For the first time in over a century, Moody’s downgraded the United States’ perfect ‘Aaa’ credit rating.
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 15 in our series for 2025 and today’s date is Friday May 23.
First, I’ll be talking to Iain Salteri who developed the KttiPay app which targets Gen Z and Millennials, acknowledging their daily encounters with group spending. The app, loaded with customizable features, simplifies the process by allowing users to create separate ‘Ktties’ for different purposes. KttiPay issues Visa debit cards directly linked to each Ktti, facilitating seamless payments and expense tracking. Whether for a casual dinner, a weekend getaway, or a celebration. Kttipay enables group members to contribute directly to the app using digital wallets like Apple Pay or Google Pay. A Digital Visa Debit Card for the specific Ktti is then issued for group-related expenses
And I’ll be talking to independent economist Nicholas Gruen about his innovative idea to set up a citizens council to resolve the US-Canada tariff war which could potentially be extended to Australia.
But first, let’s talk to Iain Salteri
So what’s happening in the news?
And that’s it for this week.
So what’s happening in the news.
The US has lost its last perfect credit rating. Why? Because influential ratings firm Moody’s expressed concern over the government’s ability to pay back its debt. In lowering the US rating from ‘AAA’ to ‘Aa1’, Moody’s noted that successive US administrations had failed to reverse ballooning deficits and interest costs. A triple-A rating signifies a country’s highest possible credit reliability, and indicates it is considered to be in very good financial health with a strong capacity to repay its debts. Moody’s warned in 2023 the US triple-A rating was at risk. Fitch Ratings downgraded the US in 2023 and S&P Global Ratings did so in 2011. Moody’s on the other hand, has held a perfect credit rating for the US since 1917. The downgrade “reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns,” Moody’s said in the statement. In a statement, the White House said it was “focused on fixing Biden’s mess”, while taking a swipe at Moody’s. “If Moody’s had any credibility,” White House spokesman Kush Desai said, “they would not have stayed silent as the fiscal disaster of the past four years unfolded.” A lower credit rating means countries are more likely to default on their sovereign debt, and generally face higher borrowing costs. Still, Moody’s maintained that the US “retains exceptional credit strengths such as size, resilience and dynamism and the continued role of the US dollar as the global reserve currency”. But the firm said it expects federal debt to increase to around 134% of gross domestic product (GDP) by 2035, up from 98% last year. GDP is a measure of all the economic activity of companies, governments, and people in a country. The downgrade came on the same day as Trump’s landmark spending bill suffered a setback in Congress. Trump’s so-called “big, beautiful bill” failed to pass the House Budget Committee, with some Republicans voting against it. Figures showed the US economy shrank in the first three months of the year as government spending fell and imports surged due to firms racing to get goods into the country ahead of tariffs. The US Commerce Department said the economy contracted at an annual rate of 0.3%, a sharp downturn after growth of 2.4% in the previous quarter.
Anthony Scaramucci, the Wall Street investor who runs alternative asset manager SkyBridge Capital and manages a New York Stock Exchange-listed cryptocurrency ETF, and who famously served for 11 days as White House press secretary in Donald Trump’s first administration, says the US has no choice but to reduce tariffs on China to below 10%, and is likely to face further credit ratings downgrades as its budget crisis rolls on. Scaramucci said that while China ultimately needed an end to the trade embargo with the US, it was Trump who backed down last week when the US announced it would reduce tariffs on Chinese imports from 145% to 30%. He predicted the Trump administration would end up settling for much lower tariffs. “He’s now down to 30%, and you know that’s going below 10%. It has to, because 30% is a recession here,” Scaramucci said. “There’ll be a massive capitulation over the next 60 to 90 days. They call it TACO over here – Trump Always Chickens Out.” The removal of America’s last AAA credit rating by Moody’s on Friday night was more evidence of how little the market believes in the plan, he said. “I’m surprised [the downgrade] didn’t happen five years ago and in the next five years there will be further downgrades,” Scaramucci said.
