Australian CPI to June slowed to 2.1% vs 2.2% consensus expectation.
August rate cut looks in the bag.
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 25 in our series for 2025 and today’s date is Friday August 1
First, I’ll be talking to Charles Zerafa, Senior Finance Broker with Integrity Finance Australia. With over 35 years of experience in Business and Corporate Banking, Charles works with clients who are struggling to get finance from banks. Charles, who knows the banking industry, knows how to organise finance for all his clients.
And I’ll be talking to Indeed economist Callam Pickering about the latest jobs figures. the surprising spike in unemployment and what’s the outlook for the jobs market when the Australian economy is hardly growing.
But first, let’s talk to Charles Zerafa.
So what’s happening in the news?
After tense negotiations, the European Union has averted a tariff war with the United States. It’s a broad-brush trade deal set at US president Donald Trump’s Turnberry golf resort in Scotland that sets a 15% tariff on most E.U. goods, including cars, but not for steel, which will be subject to a quota system – and that’s down from a 27.5% punitive fee in April. It averts what could have become a painful trade war with a bloc that is the United States’ single biggest source of imports. This is higher than the UK which had secured a 10% baseline tariff. The EU was following this line and had been working toward an agreement that would have kept baseline tariffs at 10% for its 27 member countries. Rather than join Canada and China with instant retaliation and inflict pain on US consumers and businesses, the EU — hamstrung by divergent views among its member states — chose to take the pain in the hope of securing a better deal. President Trump said that the European Union had agreed to purchase $750 billion of American energy, which Ursula von der Leyen, the president of the E.U.’s executive branch, told reporters would be spread out over three years. The 27-nation bloc also agreed to increase its investment in the United States by more than $600 billion above current levels. Mr. Trump said the European Union would buy military equipment as part of the deal. The two sides also agreed to drop tariffs to zero on a range of goods, including aircraft, plane parts, certain chemicals, certain generic drugs, semiconductor equipment and some agricultural products, Ms. von der Leyen said. Altogether, while it was clear that major details still needed to be hammered out, the framework seemed likely to permanently reshape the trading relationship between two of the world’s largest and most interconnected economies. The agreement will “rebalance, but enable trade on both sides,” Ms. von der Leyen said as she sat next to Mr. Trump and the leaders made the announcement. Not all higher tariffs were eliminated. The president implied that the 50% tariff he had imposed on steel and aluminum globally may remain for some products, saying it’s a “worldwide thing that stays the way it is.” Ms. von der Leyen suggested that those might be reduced through further negotiation.
That said, it was not an easy deal for the European Union. Europe, being what it is, is made of different views and disagreements. True, there was relief among policymakers about avoiding an immediate transatlantic trade war. The trade war-ending deal has been welcomed by most EU leaders, but with a significant dose of scepticism. The agreement with Trump was tinged with regret: could the EU, the world’s largest trading bloc and supposedly an economic heavyweight, have extracted better terms had it not pulled its punches early on? “He’s the bully in the schoolyard and we didn’t join others in standing up to him,” said one diplomat. “Those who don’t hang together get hanged separately.” The EU knew that Trump says the EU is a parasite, feeding off the lucrative US market while closing its own through regulation and standards. The US president has said the union was “formed to screw the US” and “nastier than China”. Germany, France and a few others pushed for the commission to consult on using its new “trade bazooka”, the anti-coercion instrument. Designed after Trump’s first term to counter trade policy being used to pressure governments over other matters, it would allow Brussels to bar US companies from public tenders, revoke intellectual property protection and restrict imports and exports. However, it was not clear a majority of member states agreed with the threatening move. This was why the EU finally agreed to that deal. Still, French Prime Minister Francois Bayrou said the deal amounted to “submission” by the EU.
Added to that, US President Donald Trump has flagged a new, higher baseline leaving Australian exporters facing the prospect of tariffs of 15 to 20% at the United States border, with the Albanese government yet to strike a deal. The Australian government has so fat stood back from negotiations, given about $24 billion of Australian goods sold to the US annually have been subject to the lowest rate and there was so far no expectation that carve-outs would be applied to that baseline. As such, the possibility of a new, higher baseline rate will likely come as a shock to Australian officials and to the meat, gold and pharmaceutical vendors that make up almost half of the country’s US-bound exports.
Added to that, US President Donald Trump has flagged a new, higher baseline leaving Australian exporters facing the prospect of tariffs of 15 to 20% at the United States border, with the Albanese government yet to strike a deal. The Australian government has so fat stood back from negotiations, given about $24 billion of Australian goods sold to the US annually have been subject to the lowest rate and there was so far no expectation that carve-outs would be applied to that baseline. As such, the possibility of a new, higher baseline rate will likely come as a shock to Australian officials and to the meat, gold and pharmaceutical vendors that make up almost half of the country’s US-bound exports.
