The RBA has held the cash rate steady at 3.6%.
Traders now expect the RBA will leave the cash rate on hold until its February 2-3 board meeting.
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 https://www.businessacumen.biz/
I am Leon Gettler. My job is review and monitor the week’s news in business finance and economics. I bring it all to you every week.
For the most exclusive access to leading economists and business leaders from around the world, subscribe to Talking Business from my website leongettler.com or whatever your favourite podcast platform is.
This is episode number 34 in our series for 2025 and today’s date is Friday October 3.
First, I’ll be talking to Dr Tim Currie, the CEO of NOVA, which provides onshore and nearshore IT services. We’ll be talking about why Gen Z are turning away from remote work, how business leaders need to think carefully about workplace design when setting up remote workplaces and become influencers there, and work out exactly how return to work regimes can operate.
And I’ll be talking to RMIT economist Sinclair Davidson on why universities don’t and shouldn’t work as businesses.
But first, let’s talk to Dr Currie.
So what’s happening in the news?
US President Donald Trump has announced he will impose a 100% tariff on all foreign-made movies. Yes, it’s an unprecedented move that threatens Hollywood’s global business model. It also raises uncertainty for studios that depend heavily on international box-office revenue and cross-border co-productions. Mr Trump announced the measure in a post on his Truth Social platform, claiming US movie-making was losing ground to international competition. “Our movie making business has been stolen from the United States of America, by other Countries, just like stealing candy from a baby,” he wrote. However, it was not immediately clear what legal authority Mr Trump would use to impose a 100% tariff on foreign-made films. Studio executives say they’re “flummoxed” by how a movie tariff might be enforced, given that modern films often use production, financing, post-production and visual effects spread across multiple countries. Examples include Mad Max, The Gray Man, Body of Lies, Rush. Red Notice, Casino Royale, Diamonds Are Forever and The Bourne Identity. The move has drawn scepticism from legal and trade analysts. Some argue films are a form of intellectual property and part of the global trade in services, an area where the US often runs a surplus, raising questions about the legal basis for tariffs. Co-productions with foreign studios have also become more common, adding to doubts about how such films would be classified.
The Reserve Bank of Australia board has warned inflation is on track to exceed its forecasts. So it’s left the cash rate on hold at 3.6%. Announcing the unanimous decision on Tuesday, the board said in a statement that the decline in underlying inflation had slowed since its August meeting. In other words, it’s higher than expected. No surprises then that everyone expected the RBA board to leave the cash rate on hold at 3.6% at Tuesday’s meeting, following the release of hotter-than-expected monthly inflation data last week. Those figures showed a pick-up in price pressures across the services sector. The result: some economists have concluded that the central bank might not cut the cash rate again until next year. Bond markets view the prospect of a rate cut at the RBA’s November 3-4 meeting as no more than a coin toss. Traders now expect the RBA will leave the cash rate on hold until its February 2-3 board meeting. At her regular post-meeting press conference, RBA governor Michel Bullock said you’d want to get it right. She said she could envision rates being on hold for the foreseeable future, and where they need to be cut again. So what does that mean? “What we’re focusing on is an interest rate path that will deliver us inflation sustainably in the band,” she said, batting away repeated attempts to pin her down. “That could mean a couple more reductions. It might not. I don’t know at this point, and we’ll look at all this again in November.” Go figure!
Will Australia and the European Union strike a landmark trade deal? Maybe. Europe’s trade chief is heading to Canberra for talks this month with senior government officials to try to seal a pact that Labor is pitching as an antidote to Donald Trump’s tariff spree. There is renewed optimism about the free trade negotiations after Prime Minister Anthony Albanese used last week’s United Nations General Assembly in New York to lobby French President Emmanuel Macron and other European leaders over the trade deal after France and Ireland objected to market access for Australian beef and lamb. During a meeting with Spanish Prime Minister Pedro Sánchez in London on Friday, Albanese appeared confident a European free trade deal worth $156 billion was in sight, telling him he felt “really hopeful” about the pact and that negotiations were progressing “quite well”. Trade Minister Don Farrell met EU Trade Commissioner Maros Sefcovic in Kuala Lumpur last week and invited him to Australia for meetings in late October, marking the first negotiations on Australian shores.
