Daybreak Weekend: US CPI, ECB Meeting, RBA Decision

Bloomberg Audio Studios, Podcasts, radio News. 0:00:09.360 --> 0:00:12.160 This is Bloomberg day Break Weekend, our global look ahead 0:00:12.160 --> 0:00:14.120 at the top stories in the coming week from our 0:00:14.200 --> 0:00:17.400 Daybreak anchors all around the world. Straight ahead on the program, 0:00:17.400 --> 0:00:20.240 and look at some key inflation data in the US 0:00:20.280 --> 0:00:23.640 what it could mean for FED policy moving forward, Plus 0:00:23.640 --> 0:00:26.520 a look at earnings from the computer software Giant Oracle. 0:00:26.800 --> 0:00:28.440 I'm Tom Busby in New York. 0:00:28.600 --> 0:00:31.480 I'm Caroline Hebcker in London, where we're following europe Central 0:00:31.480 --> 0:00:35.000 Bank as it navigates an unprecedented time in the region. 0:00:35.440 --> 0:00:38.400 I'm Paul Allen in Sydney, looking at next week's IBA 0:00:38.560 --> 0:00:41.839 decision and Australia's social media band for teams. 0:00:43.159 --> 0:00:47.360 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:47.400 --> 0:00:51.280 eleven three on New York, Bloomberg ninety nine to one, Washington, DC, 0:00:51.720 --> 0:00:56.600 Bloomberg ninety two nine, Boston, DAB Digital Radio, London, Sirius 0:00:56.760 --> 0:00:59.720 XM one twenty one, and around the world on Bloomberg 0:00:59.760 --> 0:01:02.360 Radio and the Bloomberg Business. 0:01:02.120 --> 0:01:08.360 At Good day to you. I'm Tom Busby, and we 0:01:08.400 --> 0:01:10.720 begin today's program with a look at some key inflation 0:01:10.880 --> 0:01:13.640 data on the heels of a big bounce back in 0:01:13.760 --> 0:01:18.000 US job creation last month. November's Consumer Price Index out 0:01:18.040 --> 0:01:20.840 on Wednesday eight thirty am Wall Street Time. The Producer 0:01:20.880 --> 0:01:23.840 Price Index for last month comes one day later. For 0:01:23.959 --> 0:01:26.880 more on what to expect, we're joined by Edward Harrison, 0:01:26.959 --> 0:01:30.680 author of Bloomberg's Everything Risk newsletter. Edward, thank you so 0:01:30.760 --> 0:01:31.600 much for being here. 0:01:31.959 --> 0:01:32.640 Good to talk to you. 0:01:32.720 --> 0:01:33.479 Tom Well. 0:01:33.480 --> 0:01:36.360 Now, inflation has come a long way down over the 0:01:36.360 --> 0:01:39.000 past two years, still has a long way to go 0:01:39.080 --> 0:01:41.800 before hitting the Fed's long established target of two percent. 0:01:41.920 --> 0:01:46.120 So what are you expecting to see in October's CPI 0:01:46.280 --> 0:01:47.560 number this week? 0:01:47.600 --> 0:01:51.000 We're expecting to see the year over year number for 0:01:51.120 --> 0:01:54.680 CPI tick up ever so slightly to two point seven 0:01:54.680 --> 0:01:57.800 percent from two point six percent. And when you look 0:01:57.800 --> 0:02:00.520 at the core number, taking out food and energy, the 0:02:00.960 --> 0:02:03.760 expectation is it's going to be roughly the same as 0:02:03.800 --> 0:02:06.560 it was last month, which is three point three percent. 0:02:07.040 --> 0:02:11.240 Both of those are based on zero point three percent 0:02:11.480 --> 0:02:16.200 rises on a monthly basis. Now, obviously two point six 0:02:16.280 --> 0:02:19.600 percent going up to two seven and three three are 0:02:19.760 --> 0:02:25.480 not that great numbers, but it's still coming down enough 0:02:26.280 --> 0:02:30.800 that I expect that the FED will still cut interest 0:02:30.880 --> 0:02:36.160 rates in December if the data come out as expected. 0:02:36.040 --> 0:02:38.600 Wow, only about half a Wall Street thinks is with 0:02:38.680 --> 0:02:41.200 you on that one, But there is a lot of hope. Well, 0:02:41.280 --> 0:02:44.200 let's talk more about those numbers and what's behind this 0:02:44.240 --> 0:02:47.240 stubbornly high inflation, because, as you said, two point seven 0:02:47.400 --> 0:02:51.079 percent year over year overall, it's good, it's not great. 0:02:51.160 --> 0:02:53.640 So what are the big factors that are keeping inflation 0:02:53.760 --> 0:02:54.520 so high? 0:02:54.639 --> 0:02:57.799 Well, it's definitely not food and energy, right, because if 0:02:57.800 --> 0:03:00.799 you you know, without food and energy, three point three 0:03:00.840 --> 0:03:04.639 percent versus two point seven percent a year on year 0:03:05.440 --> 0:03:08.760 with food and energy, Really it's about you know, core 0:03:08.919 --> 0:03:12.960 services and housing in particular. Those are the things that 0:03:13.120 --> 0:03:16.960 are still you know sticky, and you know sticky at 0:03:17.000 --> 0:03:20.320 a level of over three percent. And so what that 0:03:20.400 --> 0:03:24.240 means is is that as twenty twenty five develops, you know, 0:03:24.320 --> 0:03:27.040 the cuts that we've been seeing at every single meeting 0:03:27.080 --> 0:03:29.000 by the FED are going to come to an end 0:03:29.520 --> 0:03:32.440 in about a week's time. You know, the week after this, 0:03:32.880 --> 0:03:35.880 we're gonna see the FEDS dot plot and they're in 0:03:35.920 --> 0:03:38.440 that it's going to tell us what they expect, how 0:03:38.440 --> 0:03:41.920 many rate cuts that they expect. The market is now 0:03:41.960 --> 0:03:46.880 pricing in actually about three rate cuts for twenty twenty five. 0:03:47.200 --> 0:03:49.840 So let's just see what the what the Fed says 0:03:49.880 --> 0:03:52.640 when they come out with their data a week from now. 0:03:52.840 --> 0:03:56.240 Yeah, that's a biggie. This is a meeting December seventeenth, eighteenth, 0:03:56.880 --> 0:03:59.640 the big decision, you know, to either hold steady or 0:03:59.720 --> 0:04:03.200 as you expect another quarter percent, you know, twenty five 0:04:03.240 --> 0:04:04.080 basis point cut. 0:04:04.120 --> 0:04:06.320 Is that what you're thinking, Yeah, you know, and that's 0:04:06.400 --> 0:04:09.040 that's pretty much in line with the market. We can 0:04:09.040 --> 0:04:11.800 talk a little bit about the jobs numbers that we 0:04:11.840 --> 0:04:14.760 saw last week, but on the basis of the jobs numbers, 0:04:14.800 --> 0:04:19.200 immediately after the jobs numbers came out, the swaps market, 0:04:19.279 --> 0:04:22.880 which shows what the market is expecting the Fed to do, 0:04:23.440 --> 0:04:26.560 went from like, you know, sixty percent odds of a 0:04:26.640 --> 0:04:30.320 cut to over eighty percent odds of a cut. So 0:04:30.600 --> 0:04:32.960 this number, the CPI number, this is going to be 0:04:33.000 --> 0:04:35.120 the one that either solidifies it or makes it a 0:04:35.160 --> 0:04:39.320 little bit murky. But word eighty percent, So that says 0:04:39.400 --> 0:04:43.320 that likely we're going to move towards eighty five ninety 0:04:43.320 --> 0:04:46.119 percent if the number is in line with expectations. 0:04:46.279 --> 0:04:49.159 Wow, so that jobs report really did a number you 0:04:49.200 --> 0:04:51.280 think for the FED, Well, let's talk about it. Two 0:04:51.360 --> 0:04:54.120 hundred and twenty seven thousand jobs added. It looks like 0:04:54.400 --> 0:04:58.039 maybe we've exercised the ghost of those devastating strikes, a 0:04:58.080 --> 0:05:02.360 couple of really bad hurricanes. I mean, is this, Hey, 0:05:02.360 --> 0:05:05.400 we're back in business now after that dismal October number. 