And Australia and the EU are unlikely to strike a trade agreement this year. After negotiations between Australia and the EU collapsed in October 2023, the parties rekindled talks in June this year as both sought insurance against the impact of Trump’s global trade war. European Commission President Ursula von der Leyen, whom Anthony Albanese met in Rome in May and again in Canada a month later, had pencilled in a visit to Australia early in the second half of this year but there’s little likelihood of that happening in 2025. Why? Because the EU had become so distracted in dealing with the US. Now it’s prioritising its attempt to finalise the so-called Mercosur deal with a South American bloc of nations comprising Argentina, Brazil, Paraguay and Uruguay. When Trade Minister Don Farrell met his EU counterpart Maroš Šefčovič in Paris in early June, he was assured that the Mercosur deal would soon pass the European parliament, enabling the Europeans to focus on Australia. But because of its high agricultural content, mainly beef, it was blocked by the French, and the EU’s focus is on trying to salvage that deal. After that, it wants to deal with India. Let’s cut to the chase – Australia, which is at the other end of the world, is not a priority for the EU.
The Reserve Bank of Australia has been given the green light to cut interest rates in August with inflation dropping to its lowest level since the March 2021 quarter. CPI eased further in the June quarter, with consumer prices rising at an annual pace of 2.1%, down from 2.4% in the March quarter. This was lower than the 2.2% expected by economists polled by Reuters. The “trimmed mean” measure of inflation, which is the Reserve Bank’s preferred measure of underlying inflation, also declined, falling from 2.9 to 2,7% between March and June, which broadly matches the Reserve Bank’s forecasts from May. On a quarterly basis, Bureau of Statistics data show headline inflation rose by 0.7% in the June quarter, down from the 0.9% pace in the March quarter.
To boost Australia’s flagging productivity, the Productivity Commission will recommend the federal government offer a more generous immediate tax deduction for new investment by companies. The aim is to boost non-mining business spending that has declined over the past 15 years and which has dragged down Australia’s productivity. To incentivise new business investment, the commission will this week advise Treasurer Jim Chalmers to move towards a corporate cash flow tax model, enabling companies to receive a larger upfront tax deduction for capital outlays. Certain businesses and types of investment would be rewarded with a larger immediate write-off for new capital outlays, instead of having to gradually depreciate the cost of investment over up to 10 years, under the proposal in a report to be released publicly on Thursday. The faster tax benefit flowing to business would cost the federal budget potentially tens of billions of dollars in the early years, but be almost revenue neutral over 10 years due to lower future depreciation deductions. Deductions for interest expenses would also decline as a result of the more immediate expensing of capital investment. To limit the fiscal cost of the proposed tax change, not all types of business investment would be eligible for full expensing, with the proposed model to be a partial form of a more pure cash flow tax. Productivity Commission chairwoman Danielle Wood said the interim report, to be released this Thursday night, would make recommendations to the government to adjust the corporate tax to boost business investment, but she ruled out a cut to the 30% rate.
And while we’re on the subject of productivity, one of the nation’s biggest agribusiness operators has urged an overhaul of freight infrastructure, particularly rural roads and rail, as a rapid-fire way to help boost flagging productivity, Wheat and grains major GrainCorp also wants the streamlining of fragmented environmental and trade regulations as a way to slash compliance costs and spur investment into regional Australia. The comments were made as part of GrainCorp’s submission to Treasury ahead of the Albanese government’s Economic Reform Roundtable in August. Inefficiencies in freight and logistics infrastructure; a lack of investment in rural roads; short rail sidings; and port congestion all slows the nation’s agriculture supply chain and result in significant costs for growers and exporters each year. Australian grain freight costs are more than triple those in countries such as Canada and Ukraine, placing pressure on farmgate prices and export competitiveness, GrainCorp said in its submission. “These cost pressures are compounded by ageing infrastructure, inconsistent investment and limited interoperability between state networks. With global demand for reliable, low-emissions supply chains increasing, Australia cannot afford to let poor infrastructure remain a barrier to growth in regional industries like agriculture,” it said. GrainCorp markets and ships grain on behalf of 10,000 growers across Australia. Combined sales of wheat, barley and sorghum represent the nation’s biggest agriculture exports.
Labor will significantly increase the number of renewables projects it will underwrite in a bid to speed up the clean energy rollout as the government’s 2030 climate targets look increasingly out of reach. Climate Change and Energy Minister Chris Bowen on Tuesday announced a 25% increase to the size of the Capacity Investment Scheme, Labor’s program to boost private investment in renewables by providing minimum revenue guarantees for new clean energy projects. Despite strong investor interest in renewables investment, the government is well behind its target of achieving 82% renewable energy generation by 2030, which underpins its commitment under the Paris Agreement to reduce emissions by 43% on 2005 levels by the same date.
