US inflation climbs to 2.7% surpassing expectations and signalling that Donald Trump’s tariffs are hitting prices.
Welcome to Talking Business, a podcast produced in Melbourne Australia. The podcast is available on the Acast site, my own website, the Apple Podcast store or wherever you go to get your podcasts. Or you can get it at the Business Acumen website at www.businessacumen.biz
For the most exclusive access to leading economists and business leaders from around the world, subscribe to Talking Business from my website leongettler.com.
I am Leon Gettler. My job is to review and monitor the week’s news in business, finance and economics. I bring it all to you, every week.
This is episode number 23 in our series for 2025 and today’s date is Friday July 18.
First, I’ll be talking to Steve Plarre, the CEO of Plarre Foods who has helped rebuild the family brand to become an award-winning, sustainable business that currently boasts 85 stores across Victoria. Apart from a strong focus on profitability and growth, perhaps across Australia, even using AI to build the business. They have a plant-based pie and sausage roll in their range as part of their savoury turnover. It sells under the Pie Society brand at Woolies and Coles. They’ve even opened up Plarre Foods drive-throughs next to Coles Express stores. Perfect for those seeking a meat supplement or faux meat dish. Plarre Foods is a family business with franchisees. A fascinating business story.
And I’ll be talking to AMP Capital chief economist Shane Oliver who will explain why the RBA’s kept rates on hold, what impact this will have on markets and whether we can expect more rate cuts this year.
But first, let’s talk to Steve Plarre.
So what’s happening in the news?
US inflation accelerated in June as President Trump’s tariffs started to leave a bigger imprint on the economy. The Consumer Price Index rose 2.7% from a year earlier, the swiftest pace since February, data released by the Bureau of Labor Statistics showed on Tuesday. That is slightly higher than expected and up from an annual pace of 2.4% in May. “Core” inflation, which strips out volatile food and energy prices and is seen as a reliable gauge for underlying price pressures, also shifted higher. Those prices were up 2.9% from the same time last year. Over the course of the month, prices rose 0.3%, a notable pickup from a 0.1% increase in May. Core prices rose 0.2%. The June data still reflects only the initial impact of Mr. Trump’s global trade war. This is just the beginning. Up to this point, inflation has been more muted than feared when Mr. Trump returned to the White House. That had emboldened the president and his top advisers to dismiss the latest set of warnings from economists about the damage steep tariffs could have on consumers and businesses across the country. Officials have been wedded to a “wait and see” approach, opting to keep borrowing costs steady until they have a clearer sense of how Mr. Trump’s policies — which beyond tariffs include a crackdown on immigration, sweeping tax and spending cuts, and a broad deregulatory push — will affect the economy. The US inflation data tells another story.
US President Donald Trump has announced that the US will impose 100% secondary tariffs targeting Russia’s remaining trade partners if a peace deal with Ukraine is not reached within 50 days. This would see any country that trades with Russia face the tax if they want to sell their products to the US. For example, if India keeps buying oil from Russia, US companies that purchase Indian goods would have to pay a 100% import tax, or tariff, when the products reach American shores. This would make the goods so expensive that US businesses would likely choose to buy them cheaper from elsewhere, resulting in lost revenue for India. The intention is also to hobble Russia’s economy. Theoretically, if Moscow was unable to generate money by selling oil to other nations it would also have less money to finance its war in Ukraine. Given that oil and gas account for almost a third of Moscow’s state revenue and more than 60% of its exports, 100% tariffs could make something of a dent Russia’s finances. This coincides with Trump announcing that the US will send “top-of-the-line weapons” to Ukraine via Nato countries, “We want to make sure Ukraine can do what it wants to do,” Trump said following a meeting with Nato chief Mark Rutte in Washington. Rutte confirmed the US had decided to “massively supply Ukraine with what is necessary through Nato” and that the Europeans would foot the bill. European countries will send Kyiv their own Patriot air defence systems – which Ukraine relies on to repel Russia’s deadly air strikes – and replacements will then be issued by the US, Trump said. Neither Rutte nor Trump elaborated on the weaponry that will be sent to Kyiv but Rutte said the deal included “missiles and ammunition”.