0:05:05.640 --> 0:05:08.120 Well, you know, it does seem that way to me. 0:05:08.520 --> 0:05:11.720 The number, the two twenty seven number comes with fifty 0:05:11.760 --> 0:05:15.280 six thousand of net revision upward from the last two 0:05:15.320 --> 0:05:18.440 months before that, and now we're at about one hundred 0:05:18.480 --> 0:05:22.839 and seventy some thousand a month over the last three months. 0:05:22.839 --> 0:05:26.920 That's up by fifty thousand. So you might think that 0:05:27.000 --> 0:05:30.120 those numbers would make the market spooked, but actually it 0:05:30.279 --> 0:05:32.960 wasn't because if you look at the household survey, the 0:05:33.040 --> 0:05:36.920 unemployment rate went up, So the unemployment rate went up 0:05:36.920 --> 0:05:39.400 from four point one to four point two percent. And 0:05:39.440 --> 0:05:42.640 if you've listened to what these FED speakers are saying, 0:05:42.720 --> 0:05:45.560 Chris Waller is one that I was thinking about. Another 0:05:45.600 --> 0:05:50.040 one is the Atlanta Fed Raphael Bostic. They're basically saying, 0:05:50.320 --> 0:05:54.159 you know, unless the data are really terrible, we want 0:05:54.200 --> 0:05:57.600 to have a preventive cut going forward. Same thing from 0:05:57.640 --> 0:06:01.280 Austin Gouldsby of the Chicago Fed, they're all saying that, 0:06:01.360 --> 0:06:03.880 you know, this meeting, yes we're going to give the cut, 0:06:03.960 --> 0:06:08.000 the market's priced it in, but then going forward we're 0:06:08.040 --> 0:06:09.840 going to be a little more circumspect. 0:06:10.000 --> 0:06:13.159 So three rate cuts in a row to end twenty 0:06:13.200 --> 0:06:17.080 twenty four year thinking, but twenty twenty five definitely dialing 0:06:17.200 --> 0:06:21.320 back on that more aggressive rate cut strategy exactly. 0:06:21.360 --> 0:06:24.200 And you know, a lot of this, remember, is about 0:06:24.600 --> 0:06:27.800 the real interest rate. That is is that as inflation 0:06:27.920 --> 0:06:32.040 comes down, the FED is saying, unless we bring rates down, 0:06:32.520 --> 0:06:35.719 then it's going to be restrictive, not necessarily for those 0:06:36.040 --> 0:06:40.040 companies that can go out and borrow money in the 0:06:40.080 --> 0:06:43.400 capital markets, but for small businesses that are getting their 0:06:43.520 --> 0:06:46.680 loans based upon these rates. We really need to bring 0:06:46.720 --> 0:06:50.040 them down in order to be less restrictive for those companies. 0:06:50.440 --> 0:06:54.320 Well in November, CPI data out there coming Wednesday, PPI 0:06:54.440 --> 0:06:57.960 on Thursday, and our thanks to Edward Harrison, he's the 0:06:58.000 --> 0:07:01.560 author of Bloomberg's Everything Risk newsletter. We turned out to 0:07:01.680 --> 0:07:04.960 earnings from one of the biggest names in technology, software 0:07:05.000 --> 0:07:08.359 giant Oracle putting out its Q two results on Monday. 0:07:08.760 --> 0:07:12.960 Will the artificial intelligence boom continue to fuel oracles year 0:07:13.080 --> 0:07:15.440 long rally and for more we're joined by Ana rog 0:07:15.480 --> 0:07:19.840 Rana Bloomberg Intelligence Technology Analysts. Ana Rok, thank you so 0:07:19.920 --> 0:07:24.240 much for joining us. Shares of Oracle have skyrocketed this year, 0:07:24.320 --> 0:07:27.760 mostly on a cloud infrastructure services. So what do you 0:07:27.840 --> 0:07:30.440 expect to see in this earnings report on Monday. 0:07:30.760 --> 0:07:33.239 Yeah, I think we'll listen to more of the same 0:07:33.360 --> 0:07:37.240 in a sense that cloud infrastructure revenue should continue to 0:07:37.280 --> 0:07:39.720 go up. The question is going to be by how 0:07:39.840 --> 0:07:43.480 much and whether the revenue recognition is being held. 0:07:43.280 --> 0:07:47.520 Back by the shortage of supply, which is, you know, 0:07:47.560 --> 0:07:50.840 the GPUs that are sold by Nvidia, whether they're able 0:07:50.840 --> 0:07:53.560 to get their hands and do enough of them. 0:07:53.720 --> 0:07:55.760 So when you look at somebody like an Oracle, it 0:07:55.800 --> 0:07:58.400 has a massive backlog right now, and we'll get to 0:07:58.440 --> 0:08:01.280 that in a second how it has them backlog. But 0:08:01.360 --> 0:08:04.000 the problem a lot of these cloud infrastructure providers are 0:08:04.040 --> 0:08:07.720 facing is their data center capacity as well as their 0:08:07.760 --> 0:08:11.920 hardware capacity is still a bottleneck, which is people are 0:08:11.920 --> 0:08:14.280 sending work for them, but they're not able to fulfill 0:08:14.280 --> 0:08:17.920 that demand. And that's where Oracle also is at this point. 0:08:18.120 --> 0:08:23.200 So a shortage of GPUs stressed data centers. But now 0:08:23.280 --> 0:08:27.160 Oracle has built more data centers, hasn't it, including plans 0:08:27.280 --> 0:08:29.760 for a nuclear powered one. It is just go go 0:08:29.760 --> 0:08:32.160 go for them. Are they keeping up? Are they going 0:08:32.200 --> 0:08:33.040 to meet demands? 0:08:33.520 --> 0:08:37.439 See? The thing is, it's unlike just you know, buying GPUs, 0:08:37.520 --> 0:08:41.079 which is also in a shortage. Data centers take time. 0:08:41.240 --> 0:08:44.000 You just can't spin up a data center overnight. It 0:08:44.080 --> 0:08:47.079 takes a few years to build one. What companies are 0:08:47.080 --> 0:08:49.880 doing right now is taking their role data centers and 0:08:50.600 --> 0:08:55.680 retrofitting them with new equipment, new cooling technology, new GPUs, 0:08:55.840 --> 0:08:58.680 new hardware in order to run some of these workloads, 0:08:59.000 --> 0:09:01.400 but in order to create the new one, that takes time. 0:09:01.720 --> 0:09:04.760 And actually that's what's benefiting Oracle in one way because 0:09:05.559 --> 0:09:08.880 Microsoft has this relationship with open Ai, and open Ai 0:09:09.080 --> 0:09:13.760 is sending more and more workloads to Microsoft's cloud product, 0:09:13.800 --> 0:09:17.720 which is called Asher, and Microsoft is seeing that shortage. 0:09:17.800 --> 0:09:21.040 So guess what it's doing. It's tapping into Oracle and saying, hey, 0:09:21.080 --> 0:09:24.160 can you be my subcontractor and I can lease into 0:09:24.240 --> 0:09:27.360 your data center and run some of the workloads over there. 0:09:27.800 --> 0:09:30.400 And that's really how you know the Oracles laughing about 0:09:30.400 --> 0:09:34.160 it because it's having to service it's one of its 0:09:34.160 --> 0:09:37.480 bigger competitors and partners, so it's getting a lot of 0:09:37.480 --> 0:09:40.800 work from Microsoft also at this point. So that is 0:09:41.240 --> 0:09:43.280 that is the big story for Oracle, then we think 0:09:43.320 --> 0:09:45.680 it is going to be the big thing for at 0:09:45.800 --> 0:09:47.200 least the next couple of years. 0:09:47.480 --> 0:09:50.640 Well, Oracle not only Microsoft, It also had deals with Google, 0:09:50.800 --> 0:09:53.000 and just a few months ago a big deal with 0:09:53.080 --> 0:09:57.280 Amazon Web Services was exactly correct, Yeah, exactly, yeah, tell 0:09:57.320 --> 0:09:58.480 me about all those deals. 