Trillion-dollar Dutch pension fund APG Asset Management has defied the recent trend of international investors exiting Australia’s clean energy sector, committing more than $1 billion to expand the renewables platform of developer Octopus Australia. APG’s move is one of the most significant institutional investments to date in Australia’s clean energy transition, which needs to accelerate if it is to meet the federal government’s target of 82% of power generation from renewables by 2030. Octopus Australia chief executive Sam Reynolds said the funding would allow the firm to double its already large pipeline of solar, wind and battery projects over the next few years. “Our pipeline is about $11 billion today, but with the firepower that APG can put behind us, we’d expect that to double over the next few years because it gives us confidence to develop, go in and buy and originate more assets,” Reynolds said. Octopus Australia is a sister company to the UK-based retailing and tech company Octopus Energy, which is 23% owned by Origin Energy. The Australian company’s investors also include superannuation funds REST and Hostplus, international funds and the federal government’s green bank. The first funds from APG into Octopus Australia will be deployed in September at the $900 million Blind Creek solar and battery project near Bungendore in NSW, and the 1 GWh $850 million Blackstone battery project in south-east Queensland. The group’s projects that are already operational in Australia include the 275 megawatt Darlington Point solar farm in NSW, and the 181 megawatt Dulacca wind farm in Queensland. It is also in the process of developing a line of projects along the eastern seaboard, including the Fulham solar farm and battery in Victoria, taking its total assets in operation or development to more than 4 gigawatts.
Global pharmaceutical giants, including Pfizer and Johnson & Johnson, are paying a tiny fraction of the billions of dollars they earn from drug sales in local taxes, at a time when they’re lobbying US President Donald Trump to force an overhaul of Australia’s Pharmaceutical Benefits Scheme and impose a 200% tariff on Australian pharmaceuticals. An analysis of earnings statements filed with the corporate regulator by five of the biggest US and European drugmakers shows the companies on average pay between 2-4% of their Australian sales in income tax.The numbers may make for uncomfortable reading for drug multinationals as they step up efforts to loosen the PBS’ grip on the pricing of key medicines. Vaccine maker Pfizer paid $43.5 million in income tax on its $1.1 billion in sales in Australia in the year to November 30, 2024, accounts lodged with the Australian Securities and Investments Commission show. Johnson & Johnson paid $27 million in local taxes on sales of $1.46 billion for the year ended December 31, 2024, while weight loss drug company Eli Lilly recorded sales of $462 million and income tax payments of $5.2 million for the same period. Collectively, multinational drug companies booked $5 billion in Australian revenue last year, but the weak profit margins meant they only paid around 2¢ in the dollar in tax. While there is no suggestion that the companies are doing anything unlawful or not complying with their tax obligations, the amount of tax they pay in Australia could come under scrutiny because of their criticism of the PBS, which has been linked to Trump’s trade tariffs and the amount they receive for drugs sold in Australia. Australia says it’s not budging on the PBS.
And Ansett Australia, formerly operated by Air New Zealand, which collapsed into administration nearly 24 years ago and at its height was the country’s second-biggest airline has made a surprise triumphant return to the travel industry as an AI-operated travel agent known as The Ansett Travel Platform. Melbourne tech entrepreneur Constantine Frantzekos is the brains behind the new Ansett. He said he spotted a “quiet opportunity” when he noticed the once-famous Ansett trademark had lapsed. “I registered the trademark, created a fleet of AI agents….and have now turned Ansett into a one-founder online travel agency,” Frantzekos said on LinkedIn. Frantzekos claims Ansett is the country’s first “truly AI-run travel agency” and said it uses artificial intelligence to shave money off the price of hotels, flights and holiday packages. His new website is already live with advertisements for holiday deals to the likes of Tokyo, Athens, Las Vegas and Bali.
Notorious Melbourne underworld figure Mick Gatto gave more than a dozen Versace gold bracelets to Victorian CFMEU officials he considered his closest allies or to those he wanted onside, including the most powerful branch leaders along with the union’s up-and-comers. Versace chains are favoured among the underworld and retail from between $1000 to several thousand dollars, depending on the design and any extras, such as diamonds. The recipients included former assistant secretary Derek Christopher, who remains the subject of an unrelated police investigation into suspicions he received kickbacks from large building companies in return for favourable treatment, and Joe Myles, the ex-union vice president accused of helping to recruit bikies into the CFMEU. The revelation of Gatto’s gold gifts marks another scandal for a union drowning in scandals and puts Albanese government-appointed CFMEU administrator Mark Irving in an invidious position as some of the gift-takers are still key officials helping rebuild what was once the country’s most powerful union. Rules cover union officials accepting gifts from players in the industrial system to avoid perceptions of conflicts of interest or undue influence. As lead investigator for the administration, Geoffrey Watson, SC, wrote in an interim report late last year that union officials he interviewed “described Mick Gatto as a friend” or a person who “came with the furniture of the job”. Watson found this so concerning because Gatto is not only a gangland figure but at times was engaged in inappropriate and murky roles in union disputes.
And that’s it for this week.
And next week, I’ll be talking to Tim Bhatnagar, co-founder of Paiverse about how his platform ensures that all luxury NFT’s have a provable provenance and are free of fraud. The platform seeks to be the primary destination for luxury brands to market and for consumers to buy and sell their luxury goods via blockchain technology, in a secure and transparent manner.
And I’ll be talking to Rabobank economist Teeuwe Mevissen about how China’s economy is faring in the wake of the tariff war with the US and tensions with the EU.
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.