Prime Minister Anthony Albanese has invited Indian owned Abu Dhabi ‘hypermarket’ chain LuLu, carrying Australian items like Vegemite, meat, fruit and vegetables selling cheaper there than what you’d pay in Australia, to come here and challenge Coles and Woolworths. Mr Albanese confirmed the invitation to LuLu Hypermarket chairman Yusuff Ali while on a pit stop through the United Arab Emirates, as a free trade agreement with the Middle Eastern nation takes force. “One of the great things about the LuLu Group chairman’s company, there are 300 supermarkets just like this one, I have encouraged him to come to Australia as well,” Mr Albanese said. “We need more competition in the Australian supermarket sector, and we have had a little discussion about that.” LuLu Hypermarket is one of the largest retail chains in the Middle East across the Gulf states and elsewhere. “This company is big enough to have direct relations with [Australian] producers, whether they be mango producers, the orange producers, the meat producers that the chairman met in Mudgee that are still providing Halal-certified meat into this market,” Mr Albanese said. The prime minister said the free trade agreement would remove tariffs on nearly all Australian exports to the UAE, as well as increased investment from the oil-rich nation’s massive sovereign wealth funds into Australia. The supermarket sector faced intense scrutiny through the previous term of government as product price increases compounded with other cost of living pressures. The consumer watchdog has found Australia’s supermarkets are more profitable than their global peers and the two majors don’t need to compete “vigorously”, but the ACCC stopped short of declaring grocery prices excessive. Critics argued the sector was too concentrated in the hands of just two players, Coles and Woolworths, which was leading to a lack of competition and distorted prices.
Singtel chief executive Yuen Kuan Moon and Optus chief Stephen Rue have blamed Optus staff for Triple Zero outages that have been linked to three deaths. Federal Communications Minister Anika Wells this week confronted the Singtel and Optus bosses at the federal government’s offices in Sydney to say the outages were “unacceptable”. She made it clear she could trust the two Optus guys as far as she could throw them. In other words, not at all. She said Optus must appoint an independent, external adviser to oversee its business. Yuen fronted the media on Tuesday for the first time since the telco group’s two outages over the past 11 days to say Optus was investigating the cause of the most recent outage in NSW on Sunday. He couldn’t explain exactly why it happened. But he knew who to blame. A previous outage of Optus’ Triple Zero networks in four states on September 18, he said. was “due to a step that was missed by someone at Optus, a process issue, a people issue that didn’t follow the proper steps” Yuen also told the media that Sunday’s outage was “a different issue”. But asked about the meeting with the minister, Optus chairman John Arthur said he couldn’t explain exactly what Wells meant by “external accountability”. He denied lack of investment resulted in the failures, laying the blame instead on Optus staff.
Liberal Party women are warning that party will alienate more women and young people if it abandons net zero. The party is publicly fracturing over its energy policy with Andrew Hastie threatening to quit the frontbench if the Coalition embraces net zero. As a result, three high-profile current and former senior Liberal women have warned going backwards on climate action will only hurt the party more with key demographics. Maria Kovacic, recently promoted to Sussan Ley’s shadow ministry, said women and young people had already abandoned the party at the last election. “[Abandoning net zero] is unpopular with women and it’s unpopular with young people and I don’t think that’s news to anyone,” she said. “It’s why people walked away from us in metropolitan areas. We can pretend that other things are afoot but that was the reality.” Jane Hume, who was relegated from frontbench by Ley, has become one of the most outspoken advocates for net zero, and the push to bring more women into the party. The former shadow finance minister said the party should not be focusing on the seats it now holds, but the 33 seats it needs to win back. “The electorate has told us time and time again at elections, and even in the most recent Newspoll, that they care about climate and want to see action,” she said. “We need to actually show those Australians that not only have we heard the message, but that we agree with it.” The former cabinet minister Karen Andrews also called on the party to take climate action seriously, if it wants more women to join its ranks. “If they [Liberal party] want to regain government, they are going to have to take seriously the issues that women and young people, but particularly women, are concerned about,” she said. “One of those issues that is front of mind for so many women is climate change.”
A surge in income and company taxes has pushed federal government revenue to its biggest share of the economy in almost a quarter of a century. The final budget outcome for 2024-25 showed the government collected $717 billion in revenue last financial year. That’s $13 billion more than was forecast at the pre-election economic and fiscal outlook in April. Treasury is reaping a multi-year revenue windfall with overall tax and non-tax revenue rising to 25.9% of gross domestic product, much more than Treasury’s forecast of 25.3% and the highest since 2000-01 when the GST was introduced. Tax collections unexpectedly held steady at 23.7% of GDP last financial year despite the stage three tax cuts coming into effect and underscoring the strength of the ongoing income and company tax windfall. The extra cash drove a $17 billion improvement in the budget bottom line compared to April, with the federal government recording a narrower-than-expected underlying deficit of $10 billion. The underlying deficit figure does not include the $11.8 billion in so-called “off-budget spending” last year in areas such as the Snowy Hydro project and loss-making assets like the national broadband network and the Whyalla Steelworks. Including the off-budget spending the government’s headline deficit was $21.8 billion, also better than forecast. Higher-than-expected commodity prices delivered an extra $5.3 billion in company taxes compared to Treasury’s forecast, while the strong jobs market saw income tax collections beat expectations by $3.4 billion. Strong investment earnings helped the government collect an extra $2.9 billion in taxes from superannuation funds.