0:09:58.760 --> 0:10:01.080 It is the same deal. Basically. What it is saying 0:10:01.200 --> 0:10:04.600 is if you get a command or a workload and 0:10:04.800 --> 0:10:07.640 you don't have capacity to do it, send it my way. 0:10:07.760 --> 0:10:10.560 I will be your subcontractor and you can run it 0:10:10.600 --> 0:10:12.839 in my data center and you will pay me for it. 0:10:13.040 --> 0:10:16.240 So it's a good thing for Oracle that it has 0:10:16.320 --> 0:10:19.320 this capacity, it has this data center. And as I 0:10:19.360 --> 0:10:22.880 said in principle, the only thing that's holding back all 0:10:22.920 --> 0:10:25.760 of them is that there's a shortage of GPUs and 0:10:25.800 --> 0:10:29.440 the processing capacity. There is another thing that's helping Oracle. Frankly, 0:10:29.640 --> 0:10:32.439 I talked about one thing as an outsourced for the 0:10:32.800 --> 0:10:35.800 three companies that we mentioned, but there is another element 0:10:35.920 --> 0:10:38.240 that a lot of startups are also going to Oracle 0:10:38.280 --> 0:10:40.200 and saying, you know what, I just want to go 0:10:40.280 --> 0:10:43.920 out and experiment on this cloud infrastructure, and Oracle is 0:10:43.960 --> 0:10:46.559 giving them a good deal giving them, you know, because 0:10:46.600 --> 0:10:49.800 remember from a market size point of view, Oracle's cloud 0:10:49.880 --> 0:10:53.000 infrastructure is fourth in size. The biggest one is Amazon, 0:10:53.240 --> 0:10:58.360 then Microsoft, then Google, and Oracle, given its large wallet, 0:10:58.880 --> 0:11:01.920 if we can fund set billion dollars of capital expenditures, 0:11:02.440 --> 0:11:04.760 is now, you know, in our view, the fourth biggest 0:11:05.040 --> 0:11:06.319 cloud data center company. 0:11:06.520 --> 0:11:10.160 But is the cloud data center becoming more not just 0:11:10.200 --> 0:11:13.120 the management what it used to be, becoming more of 0:11:13.160 --> 0:11:14.439 the cash cow for Oracle? 0:11:14.760 --> 0:11:16.400 Yeah, it is. Oh no, no, it's growing very well. 0:11:16.480 --> 0:11:19.679 It's growing somewhere north of forty percent. I think Consensus 0:11:19.679 --> 0:11:23.359 has that product to grow by fifty percent this particular 0:11:24.040 --> 0:11:26.720 quarter that's going to be on Monday. So from a 0:11:26.840 --> 0:11:28.800 revenue point of view, they are gaining. 0:11:28.520 --> 0:11:30.080 As much market share as possible. 0:11:30.440 --> 0:11:33.800 Whether they are making enough money, that's okay for them, 0:11:33.920 --> 0:11:36.960 because it's okay to take to buy it at a 0:11:37.320 --> 0:11:41.080 cheaper price or taking even of a big loss on 0:11:41.160 --> 0:11:43.600 that end, only because they have some other products that 0:11:43.600 --> 0:11:47.360 are highly profitable. Their old business of core database is 0:11:47.600 --> 0:11:52.679 very profitable. They have other applications, cloud applications, on HR 0:11:52.960 --> 0:11:56.160 customer service management. They are very profitable. So it has 0:11:56.559 --> 0:11:58.720 is it is really one of the most profitable software 0:11:58.720 --> 0:12:01.120 companies out there. It's okay for them to lose a 0:12:01.120 --> 0:12:03.640 little bit money on the infrastructure and service. I don't 0:12:03.640 --> 0:12:07.640 think they lose money there because since those financials are 0:12:07.640 --> 0:12:10.440 not publicly available, even if they make less money on 0:12:10.480 --> 0:12:13.720 that compared to the database, that doesn't matter because in 0:12:13.760 --> 0:12:17.480 totality it's adding to the overall revenue base of the company. 0:12:17.679 --> 0:12:19.959 Well, a lot to watch for Q two results from 0:12:20.000 --> 0:12:23.280 Oracle out on Monday. Our thanks to Anna rod Rana 0:12:23.400 --> 0:12:27.079 Bloomberg Intelligence and Technology Analysts, and coming up on Bloomberg 0:12:27.160 --> 0:12:29.720 day Break weekend, we'll look ahead to Europe's Central Bank 0:12:29.760 --> 0:12:33.440 decision as it navigates an unprecedented time in the region. 0:12:33.880 --> 0:12:47.560 I'm Tom Busby, and this is Bloomberg. This is Bloomberg 0:12:47.600 --> 0:12:49.640 day Break Weekend, our global look ahead at the top 0:12:49.679 --> 0:12:52.679 stories for investors in the coming week. I'm Tom Busby 0:12:52.720 --> 0:12:55.040 in New York. Up later in our program, we look 0:12:55.080 --> 0:12:57.840 ahead to an important policy decision from the Preserve Bank 0:12:57.840 --> 0:13:02.320 of Australia. But first JUCHS policymakers convening this week to 0:13:02.320 --> 0:13:05.360 make their last interest rate decision of twenty twenty five. 0:13:05.760 --> 0:13:10.360 That's against a backdrop dominated by political uncertainty amid governmental 0:13:10.440 --> 0:13:13.560 challenges in France and looming US tariffs. Could the rate 0:13:13.600 --> 0:13:17.880 path ahead be more slippery than first anticipated? Well, for more, 0:13:18.000 --> 0:13:20.480 let's go to London and bring in Bloomberg daybreak, europe 0:13:20.480 --> 0:13:22.479 Banker Caroline hepger. 0:13:22.480 --> 0:13:25.160 Tom the European Central Bank is likely to cut interest 0:13:25.240 --> 0:13:29.400 rates again at its December meeting. Policymakers made debates a 0:13:29.440 --> 0:13:33.800 bigger than usual move, but comments from individuals suggests that 0:13:33.880 --> 0:13:37.280 they will proceed with caution for now. Speaking during a 0:13:37.320 --> 0:13:41.319 recent television interview, the Bank of Latvia, Governor Martin's Kazakhs 0:13:41.679 --> 0:13:44.920 said that uncertainty is still very high, with a number 0:13:44.920 --> 0:13:50.000 of complex geopolitical risks facing Europe. Governing Council member Joachim 0:13:50.120 --> 0:13:55.400 Nagel has suggested interest rates should converge only slowly towards 0:13:55.600 --> 0:13:59.360 neutral territory, so support for a fifty basis point move 0:13:59.520 --> 0:14:04.160 does seem limited. Layer onto that, the political crisis in France, 0:14:04.240 --> 0:14:08.040 one of the bloc's biggest members after Michelle Barnier, became 0:14:08.080 --> 0:14:12.120 the shortest serving prime minister in French history, his government 0:14:12.200 --> 0:14:16.160 collapse following a vote of no confidence, crucially before a 0:14:16.240 --> 0:14:21.280 budget could be agreed in parliament. The fiscal unpredictability of 0:14:21.320 --> 0:14:25.320 Europe is something ECB policymakers will have to consider their 0:14:25.400 --> 0:14:29.600 upcoming meeting Bloomberg. Stephen Cowl and I discussed this with 0:14:29.720 --> 0:14:33.440 Maria Demerzis, who is program leader at the Conference Board 0:14:33.680 --> 0:14:38.040 and professor of Economic policy at the European University Institute. 