The Albanese government has been advised the budget cannot be fixed without raising taxes and cutting spending, and that its housing target is unachievable. The advice, written by the independent Treasury and offered after Labor’s re-election, warns the government’s signature pledge to build 1.2 million homes over five years to address the housing crisis “will not be met”. The Treasury advice doe not elaborate on which taxes could be raised, but suggest that Treasury canvassed “indirect taxes” like the GST, wine equalisation tax and luxury car tax, and superannuation tax as possible targets. It appeared to favour lower taxes on companies and personal incomes. Treasury advised that “improvements to the budget will need to come from economic growth, additional revenue and spending reductions” and that “tax should be raised as part of broader tax reform”. The department also advised Mr Chalmers and Housing minister Clare O’Neil that the 1.2 million homes target “would not be met” and floated changing it, advising the government to “build on [its] agenda” by crafting a “coherent and well-prioritised” housing agenda. There has been substantial public commentary about the viability of the target, with housing completions so far well off track, and the ministers have described the target as “ambitious” but maintained it can be met. Mr Chalmers has since declared an appetite for tax reform reaching beyond Labor’s election platform, and will hold a roundtable in August with tax on the agenda, saying proposals should improve the budget bottom line, or at least be budget neutral.
For its part, the Commonwealth Bank of Australia has urged Treasurer Jim Chalmers to consider major tax reform to revive productivity, including slashing income taxes, lifting the GST, capping superannuation concessions and introducing wealth taxes. In a frank submission to the Productivity Commission’s review ahead of Chalmers’ economic reform roundtable next month, the largest lender also said lowering company taxes should not be a priority. CBA’s priorities, as outlined in its submission, include capping tax concessions on high balance superannuation accounts, which would raise tens of billions of dollars in additional tax revenue in the coming years. “We would support a superannuation cap, set at a level that encourages aspiration, and set well above the level where there is dependence on the state for support in retirement,” its submission states. In its submission, CBA said the Henry Tax Review from 2010 was “a sensible starting point” to launch a national conversation about tax reform. Its author, respected public servant Ken Henry, was prohibited from considering changes to the GST but put forward 138 other recommendations. The most significant was to introduce a resources super profits tax. This was made law by the Gillard Labor government in 2012 but abolished by the Abbott Coalition government in 2014 after a fierce backlash from industry. CBA said the federal budget’s current reliance on personal income taxes was not sustainable in the long term to fund the level of public services people want. Personal income tax hit a record $349 billion, or 52%, of the federal tax take in 2023-24, the highest share since the 2000 financial year, shortly before the Howard government introduced the 10% GST, in part, to take tax pressure off wage earners. “Australia needs to find a way to lower its dependence on income taxes,” CBA said. “We believe it should be possible to achieve a revenue-neutral but more sustainable tax mix through a package of measures. Australia’s prosperity has been built on waves of reform to align our tax system to the economic demands and opportunities of the time. We now need to catalyse the next wave of tax reform debate, which should include the appropriate levels and role for consumption and wealth taxes, for distributional fairness, and for incentivising productive activity in the economy.” After boasting about Labor’s back-to-back surpluses and improvements to the budget during the election, Chalmers delivered a sombre assessment last month that the budget was unsustainable and in need of serious repair. “No sensible progress can be made on productivity, resilience or budget sustainability without proper consideration of more tax reform. I don’t just accept that, I welcome that,” he said. The treasurer initially indicated that although he was reluctant to introduce changes to the GST, he did not want to “artificially limit” contributions at the economic reform roundtable, leaving changes up for debate. But speaking at a summit last week, Prime Minister Anthony Albanese tried to slam the door shut on GST changes. “Consumption taxes by definition are regressive in their nature, so that’s something that doesn’t fit with the agenda,” he said. On Monday, Chalmers fell into line when asked whether he would support GST reform if the states brought a joint proposal to the federal government. “I think both the prime minister and I have made it pretty clear when it comes to the GST, we’ve had a view about that historically and that view hasn’t changed,” he said.