Five years after Brexit, the UK and the EU have struck a deal that covers fishing, trade, defence, energy and strengthening ties in a number of policy areas still up for negotiation. A key part of the deal involves giving European fishing boats a further 12 years of access to British waters in exchange for easing some trade frictions. It marks the biggest reboot since the UK officially left the EU in 2020 and comes after years of disagreements over Brexit. The Conservatives and Reform UK have described the deal as a “surrender” to the EU, while the Liberal Democrats said the government had taken some “positive first steps” to rebuilding ties with Europe. The agreement was finalised late on Sunday, ahead of a summit involving EU chiefs Ursula von der Leyen and Antonio Costa in London on Monday. “It’s time to look forward,” British PM Sir Keir Starmer said at the summit. At a news conference, European Commission President von der Leyen described the summit as a “historic moment” that was only possible “thanks to the leadership” of Sir Keir. “We’re turning a page,” she said. “We’re opening a new chapter in our relationship.” The president said the deal would make “a real difference to people in the UK and across our union” at a time of global instability.
The Reserve Bank of Australia has cut interest rates, taking the cash rate below 4% for the first time in two years. The RBA’s official cash rate was last below 4% in May 2023, before it was raised to 4.1% at the June 2023 meeting. At its May meeting, the RBA’s monetary policy board decided to decrease the cash rate by 0.25 of a percentage point, to 3.85%. It is the second cut to rates this year, providing some further relief to home loan borrowers after 13 rate hikes between May 2022 and November 2023, when the cash rate was left on hold until a cut in February this year. Forecasts in the RBA’s latest quarterly Statement on Monetary Policy (SMP) offer good news for borrowers, by suggesting that market pricing for a 3.2% cash rate by early next year is compatible with inflation staying near the middle of its 2-3% target range. After the February board meeting, US President Donald Trump’s “Liberation Day” tariff announcement ignited global trade disputes and rocked financial markets, leading some to forecast even deeper rate cuts, although the ensuing tariff delays saw expectations pared back. In its post-meeting statement, the board acknowledged that inflation has fallen substantially from its peak, while the outlook remains uncertain, also lowered its forecasts for economic growth and inflation. It was forced to admit that household spending would remain softer than expected, both due to domestic factors and the uncertainty caused by Trump. At a press conference following the decision, RBA governor Michele Bullock said the possibility of holding rates steady was quickly cast aside for a debate on how deeply to cut. “If you add the international uncertainty, that gives you a little bit of confidence that … the risks have actually balanced up a bit,” she said..
Nationals frontbenchers will have their pay cut by almost $60,000 as part of the price for going it alone after the junior party refused to renew the Coalition agreement with the Liberals. The split means no Nationals will be included on the official opposition’s 30-member frontbench. Nationals frontbenchers will also have to shed advisers whom they would otherwise have been entitled to under the opposition’s staffing allowance. The Nationals will appoint their own portfolio spokespeople to speak on issues and develop policies. These will include major portfolios such as Treasury, finance and foreign affairs, which have traditionally been held by Liberals in government and opposition. Nationals Senate leader Bridget McKenzie indicated the newly liberated members could join with other minor parties, including the Greens, on issues that mattered to regional communities. Liberal leader Sussan Ley said the Liberals would appoint a new shadow ministry, “drawn exclusively from the Liberal Party party room” in coming days – and gave no guarantee that Nationals will be welcome back onto the frontbench this side of the next election. Under Remuneration Tribunal guidelines, shadow ministers are entitled to an extra 20 to 25% loading on top of a parliamentarian’s base salary of $233,660. The 25% loading is worth $58,415 for someone serving in the shadow cabinet. Those in the outer shadow ministry receive the 20% loading, worth $46,732.