0:14:38.200 --> 0:14:41.800 Well, I mean, the first thing is that we need 0:14:41.800 --> 0:14:45.080 to understand who will govern France, and the issue is 0:14:45.160 --> 0:14:47.880 that President mccran will not be able is not allowed 0:14:47.880 --> 0:14:50.880 constitution to call elections again, given that he's called elections 0:14:50.880 --> 0:14:53.400 back in June. So that means that for one year 0:14:53.920 --> 0:14:57.400 from since last June, that means that till next June, 0:14:57.400 --> 0:15:00.520 we will have to have a technocratic government, another prime 0:15:00.520 --> 0:15:04.280 minister or a technocratic government that actually does the government 0:15:04.360 --> 0:15:06.480 business right, and that means that we will have to 0:15:06.480 --> 0:15:10.320 operate with the current budget and political decisions will not 0:15:10.480 --> 0:15:13.280 be a Difficultulican decisions will not be made. So I 0:15:13.320 --> 0:15:16.600 think that is what I foresee till next Shuar, when Persson. 0:15:16.640 --> 0:15:19.120 Macron will have the chance again to call elections. 0:15:19.200 --> 0:15:21.960 Italy may be used to having a technocratic government, France 0:15:22.000 --> 0:15:26.160 certainly is not. And the budget deficit is the main challenge. 0:15:26.240 --> 0:15:28.560 It is expected to run at six point one percent 0:15:28.600 --> 0:15:31.960 this year. How significant an issue is this going to 0:15:31.960 --> 0:15:35.960 be for Europe to have this continued uncertainty and instability 0:15:35.960 --> 0:15:36.480 in France. 0:15:36.680 --> 0:15:39.400 Indeed, it's not good, and in fact, the reason why 0:15:39.400 --> 0:15:41.520 we are in this position here is indeed because Prime 0:15:41.520 --> 0:15:44.520 Minister Mariner was trying to put a budget forward that 0:15:44.560 --> 0:15:46.200 it was going to take us back in the right 0:15:46.360 --> 0:15:49.200 direction and in compliance with the European rules that have 0:15:49.280 --> 0:15:52.400 come into operations since September. All of this is postponed. 0:15:52.440 --> 0:15:55.760 Now will have to wait for the next government of 0:15:55.760 --> 0:15:57.760 French government to actually do the job, but it will 0:15:57.760 --> 0:15:59.760 have to be done, and the European Commission will be 0:15:59.800 --> 0:16:02.720 what very closely. I remind you that France is under 0:16:02.760 --> 0:16:06.640 the excessive deficit procedure, which is the corrective arm of 0:16:06.640 --> 0:16:10.400 the monitoring process of the European Union, and that means 0:16:10.440 --> 0:16:13.040 that the European Commission will be watching very carefully. 0:16:12.840 --> 0:16:17.440 What happens with the EU Commission's reaction to this if 0:16:17.480 --> 0:16:19.840 we do end up in this situation where they're rerunning 0:16:19.840 --> 0:16:21.720 the current budget, which means the effort is going to 0:16:21.720 --> 0:16:24.600 be far above what had been submitted and approved by 0:16:24.600 --> 0:16:26.920 the Commission in the pre budget rules. I mean, what 0:16:26.960 --> 0:16:29.080 are the next steps of the Commission can take If 0:16:29.120 --> 0:16:32.160 they're on this temporary holding pattern for the next potentially 0:16:32.200 --> 0:16:33.160 six months. 0:16:33.040 --> 0:16:36.240 Progressively, it can put off enormous pressure on whatever French 0:16:36.320 --> 0:16:40.440 government is in place to actually do the job. In principal, 0:16:40.440 --> 0:16:44.240 he could also impose fines on the country. In practice, 0:16:44.240 --> 0:16:46.360 this has never happened, and I don't think it will happen, 0:16:46.400 --> 0:16:50.520 given also what we call the French exceptionalism. But I 0:16:50.600 --> 0:16:53.280 think the pressure for France to deliver is going to 0:16:53.280 --> 0:16:56.360 recommend any is going to come also from other countries 0:16:57.040 --> 0:16:59.640 because there is in fact there's good reasons. What we 0:16:59.680 --> 0:17:01.600 have is rules in the European Union, and if a 0:17:01.640 --> 0:17:04.879 country like France, which is big, actually violates the rules, 0:17:04.920 --> 0:17:07.359 this isn't good either for the history of the rules 0:17:07.800 --> 0:17:09.240 or indeed for the European economy. 0:17:09.400 --> 0:17:12.199 The Conference Board keeps close tabs on the views of 0:17:12.280 --> 0:17:15.359 CEOs within Europe, looking at the stock market as a 0:17:15.359 --> 0:17:19.960 measure there obviously European stocks, particularly French equities, have been suffering, 0:17:20.720 --> 0:17:22.520 but we've seen a bit of a bounce in recent 0:17:22.680 --> 0:17:25.840 days and Germany's let to DAX has done actually recently 0:17:25.920 --> 0:17:29.280 well year to date this year, which seems quite strange 0:17:29.280 --> 0:17:33.919 given the pessimism that CEOs do have on European economic growth. 0:17:34.200 --> 0:17:36.600 Indeed, the CEOs actually tell us that they're in a 0:17:36.840 --> 0:17:39.080 recent service that we've done, they tell us that they 0:17:39.119 --> 0:17:42.800 actually prefer to operate outside Europe because I think conditions 0:17:42.920 --> 0:17:45.840 European economic conditions in Europe are not are very favorable. 0:17:45.920 --> 0:17:48.600 It's consistent also with the Charun account numbers that we 0:17:48.680 --> 0:17:52.360 see business conditions in Europe, you know they could be improved, 0:17:52.359 --> 0:17:55.159 and this is exactly what drag you. Of course, the 0:17:55.200 --> 0:17:57.640 mission of Draguar was very much to find the policies 0:17:57.640 --> 0:18:00.200 that we need to put in place for this to change. 0:18:00.560 --> 0:18:04.440 Is there actually any political currency though, to implement any 0:18:04.480 --> 0:18:06.919 of those recommendations. I mean, we saw the commission point 0:18:07.040 --> 0:18:09.439 to the Dragy Report and the other reports that have 0:18:09.440 --> 0:18:11.880 been done on competitiveness in the European Union as well. 0:18:11.920 --> 0:18:14.719 But realistically, if the national capitals aren't kind of up 0:18:14.760 --> 0:18:17.879 there and pushing it, and particularly France and Germany, nothing's 0:18:17.880 --> 0:18:18.680 really going to get done. 0:18:18.840 --> 0:18:21.480 It is true that we need France and Germany to 0:18:21.480 --> 0:18:26.120 act as as Germany as in a coalition of change. 0:18:26.240 --> 0:18:28.640 We need them, and you know, with both actually countries 0:18:28.640 --> 0:18:32.919 now in political instability, things won't move very fast. However, 0:18:32.920 --> 0:18:34.719 what I will say is that that the CEOs are 0:18:34.720 --> 0:18:36.640 telling us that if there's one change that they won't 0:18:36.720 --> 0:18:40.600 happen is simplification of the regulation. This is actually the 0:18:40.680 --> 0:18:42.879 top number one priority that they tell us is this, 0:18:43.480 --> 0:18:45.879 And what we saw actually the European Commission has actually 0:18:45.920 --> 0:18:49.560 put the point of the agenda very high in the priorities. 0:18:49.880 --> 0:18:52.160 So I would be very curious to see how they 0:18:52.320 --> 0:18:53.240 aim to implement this. 0:18:53.520 --> 0:18:55.359 Yeah, I mean I suppose speed is also the other 0:18:55.480 --> 0:18:57.320 question involved in this, as well as how fast they 0:18:57.440 --> 0:18:58.320 be able to do something. 0:18:58.359 --> 0:18:59.800 I wonder does something. 