price is
a little bit firm. Gold price Australia is the largest
third largest i should say, gold exporter. You know, these
things are all a bit supportive, whether it's interest rate
toferential commodity prices or the overall tone within global markets
when it comes to the US dollar and all of
that's going to put some you know, a bit of
a dampener on demand in the economy, but also a
dampener on inflation imported prices. Australia does import a lot
of goods. A stronger Australian dollar is going to put
some downward pressure on those and so it really is
adding to the story here that this could be something
that the ABA does look through.
Okay, James, we'll leave it there. Thank you so very much.
James McIntyre, economist for Australia and New Zealand for Bloomberg Economics,
and I'm Doug Chrisner. You can catch us weekdays for
the Daybreak Asia podcast. It's available wherever you get your podcast.
Nathan, Thanks Doug, and that does it for this edition
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