It's Thursday the 16^th of October, 2025. The Australian economy’s speed limit has fallen to about two per cent per year, reflecting slowing productivity. And wages can only grow at 3.2 per cent annually, without pushing up inflation. The estimates from Reserve Bank chief economist Sarah Hunter yesterday came in a speech in which she also said inflation could be higher than first thought, which is a blow to hopes of further rate cuts. Hunter said productivity growth is the determinant of sustainable real wages growth, because it allows wages to increase without resulting in inflationary pressure.

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News in brief

Australia has less than one month’s worth of jet fuel, petrol and diesel in storage, and is the only country failing to meet its international treaty obligations to have enough oil in case of a global emergency.

Gold has hit yet another record, boosted by an escalation in US-China friction and bets that the Federal Reserve will cut interest rates twice more this year. Bullion rose to a fresh peak of $US4185 an ounce yesterday. Spot silver also rose to another all-time high above $53.54 an ounce, before tumbling sharply amid signs a historic squeeze is starting to ease.

Commonwealth Bank boss Matt Comyn is set to stay in the job until 2029, which would make him one of the longest serving bank CEOs. If the lender’s share price keeps rising, it would make him one of the most successful as well.

More than one million American Express cardholders in Australia may be at risk of privacy breaches, fraud and identity theft due to systemic failures in the company’s security controls, according to a report in Nine newspapers.

Donald Trump is overseeing a renewable energy boom, despite doing everything he can to rollback clean energy tax credits and throw up roadblocks to renewable energy projects. That is because companies are racing to install solar panels, wind turbines and batteries the size of shipping containers before federal tax credits expire or become harder to claim.

Fear-o-meter

Will AI solve Australia’s (lack of) productivity dilemma? According to the Reserve Bank’s chief economist, Sarah Hunter, no. Or at least not any time soon.

Productivity allows an economy to grow without inflationary pressures. Australia’s long term growth rate is about 2.5 per cent, but a lack of productivity over the past two decades, due to low business investment, the slow integration of new technology and the growth in the non-market sector, means the country can no longer grow at a more than two per cent pace without triggering price pressures.

Theoretically AI should boost productivity. It should allow us to do more with less, or produce more output with the same amount of inputs.

But it will take time for AI to emerge and disrupt, Hunter said. It could well take several years. As a result, the RBA is forecasting productivity of just 0.7pc a year in the near term.

That means productivity is doing little to prevent inflation. It’s why interest rates on mortgages aren’t going back to where they were a couple of years ago, and whatever is being paid on mortgages today, is close to the new norm.

Fear & Greed Q+A today

On how investors might look at the banking sector in Australia, including his take on ANZ CEO Nuno Matos' major strategy shift announced this week:

 

"It's refreshing that Nuno has had the courage to come to Australia and set absolute targets. It's been pretty standard practice in the UK and Europe. ROE, cost to income, it's served the British banks well coming out of the GFC. It's good to see it here. He's clearly done his homework and he's employed a strong cadre of executives to join him on this journey. 

It still has that global footprint, in its institutional franchise, where it has a unique franchise in an Australian context, providing payment remittance services and institutional wholesale banking services around the world for its customers. Obviously, its retail and commercial business is now Australia only focused. They did have a foray into Asia and it's probably been left behind from a focus perspective in New Zealand. They've got the leading franchise. Think of Commonwealth Bank here - that's ANZ in New Zealand."

Greed-o-meter

Each Australian was worth an average €383,720 ($686,410) in 2024, making us the world’s third-wealthiest population, according to Allianz’ Global Wealth 2025 report in the Australian Financial Review. Property plays a major part in our wealth, and recent increases in house prices may explain why Australia has jumped up the rankings.

Source: Allianz, as reported in the AFR

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