0:18:59.480 --> 0:19:01.520 Like the twin three e g. In this idea of 0:19:01.520 --> 0:19:04.840 creating a separate corporate structure that could operate across member states. 0:19:04.960 --> 0:19:07.000 I mean that's the sort of idea that does that 0:19:07.000 --> 0:19:09.560 get CEO as excited. Is that a policy they could 0:19:09.600 --> 0:19:10.320 get on board with? 0:19:10.920 --> 0:19:13.680 Yes, But like I say, I mean the CEO's understand 0:19:14.200 --> 0:19:16.800 how slowly europe movies. The twenty eighth regime is an 0:19:16.840 --> 0:19:18.560 idea that has been around for a very long time, 0:19:18.760 --> 0:19:22.160 particularly with regards to the creation of the Capital Markets Union. 0:19:22.760 --> 0:19:24.960 We've made very little progress in this respect. I think 0:19:25.000 --> 0:19:29.399 CEOs want tangible change, and this type of change, the 0:19:29.400 --> 0:19:32.119 certification of regulation, is something that can, in principle happen. 0:19:32.119 --> 0:19:35.200 It doesn't require money, it doesn't require much agreement. Of course, 0:19:35.240 --> 0:19:38.159 it does require parliamentary approval, but everybody agrees on this, 0:19:38.200 --> 0:19:39.840 So I think this is one of the low hanging fruits. 0:19:39.840 --> 0:19:42.479 So if we get ourselves to implement it, we can 0:19:42.520 --> 0:19:43.359 actually make change. 0:19:43.400 --> 0:19:43.720 Yeah. 0:19:43.960 --> 0:19:46.920 My thanks to Maria Demerzis, who is program leader at 0:19:46.920 --> 0:19:50.280 the Conference Board and professor of Economic policy at the 0:19:50.359 --> 0:19:55.320 European University Institute, someone who spends time in both Brussels 0:19:55.400 --> 0:19:59.800 and Florence. So, after the failure of Barnier's administration, which 0:20:00.040 --> 0:20:04.800 injects uncertainty and perhaps more austerity into France, how will 0:20:04.840 --> 0:20:09.120 the ECB choose to rebuild is something I asked Bloomberg's 0:20:09.240 --> 0:20:12.720 senior reporter covering the Central bank yall around out. 0:20:13.160 --> 0:20:17.480 I think France in itself is another source of uncertainty, 0:20:17.560 --> 0:20:22.359 of course, and there are already plenty other sources out there, 0:20:22.400 --> 0:20:24.000 and I'm sure we will get a chance to talk 0:20:24.000 --> 0:20:29.040 about that when it comes to the decision itself in 0:20:29.440 --> 0:20:33.119 the coming days. That of course will will not be 0:20:33.640 --> 0:20:36.920 affected by what we're seeing in France, but of course 0:20:36.960 --> 0:20:41.080 the the economic outlook very much will both the French economy, 0:20:41.640 --> 0:20:44.439 which of course is the is the Eurozone's second largest, 0:20:44.440 --> 0:20:47.560 and the Eurozone economy itself. They're not doing very well 0:20:47.560 --> 0:20:52.240 at the moment. Pmis are deep in contractionary territory, and 0:20:53.200 --> 0:20:58.240 uncertainty of this caliber weighs on consumption, it weighs on investment, 0:20:58.560 --> 0:21:02.200 It stands in the way of of reforms. The absence 0:21:02.200 --> 0:21:05.240 of a government in France, of course, means fiscal policy 0:21:05.320 --> 0:21:09.480 is very much a wildcard, and also an important voice 0:21:09.520 --> 0:21:12.360 is missing at the European level, So a lot more 0:21:12.440 --> 0:21:16.119 uncertainty to you know, in the future. To be aware 0:21:16.160 --> 0:21:19.040 of that will change the way the EACP looks at 0:21:19.080 --> 0:21:22.000 the economy and the economic outlook and the risks associated 0:21:22.000 --> 0:21:24.480 to that outlook, But not much of an impact on 0:21:24.520 --> 0:21:25.359 the decision itself. 0:21:25.359 --> 0:21:28.200 I would say, yeah, okay, but the possibility of an 0:21:28.200 --> 0:21:31.240 economic drag perhaps further down the road. So, in terms 0:21:31.240 --> 0:21:35.480 of this upcoming meeting, do we expect twenty five basis 0:21:35.520 --> 0:21:38.320 points or could we see a fifty basis point rate reduction? 0:21:38.760 --> 0:21:41.640 Yeah? I think twenty five is what I would bet 0:21:41.680 --> 0:21:47.439 my money on. Fifty. It's been talked about, if you 0:21:47.480 --> 0:21:50.879 asked me, it was never a real option. It was 0:21:50.960 --> 0:21:54.680 part of the speculation that the ECB might go down 0:21:54.720 --> 0:21:59.720 this route after pmis were significantly weaker than expected, after 0:21:59.760 --> 0:22:05.679 inflation didn't pick up as strongly as people might have expected. 0:22:06.320 --> 0:22:09.720 But even the market has come around too prising No, 0:22:10.480 --> 0:22:13.080 but not significantly more than a quarter point cut for 0:22:14.720 --> 0:22:20.359 Thursday's meeting. So I would say twenty five is the way, 0:22:20.440 --> 0:22:21.960 you know, the way to position. 0:22:22.560 --> 0:22:22.960 Yeah. 0:22:23.040 --> 0:22:25.520 In terms of the risks though in Europe there are 0:22:25.920 --> 0:22:30.280 a number, aren't there? Not just the geopolitical uncertainty in Ukraine, 0:22:30.680 --> 0:22:35.919 there's also Georgia and looming possibly tariffs from an incoming 0:22:36.000 --> 0:22:40.760 Trump administration. How will these factor into the interest rate 0:22:40.800 --> 0:22:43.360 decision process? So many risks, so. 0:22:43.400 --> 0:22:47.200 Many risks indeed, and all of that makes it very 0:22:47.200 --> 0:22:52.560 difficult to know what's ahead. We'll get new forecasts, which 0:22:52.680 --> 0:22:55.520 is going to be very exciting. We'll get a chance 0:22:55.560 --> 0:22:58.840 to look all the way into twenty twenty seven. But 0:22:58.960 --> 0:23:03.200 of course, you know that's that's a set of forecasts, builds, 0:23:03.320 --> 0:23:06.439 build on assumptions. We don't know yet what's going to 0:23:06.480 --> 0:23:11.240 come on the terraff front. We don't know how the 0:23:12.280 --> 0:23:15.119 warn Ukraine is going to pan out, which will have 0:23:15.160 --> 0:23:19.320 an impact on, you know, how how Europe deals with 0:23:19.640 --> 0:23:24.919 its own defense, It might impact energy overall uncertainty, of course, 0:23:25.280 --> 0:23:28.640 so the risks and and the uncertainty around those forecasts 0:23:28.720 --> 0:23:32.439 are just enormous, which makes it very very difficult for 0:23:32.520 --> 0:23:37.359 policy makers to you know, say, with with with certainty, 0:23:38.080 --> 0:23:40.840 what's needed, where to go. And and that's you know, 0:23:40.920 --> 0:23:44.159 a big part behind why policy makers say we are 0:23:44.240 --> 0:23:47.320 data dependent. We take a very gradual approach. Here, we're 0:23:47.320 --> 0:23:50.000 going step by step, and then we look around and 0:23:50.200 --> 0:23:55.120 see how our actions, our policy affect what's actually happening 0:23:55.119 --> 0:23:56.399 in the economy. 