The Albanese government says it won’t allow Donald Trump’s “war on wokeness” to undermine its diversity and inclusion agenda, including at the agency charged with securing at least three Virginia-class submarines from the US. Finance and Public Service Minister Katy Gallagher has backed the Australian Submarine Agency’s diversity policy, amid concerns the Trump administration could take issue with its mandating of diversity “champions” and training, and regular diversity and inclusion activities. The US President banished “radical and wasteful” diversity, equity and inclusion programs from US government agencies and their major contractors in his first days back in office. With his controversial Defence Secretary Pete Hegseth expected to visit Australia for AUSMIN talks in coming months, some analysts believe the administration’s anti-DEI crusade could become a further point of bilateral tension on top of differences over tariffs and the behaviour of big tech companies. The concerns emerged as Australian universities reeled at the loss of US grants after refusing to align with Mr Trump’s political agenda, including his anti-transgender executive order recognising only two sexes. US defence giants with Australian subsidiaries, including Lockheed Martin, Raytheon and Boeing, have already axed their DEI policies at home and are waiting to see if they will be required to do so in their international operations, which could place them in conflict with Australian government policies. The ASA’s diversity and inclusion policy requires the appointment of senior leaders as “diversity champions focused on the culturally and linguistically diverse (CALD); lesbian, gay, bisexual, transgender, queer, intersex, and asexual (LGBTQIA+); neurodiversity; First Nations; disability and mental health; and women and gender”. It commits the agency to “a range of diversity and inclusion activities”, including a “trans and gender diverse introduction webinar”, R U OK? Day morning teas, and virtual and in-person events for International Women’s Day. The ASA is a member of the Diversity Council of Australia and the Pride in Diversity employer support group, and uses their tools and services to guide best practice initiatives, the policy says. The Defence Department’s diversity policy is even more prescriptive, requiring enterprise-wide “culture statements setting clear expectations of behaviour”, and the completion of a range of online courses on subjects such as “unconscious bias and cultural awareness”. Senator Gallagher, who is also Minister for Women, said Labor’s election win over Peter Dutton’s Coalition, which took some inspiration from Mr Trump and his policies, underscored the community’s support for ensuring a diverse and inclusive public service. “The Australian Public Service operates best when it reflects the community it exists to serve,” she said. “The Australian people voted at this election to comprehensively reject a Coalition platform that was built on the politics of division and imported policies from overseas. Labor will continue to govern in the interests of all Australians.” The ASA, with is forecast to expand its workforce to more than 880 this year, is leading Australia’s negotiations with the US government to purchase three to five Virginia-class submarines under the $368bn AUKUS plan.
Qantas is asking for leniency from the Federal Court in hearings to determine a penalty for its unlawful outsourcing of 1820 workers, claiming the decision was a “mistake” rather than deliberate. On the other side of the fence, the Transport Workers Union which brought the case against Qantas, wants Justice Michael Lee to impose the maximum penalty of $121m against the airline, highlighting its reluctance to accept the ruling and lack of remorse. Barrister for the TWU Noel Hutley SC said even the witness used by Qantas, chief people officer Catherine Walsh, demonstrated the company’s culture remained unchanged. Ms Walsh was only appointed to Qantas in early 2024, and Mr Hutley said putting her on the stand “had the look of choosing a person who could not be the subject of true investigation”. “Ms Walsh had nothing to do with the events (of the outsourcing) and Your Honour will have noticed every time I cross-examined her about a particular event she said ‘well I wasn’t there, I can’t speak to that’,” said Mr Hutley. Justice Lee agreed that Ms Walsh was not the best choice of witness for Qantas in the circumstances and noted he’d given the airline ample opportunity to call chief executive Vanessa Hudson, who was chief financial officer at the time of the outsourcing. “One would have thought if you were truly contrite, put someone in the witness box who was there at the relevant time who said ‘I was part of the organisation when this decision was made, and I now change my tune’,” said Justice Lee. “And I gave them every opportunity to call (CEO) Ms Hudson or somebody else in that situation and a deliberate forensic decision was made for her not to be called I would infer.” Barrister for Qantas Justin Gleeson SC told the court the airline was seeking a “mid-range penalty” of no less than $40m and no more than $80m. He said the court “can and should impose a significant deterrent penalty” but pointed out it was a first contravention, and no further contraventions had occurred since then. His submission focused heavily on legal advice prepared in advance of the outsourcing decision which showed there was no attempt to conceal an “illicit reason”.
And that’s it for this week.
And next week, I’ll be talking to Nexia’s Head of Financial Planning, Craig Wilford about how in the next 20 years, $4 trillion will be transferred from baby boomers to their children and grandchildren as inheritance and how Australians who are now reliant on their compulsory super savings need to ensure they can extend their savings for the duration of their retirement.
And I’ll be talking to Independent economist Saul Eslake about the Albanese economic agenda in this term and what policies it should be taking to the 2028 election.
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.