Treasury has forecast that real government spending is on track to rise 6% in 2024-25 – far higher than the 3.4% average rate recorded in the two decades before the pandemic. Treasury predicts that spending as a share of GDP will rise to 27% in 2025-26. Outside the pandemic, that would be the highest level of spending since 1985-86. Treasury expects gross debt, which stands at $960 billion, to surpass $1 trillion sometime this financial year. This month, the Parliamentary Budget Office warned that the budget would remain in deficit for the next decade, and return to balance in 2035-36, solely as a result of bracket creep causing workers to pay rising rates of income tax. On the spending side of the budget, the PBO report highlighted persistent long-term structural pressures from the $52 billion National Disability Insurance scheme, rising health costs, pressures to increase defence spending, government debt interest and measures to tackle climate change.
Treasurer Jim Chalmers says the government is in no rush to roll out a road user charging system amid concerns the tax could discourage consumers from buying electric vehicles, as major car brands scale back their EV investment due to slow consumer uptake. The Climate Change Authority has said more than 50% of all new cars sold in the next decade must be EVs if the Albanese government is to reach its goal of reducing carbon emissions by 62 to 70% on 2005 levels by 2035. The federal government is working with the states on a road user charge strategy as it seeks to replace the revenue from fuel excise that will be lost in the transition to EVs. Chalmers said on Monday that a key consideration was ensuring any road user charge did not deter the uptake of EVs. “We want to see more and more people take up the opportunity of an electric vehicle,” he said. “In most of the discussions we have publicly and privately and with the states and with others, we’re very conscious of finding the right balance, getting the sequence right, so that we can continue to encourage people into an EV with the tax cuts that we are providing. “But we’ll also be conscious that, as we implement over time, and we’re in no rush. Chalmers’ comments were a significant change in tone from the Productivity Roundtable in August where the idea of a road user tax for EVs was discussed and received broad support. Unable to compete with Chinese EVs on performance and price, some of Australia’s top car brands are scaling back their EV investment, citing slow consumer uptake. Tony Weber, chief executive of the Federal Chamber of Automotive Industries, said he was criticised for being conservative when he predicted in early 2024 that EV penetration would be at only 14% by 2025. Yet it is only at 8% now. “It is clear that expectations from governments for rapid EV uptake have not been met in many markets,” Weber said. “The car industry is spending billions of dollars in research and development and then changing their factories supplying high-quality EVs to the market, but people aren’t buying them in the numbers that governments, and to be quite frank, the industry was anticipating.” Last week, Bloomberg revealed Volkswagen, Australia’s 10th most popular traditional car manufacturer, was temporarily shutting down two of its German factories due to lower-than-expected demand for EVs. Locally, major car brands such as Subaru and Mitsubishi, while committed to electrification, are keen to emphasise that in 2035 they aim to provide consumers with options that will include petrol and diesel engines. “Here in Australia, Subaru will continue to offer customers a diverse range of powertrain options, from internal combustion through to hybrid and fully electric, to meet different needs and driving preferences,” Subaru said. Only Hyundai Group, which also includes Kia and Genesis, would commit to an EV sales target which aligned with the federal government’s vision. Hyundai expects 95% of its vehicles sold in Australia in 2034 to be electrified. These include fully electric vehicles and hybrid alternatives. Automotive industry expert and former chief executive of the Motor Trades Association of Australia, Matthew Hobbs, said international fluctuations were significant because the Australian market was too small to encourage carmakers to tailor vehicles specifically for local regulations.
Seven West Media has announced it will merge with Southern Cross Media. This deal will have major implications for the Australian media sector, bringing radio networks Triple M and Hit together with the Seven Network. It merges two of Australia’s biggest media companies at a time when traditional media is under pressure from global tech giants and streaming services. The move will see Kerry Stokes step down as the chairman of Seven West Media, which owns the Channel 7 TV network and the state’s daily newspaper, The West Australian. Mr Stokes would chair the board of the combined group until February 2026 when he will hand the reins to Heith Mackay-Cruise, the current chair of Southern Cross Radio. Jeff Howard, who is the current managing director and chief executive of Seven West Media, will take the helm as chief executive. The deal would require regulatory approval and also approval from Seven West shareholders.
And that’s it for this week. And next week, I’ll be talking Suhini Wijayasinghe, Head of HR Solutions at recruitment firm people2people about the impact of AI on hiring and workplace solutions.
And I’ll be talking to Indeed economist Callam Pickering about the latest jobs figures.
For the most exclusive access to leading economists and business leaders from around the world, subscribe to Talking Business from my website leongettler.com or whatever your favourite podcast platform is.
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Looking forward to the next episode of Talking Business next week