0:23:57.040 --> 0:24:00.640 In terms of the data. As you say, the pressures 0:24:00.640 --> 0:24:04.240 on the economy, the possibility of stagnation really across Europe 0:24:04.840 --> 0:24:08.920 is quite significant. The pressures on inflation, though, have also 0:24:08.960 --> 0:24:12.240 been coming down. Just took us through the inflation picture 0:24:12.280 --> 0:24:13.600 now for Europe, we. 0:24:13.640 --> 0:24:17.040 Have seen a small pickup in headline inflation that was 0:24:17.160 --> 0:24:20.199 very much in line with expectations, so that was not 0:24:20.280 --> 0:24:25.280 a big surprise there. The surprise really was underneath the 0:24:25.320 --> 0:24:29.639 headline number, so we had core inflation holding steady at 0:24:29.640 --> 0:24:33.000 two point seven percent. It's obviously still still above that 0:24:33.160 --> 0:24:36.760 two percent target, but it was weaker than expected. We 0:24:36.840 --> 0:24:42.080 are seeing a slowdown in services prices finally from a 0:24:42.160 --> 0:24:44.520 very high level. Of course, we're still closer to four 0:24:44.520 --> 0:24:48.520 percent than two percent on that indicator, but we're seeing 0:24:48.560 --> 0:24:52.640 movement as well. And what is going to be very 0:24:52.640 --> 0:24:56.359 interesting on the inflation side is a look at the 0:24:56.840 --> 0:25:00.480 quarterly profile of the new projections I mentioned, and that 0:25:00.680 --> 0:25:05.080 will tell us you know something about how confident they 0:25:05.119 --> 0:25:07.120 will be in cutting interest rates further. 0:25:07.560 --> 0:25:10.159 My thanks to Bloomberg's Janna Randau, and we will have 0:25:10.280 --> 0:25:13.920 full coverage of that final ECB meeting of the year 0:25:14.320 --> 0:25:18.399 with a Bloomberg survey showing that ECB watches now expect 0:25:18.400 --> 0:25:21.399 the Central Bank to cut a quarter point at every 0:25:21.480 --> 0:25:25.679 policy meeting through to June, taking the deposit rate at 0:25:25.680 --> 0:25:28.560 the ECB to two percent. I'm Caroline Hepge here in 0:25:28.600 --> 0:25:31.000 London and you can catch us every weekday morning for 0:25:31.040 --> 0:25:33.840 Bloomberg Daybreak you're at beginning at six am in London. 0:25:34.080 --> 0:25:35.560 That's one am on Wall Street. 0:25:35.720 --> 0:25:38.640 Tom, Thank you, Caroline. And coming up on Bloomberg day 0:25:38.640 --> 0:25:42.960 Break Weekend, we'll discuss Australia's social media band for teenagers. 0:25:43.320 --> 0:25:57.560 I'm Tom Busby and this is Bloomberg. This is Bloomberg 0:25:57.640 --> 0:26:00.000 day Break Weekend, our global look ahead at the top store, 0:26:00.000 --> 0:26:02.760 worries for investors in the coming week. I'm Tom Busby 0:26:02.760 --> 0:26:05.960 in New York. Australia's household spending rose eight tens of 0:26:06.119 --> 0:26:09.960 percent in October, exceeding estimates. This as the Reserve Bank 0:26:10.000 --> 0:26:13.440 of Australia is set to issue a policy decision this week. 0:26:13.760 --> 0:26:16.560 Bloomberg's Paul Allen is in for Doug Chrisner on the 0:26:16.680 --> 0:26:19.800 Daybreak Asia podcast, and he has more from Sydney. 0:26:20.160 --> 0:26:23.879 Tom. That pickup in Australia's October retail sales reflects a 0:26:23.920 --> 0:26:27.560 boost to household spending capacity. The data probably gives the 0:26:27.640 --> 0:26:30.119 RBA more room to hold rates for the time being 0:26:30.359 --> 0:26:33.200 while it waits for inflation to call. That's according to 0:26:33.280 --> 0:26:37.280 James McIntyre, who covers Australia and New Zealand for Bloomberg Economics, 0:26:37.320 --> 0:26:40.800 and he joins me now in our Sydney radio studio. So, 0:26:40.960 --> 0:26:44.040 James has been more than a year now. The next 0:26:44.119 --> 0:26:46.440 move from the RBA is likely to be down. 0:26:46.600 --> 0:26:49.760 But when so twelve months, that's one of the longer 0:26:49.800 --> 0:26:53.080 holds that they've had. We have been thinking that they 0:26:53.119 --> 0:26:55.359 should be cutting already, but we've been wrong on that. 0:26:55.440 --> 0:26:58.280 And why we've been wrong as we've been surprised by 0:26:58.280 --> 0:27:01.119 how strong population growth is adding that extra demand of 0:27:01.160 --> 0:27:04.080 the economy. It looks like that's phasing off. So the 0:27:04.160 --> 0:27:07.280 question is is there going to be enough evidence in 0:27:07.359 --> 0:27:09.960 the first quarter of the year for the RBA to 0:27:10.000 --> 0:27:13.240 begin cutting in in February or March. My view is 0:27:13.240 --> 0:27:15.880 that will at least be seeing that first move by May. 0:27:16.160 --> 0:27:18.240 So it's a question this year of whether there is 0:27:18.720 --> 0:27:21.080 kind of seventy five or maybe at a stretch one 0:27:21.119 --> 0:27:23.840 hundred bases points of cuts from the RBA next year. 0:27:24.160 --> 0:27:26.160 At the moment, the data is pretty strong, it's looking 0:27:26.240 --> 0:27:28.200 like we might be on that May start. 0:27:28.880 --> 0:27:31.280 You're not the only one who thinks that the RBA 0:27:31.440 --> 0:27:33.800 probably should have gone by now. We had some commentary 0:27:33.800 --> 0:27:36.879 from Goldman Sachs saying that the RBA has no longer 0:27:37.040 --> 0:27:39.480 got an argument to keep rates high and continuing to 0:27:39.560 --> 0:27:43.840 keep them high is going to inflict unnecessary economic damage. Now, 0:27:44.359 --> 0:27:47.600 the RBA was slow to titan and it got criticized 0:27:47.640 --> 0:27:50.520 for that. Now it's slow to ease. Are we seeing 0:27:50.560 --> 0:27:54.040 the formation the genesis of another policy mistake here? 0:27:54.400 --> 0:27:56.480 Well, I guess we need to kind of look at 0:27:56.760 --> 0:27:59.760 what are they trying to achieve and why would they 0:27:59.760 --> 0:28:03.280 cut And I think it's really the labor market that's 0:28:03.560 --> 0:28:07.159 that's been the surprise. If we hadn't had that population surge, 0:28:07.160 --> 0:28:09.280 we would have had a lot less demand in the economy, 0:28:09.680 --> 0:28:13.000 taking a lot more wind out of the pricing pressure, 0:28:13.720 --> 0:28:16.399 especially with demand and the retail sector and the. 0:28:16.400 --> 0:28:16.879 Like with that. 0:28:17.600 --> 0:28:19.879 But what's that demand? Being there in the economy has 0:28:19.920 --> 0:28:22.200 meant that labor market's been there and it's been quite 0:28:22.240 --> 0:28:24.600 strong as well. And we'd been expecting the unemployment rate 0:28:24.640 --> 0:28:29.600 to be marching well towards five percent by now by 0:28:29.640 --> 0:28:32.280 this time, giving the RBA a clear cut reason to 0:28:32.359 --> 0:28:34.760 lower rates. But at four point one percent, that's what 0:28:34.800 --> 0:28:38.080 the RBA is clinging to. But the very narrow path 0:28:38.120 --> 0:28:39.880 and this has been the retric from the RBA wanting 0:28:39.920 --> 0:28:43.520 to maintain those labor market gains, staying on the narrow path, 0:28:43.600 --> 0:28:46.840 keeping that unemployment rate down. It's very very dicey about 0:28:46.840 --> 0:28:50.560 how long you hold because you can overcorrect, and you know, 0:28:50.600 --> 0:28:53.120 we're seeing that in New Zealand and the repercussions of 0:28:53.160 --> 0:28:56.880 that in Australia. Interestingly is that with that New Zealand 0:28:56.920 --> 0:28:59.920 labor market being so terrible, key wes have started flood 0:29:00.120 --> 0:29:03.920 across the border here to Australia and adding to the 0:29:04.000 --> 0:29:06.480 RBA's delay and problems. 