Anthony Albanese has rebuffed US pressure to commit to defending Taiwan from attack, overshadowing a six-day visit to China aimed at bolstering economic ties with Australia’s biggest trading partner. Albanese arrived in Shanghai for his second official visit to China, and met Chinese President Xi Jinping and Premier Li Qiang on Tuesday. He spent his first day spruiking a new agreement that the government hopes will kickstart stalled tourism to Australia. The Trump administration’s undersecretary for policy, Elbridge Colby is already leading a review of the AUKUS agreement between Australia, the US and the United Kingdom, and increasingly pushing for firmer commitments about how nuclear submarines would be used. Colby has asked Australia and Japan what they would contribute to defend Taiwan from China. But the prime minister said private discussions with the Trump administration were already in progress about how the AUKUS nuclear defence pact would work, insisting the increase in military spending and the acquisition of submarines were intended to prevent war, not cause it. “There is no fixed model for a stabilised relationship. Our job is to make sure that we manage our relationship so that we can contribute to regional and global peace and prosperity,” he said. “Dialogue advances co-operation and addressing our differences without allowing them to define us.” Pressed about Taiwan in a media conference in Shanghai, Albanese said: “We support the status quo when it comes to Taiwan. We don’t support any unilateral action there. What’s important when it comes to international relationships is that you have a stable, orderly, coherent position going forward … We want peace and security in our region. Our alliance with the US is a very important one for Australia, so we’ll continue to engage constructively in a coherent, stable, orderly way,” he said. “Our aim of investing in our [military] capability, and as well as investing in our relationships, is about advancing peace and security in our region. That’s our objective, and that’s why we invest in our military.” The Australian government’s official policy is not to recognise Taiwan as a sovereign state, although, like many other countries, it has informal and unofficial ties with Taipei on economic and development matters. The US has a similar position and has not made any formal commitments to defending Taiwan in the event of conflict with China.
At the same time, Anthony Albanese is refusing to buckle to Chinese pressure to back down on his election vow to force the Chinese owners of Darwin Port to sell the key asset, despite a fresh warning Beijing could retaliate by limiting Australia’s lucrative $105 billion iron ore trade. However, while Australian analysts believe the threat to iron ore was a hollow one, China may seek retribution elsewhere. Lowy Institute senior fellow Richard McGregor said Beijing would undoubtedly punish Australia if there was a forced sale. “The issue of ports is not just about Australia. It goes much further than that,” he said. “Chinese state companies have built an extensive network of ports around the world – more than 100 ports in about 50 countries. They do not want to see a precedent set in Australia which could be followed by governments elsewhere in the world. Australia will have to be seen to pay a price.”
Prime Minister Anthony Albanese has raised Australian concerns over Chinese steel dumping and has urged industry leaders from both nations to work together to develop low-carbon steel production methods. At a roundtable of Australian iron ore producers and Chinese steelmakers in Shanghai on Monday, Mr Albanese called on China to address an oversupply of steel in the global market. Excess Chinese steel production – the result of prolonged economic stimulus and weak domestic demand – has flooded the international market in recent years, squeezing producers in places such as the US and Europe, and precipitating allegations of dumping. Australia imposed anti-dumping duties on steel imports from China but the World Trade Organization found they were improperly applied. Mr Albanese knows Australian miners – and government revenue streams – are vulnerable to a downturn in the iron ore price. “As both countries co-operate to advance decarbonisation, we also need to work together to address global excess steel capacity,” he told the roundtable on Monday morning “It is in both countries’ interests to ensure a sustainable and market-driven global steel sector.” It’s hard to overstate the Australian economy’s dependence on the Chinese iron ore trade. China is by far Australia’s largest export destination and iron ore is by far the largest component.
Australia’s largest banks and retailers have agreed to tip in $25 million to keep Armaguard, the monopoly cash transportation business owned by billionaire Lindsay Fox, operating until the end of the year. The companies – Commonwealth Bank, Westpac, National Australia Bank, ANZ, Coles, Woolworths, Bunnings and Australia Post – last year paid Armaguard some $50 million to keep operating after the Fox family suggested it was not profitable and could shut. Cash payments are expected to fall to 4% of transactions this decade. Still, while fewer people are using cash, Armaguard is crucial to its circulation around the economy. When concerns about its possible demise were at their highest, some supermarkets began hoarding cash to make sure that they did not run out of reserves over the Easter holidays. Multiple people involved in the negotiations confirmed that a deal had been agreed at the weekend, which extends Armaguard’s lifeline until the end of December. In many European countries, cash has been designated an “essential service” and is regulated by central banks as its use plummets
And that’s it for this week.
And next week, I’ll be talking to David J. Greer, an entrepreneurial coach specializing in creating high performing and high growth mid-market businesses. He also helps entrepreneurs challenged with alcoholism or addiction.
And I’ll be talking to RMIT economist Jonathon Boymal about trends in the Australian property market.
For the most exclusive access to leading economists and business leaders from around the world, subscribe to Talking Business from my website leongettler.com
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Looking forward to the next episode of Talking Business.