0:29:06.840 --> 0:29:09.440 And of course there's no restrictions on the number of 0:29:09.440 --> 0:29:11.880 New Zealanders that can come over either thanks to their 0:29:11.880 --> 0:29:16.240 closer Economic Relations agreement. But immigrations a really important part 0:29:16.240 --> 0:29:18.400 of the story here and it impacts the property story 0:29:18.400 --> 0:29:19.760 as well, and I want to get to that in 0:29:19.800 --> 0:29:22.480 a minute. But the other part of the dual mandate is, 0:29:22.520 --> 0:29:26.280 of course inflation. Now it's coming down. Is there a 0:29:26.360 --> 0:29:27.840 risk of undershooting here? 0:29:28.000 --> 0:29:31.040 Well, look, in my view, yes, that's where the balance 0:29:31.040 --> 0:29:34.240 of risks lies. So the RBA is still the underlying 0:29:34.240 --> 0:29:37.160 inflation has been coming down. It's a little bit slower 0:29:37.160 --> 0:29:40.680 than the headline inflation. Some of the reasons that there 0:29:40.800 --> 0:29:44.400 is this embedded stickiness. Every country's got little different quirks 0:29:44.400 --> 0:29:46.880 with their inflation, and some of the Australian story at 0:29:46.880 --> 0:29:50.200 the moment is a bunch of these administered prices and 0:29:50.240 --> 0:29:54.160 some of them are basically goods that go up by 0:29:54.240 --> 0:29:56.440 inflation the year before. So we've got a bit of 0:29:56.480 --> 0:29:59.239 an echo in some of the inflation right now, and 0:29:59.240 --> 0:30:01.640 that low inflation that we're getting as a result of 0:30:01.680 --> 0:30:05.719 the government's steps to provide cost of living subsidies and 0:30:05.760 --> 0:30:08.840 really putting downward pressure on the headline inflation. Those are 0:30:08.880 --> 0:30:11.600 things that will be anchored pretty low next year, but 0:30:11.680 --> 0:30:13.880 we could see that undershoot all of that would be 0:30:13.920 --> 0:30:17.040 a recipe for things going a little bit more south, 0:30:17.080 --> 0:30:19.880 a little bit quicker than the RBA is expecting, and 0:30:19.920 --> 0:30:22.480 pulling inflation down with it. That's where that balance of 0:30:22.560 --> 0:30:23.040 risk lies. 0:30:23.080 --> 0:30:23.600 In my view. 0:30:23.720 --> 0:30:26.240 Growth's really been struggling, hasn't it. I think Jim Chalmers, 0:30:26.240 --> 0:30:28.120 the Treasurer, said of it in the second quarter it 0:30:28.160 --> 0:30:31.840 was only government spending that kept the country out of recession. 0:30:32.240 --> 0:30:33.600 How great is recession risk? 0:30:33.760 --> 0:30:34.000 Yeah? 0:30:34.000 --> 0:30:35.640 Well, I mean if you look in per capita terms, 0:30:35.680 --> 0:30:38.560 we've been in recession for more than eighteen months and 0:30:38.640 --> 0:30:42.720 that's likely to continue. In the GDP figures that we'll 0:30:42.760 --> 0:30:46.560 see for the third quarter, and it's unlikely I think 0:30:46.600 --> 0:30:50.480 that we do see that per capita GDP growth actually 0:30:50.560 --> 0:30:55.000 beginning to pull up until that's unlikely until we get 0:30:55.080 --> 0:30:57.680 rate cuts helping to kind of relieve some of the 0:30:57.720 --> 0:31:02.520 tension on consumers there. So yeah, it's a very icy outcome, 0:31:02.600 --> 0:31:05.440 very low growth, very weak growth, which means that the 0:31:05.480 --> 0:31:08.080 labor market outcomes that we're getting some of those are 0:31:08.080 --> 0:31:11.440 reflecting previous growth, and the labor market ahead the outlook 0:31:11.520 --> 0:31:14.080 isn't as strong. And I think that's that very very 0:31:14.120 --> 0:31:16.400 delicate balance, that narrow path that the RBA is trying 0:31:16.400 --> 0:31:16.800 to three. 0:31:16.680 --> 0:31:19.480 To hear, James will just finish up on the property 0:31:19.520 --> 0:31:22.760 story because it has the great Australian barbecue stopper, if 0:31:22.760 --> 0:31:25.560 you like, and so rate sensitive as well. And we've 0:31:25.600 --> 0:31:29.640 seen property prices cooling in Australia and that's a relative term. 0:31:29.680 --> 0:31:32.920 I mean, we're still a nosebleed territory here. But once 0:31:33.040 --> 0:31:36.320 the easing cycle does begin from the RBA, are we 0:31:36.400 --> 0:31:38.720 going to just see prices reigniting. 0:31:39.080 --> 0:31:39.360 Well. 0:31:39.400 --> 0:31:42.920 There has been really a tale of two stories within 0:31:42.960 --> 0:31:46.720 the property market. The Melbourne property market's been very weak 0:31:46.800 --> 0:31:49.720 for quite some time now. Sydney's starting to show those 0:31:49.720 --> 0:31:52.160 signs of weakness, especially at the top end, and that's 0:31:52.160 --> 0:31:55.760 where the borrowing capacity hit from high rates is really 0:31:55.840 --> 0:31:59.720 leaving its mark. Those markets are likely to be ones 0:32:00.120 --> 0:32:02.640 could see quite a bit of upside if we do 0:32:02.720 --> 0:32:08.800 get a strong rates download rate cycle, But fifty seventy 0:32:08.800 --> 0:32:11.720 five or one hundred basis points over the year it's 0:32:11.760 --> 0:32:13.720 not going to give you that bigger punch on boring 0:32:13.720 --> 0:32:19.400 capacity and property price boost as other rate cut cycles 0:32:19.480 --> 0:32:21.680 might have. So I think we might be relying on 0:32:21.760 --> 0:32:23.840 sentiment and those two bigger cities, which are the most 0:32:23.840 --> 0:32:26.440 important ones for the Australian economy, a bit of a 0:32:26.480 --> 0:32:30.240 sentiment improvement as rate cuts maybe helping propel things a 0:32:30.240 --> 0:32:30.920 bit next year. 0:32:31.080 --> 0:32:33.800 All right, thanks James, as the RBA keeps us waiting. 0:32:33.920 --> 0:32:37.400 That is James McIntyre, who covers Australia for Bloomberg Economics. 0:32:37.720 --> 0:32:41.960 We move next to Australia's sweeping social media ban. Last week, 0:32:42.000 --> 0:32:45.480 Canberra past a law banning teams under sixteen from platforms 0:32:45.560 --> 0:32:48.360 like Facebook and tech Talk. It marks one of the 0:32:48.440 --> 0:32:51.760 toughest crackdowns on these social media companies, and the move 0:32:51.840 --> 0:32:56.040 is sending shock waves through the industry worldwide. Bloomberg's Angus 0:32:56.040 --> 0:32:59.760 Swickley joins me now for a deeper dive. So, Angus 0:33:00.120 --> 0:33:02.880 key among this new law, as parents are going to 0:33:02.920 --> 0:33:05.280 be responsible for enforcing this band it's going to be 0:33:05.320 --> 0:33:07.800 up to social media companies to do it at risk 0:33:07.880 --> 0:33:11.440 of a thirty two million dollar US fine for non compliance. 0:33:12.040 --> 0:33:14.040 How is this even going to work? I mean, you 0:33:14.080 --> 0:33:16.960 can't could just find a way to get around this. 0:33:17.920 --> 0:33:21.760 I think this is one of the big unanswered questions 0:33:22.160 --> 0:33:25.040 sort of hanging over this legislation. You're right in the 0:33:25.840 --> 0:33:30.400 law really does put the responsibility on the social platform 0:33:30.440 --> 0:33:33.280 operators rather than the kids and even their parents. So 0:33:33.680 --> 0:33:39.520 it's the operators like Facebook and Snapchat that must find 0:33:39.560 --> 0:33:44.160 a way somehow to check the identity or the age 0:33:44.240 --> 0:33:48.360 rather of the users without some kind of formal government 0:33:48.640 --> 0:33:52.800 identification because that has also been ruled out. So one 0:33:52.840 --> 0:33:56.320 of the weaknesses, if you like, when this law was 0:33:56.440 --> 0:34:00.480 passed is that this technology doesn't really seem to exist 0:34:00.600 --> 0:34:04.760 in any practical form yet at least. Yes, it's true 0:34:04.760 --> 0:34:07.120 that the law does not come in to sort of 0:34:07.520 --> 0:34:10.879 effect for another twelve months or so, but even then, 0:34:10.960 --> 0:34:14.120 it's not quite clear whether the technology will be in 0:34:14.200 --> 0:34:18.960 place even then, So, yeah, how are the kids going 0:34:19.040 --> 0:34:22.920 to be checked? There are privacy concerns there, facial recognition 0:34:23.200 --> 0:34:26.279 perhaps that doesn't seem to be up to speed yet, 0:34:26.400 --> 0:34:28.520 So yes, that is one of the questions. 0:34:28.960 --> 0:34:31.960 Yeah, I've seen other commentary around this, suggesting that you know, 0:34:32.000 --> 0:34:36.279 even things like browsing history, online shopping behavior, whether or 0:34:36.320 --> 0:34:39.080 not people have a MYGV account. These are all ways 0:34:39.200 --> 0:34:42.680 that social media companies can detect whether or not a 0:34:42.800 --> 0:34:45.360 user is likely to be of age. But it doesn't 0:34:45.400 --> 0:34:48.279 really draw that definitive line in the sand, does it? 0:34:48.800 --> 0:34:51.120 What a social media company saying about this. 0:34:51.760 --> 0:34:55.600 As you'd expect, there has been a strong wave of 0:34:55.600 --> 0:34:59.600 opposition to this legislation. I mean, this is a key demographic, 0:34:59.640 --> 0:35:05.160 isn't it for social media platforms, teenagers, youths. They may 0:35:05.200 --> 0:35:09.720 not be spenders at that age, but that they mature 0:35:09.760 --> 0:35:14.360 into valuable customers, don't they, so that they want to 0:35:14.400 --> 0:35:18.600 get their teeth into these users as it were. Having 0:35:18.640 --> 0:35:22.040 said that, they do make some criticisms which which do 0:35:22.160 --> 0:35:25.200 appear to hold some water, that they argue that the 0:35:25.480 --> 0:35:28.759 law is sort of ignore as the practical side of 0:35:30.440 --> 0:35:35.719 age verification technology, which you could argue is true. It's 0:35:35.960 --> 0:35:38.920 it's been rushed, they say, which is also true. I 0:35:38.920 --> 0:35:42.200 mean it was plowed through the parliament in a matter 0:35:42.239 --> 0:35:48.040 of days, very little time for consultation, the platform operators argue, 0:35:48.600 --> 0:35:52.120 and very little time for some inquiry as well. India 0:35:52.160 --> 0:35:54.840 didn't even have time, it seems, to publish all the 0:35:54.840 --> 0:35:58.279 submissions it had on this legislation. A lot of that 0:35:58.400 --> 0:36:02.560 is driven by the terrible told social media inarguably takes. 0:36:02.960 --> 0:36:05.000 Yeah, this has come about because of some of the 0:36:05.200 --> 0:36:06.720 very sad stories out there. 0:36:06.840 --> 0:36:13.720 That's right, and these are profoundly sad stories users teenagers 0:36:14.640 --> 0:36:19.480 taking their own lives after spaces of bullying online, and 0:36:20.080 --> 0:36:22.160 that is a key driver of this change. The question 0:36:22.400 --> 0:36:26.000 is how do you address these problems without destroying the 0:36:26.040 --> 0:36:27.879 benefits and that that's the problem. 0:36:27.560 --> 0:36:30.279 Here, and some other confusing things about this. I mean 0:36:30.320 --> 0:36:35.239 some platforms the suppliers do Facebook x TikTok, but others not, 0:36:35.480 --> 0:36:38.560 such as What's Happened messaging platforms. And you know, it's 0:36:38.840 --> 0:36:42.040 obvious that these sorts of problems like cyberbodying still take 0:36:42.080 --> 0:36:45.920 place on places like What's Happened messaging platforms, But this 0:36:46.080 --> 0:36:49.080 is being really closely watched by other countries as well. 0:36:49.400 --> 0:36:52.360 Could we see similar laws coming into force around the 0:36:52.400 --> 0:36:53.520 world in the coming months. 0:36:54.239 --> 0:36:56.920 Yeah, this is interesting. I mean, if you look at 0:36:56.960 --> 0:37:00.600 Australia's history, it's got form, hasn't it with big tech. 0:37:00.640 --> 0:37:04.399 It's it's picked fights with big tech before, whether it's 0:37:04.719 --> 0:37:10.840 X for you know, posting distressing material, whether it's Google 0:37:11.000 --> 0:37:14.240 or Facebook for for not paying local publishers for news. 0:37:14.280 --> 0:37:18.560 So it's shown a kind of punch, if you like, 0:37:18.680 --> 0:37:22.080 for for taking on these these big companies from the 0:37:22.120 --> 0:37:24.680 other side of the world that fights that the the 0:37:24.680 --> 0:37:27.000 rest of the world has looked at before. And the 0:37:27.080 --> 0:37:30.920 question is to what extent will this, you know, precedent 0:37:31.000 --> 0:37:34.279 setting legislation be followed in other countries. Other countries have 0:37:34.360 --> 0:37:39.240 tried to do similar things with mixed results. To my knowledge, 0:37:39.239 --> 0:37:41.760 I don't think anyone's ever tried a blanket ban with 0:37:41.760 --> 0:37:44.759 without parental permission for on the sixteens. You know, there 0:37:44.840 --> 0:37:49.160 is legislation in other US states, for instance, that allow 0:37:49.320 --> 0:37:52.120 used to use it if they're permission from parents, So 0:37:52.760 --> 0:37:56.560 that this is a blunt tool. It's it's wide ranging 0:37:56.680 --> 0:38:00.000 and all catching, and the question is will other government 0:38:00.960 --> 0:38:03.360 look at the results and say, yeah, this is something 0:38:03.400 --> 0:38:06.120 we want to do because it's proven to work, or 0:38:06.120 --> 0:38:08.839 will they say this has proven to be ineffective. They're 0:38:08.880 --> 0:38:13.920 just too many youths getting around this legislation, which inevitably 0:38:13.960 --> 0:38:14.440 there will be some. 0:38:15.120 --> 0:38:18.400 All right, Agus, thanks very much. That is Bloomberg's Angus Whitley, 0:38:18.440 --> 0:38:22.239 who has been covering that sweeping social media ban for 0:38:22.760 --> 0:38:26.120 teenagers under the age of sixteen in Australia. I'm Paul 0:38:26.120 --> 0:38:28.919 Allen in for Doug Crisner this week. You can catch 0:38:29.000 --> 0:38:31.960 him weekdays on the Daybreak Asia podcast, looking at the 0:38:31.960 --> 0:38:35.440 top stories moving markets in the Asia Pacific. It's available 0:38:35.440 --> 0:38:39.480 on Apple, Spotify or wherever you get your podcasts. Tom. 0:38:39.760 --> 0:38:42.000 Thanks Paul, and that does it for this edition of 0:38:42.000 --> 0:38:44.839 Bloomberg day Break Weekend. Join us again Monday morning at 0:38:44.840 --> 0:38:47.000 five am Wall Street Time for the latest on markets 0:38:47.000 --> 0:38:49.160 overseas and the news you need to start your day. 0:38:49.600 --> 0:38:52.560 I'm Tom Busby. Stay with us. Top stories and global 0:38:52.600 --> 0:39:01.080 business headlines are coming up right now.