It is probably the most begrudging interest rate cut of modern times. The Reserve Bank of Australia’s board cut the cash rate by 0.25 percentage points and the Governor Michele Bullock was at pains to say there isn’t another rate cut in the offing. It sounded very much like the central bank would have been quite happy to stay on hold. But there was enough evidence in recent months – notably a sharp fall in inflation – to force the bank to lower the cash rate. Ahead of Tuesday’s 2:30pm announcement, the clamour had grown so loud that it was almost impossible for the RBA to not cut rates. Ms Bullock was at pains to say the shift reversed the single rate hike in late 2023, which was done to offset some inflation risks. The RBA is unwinding that decision, but monetary policy is still restrictive - it is still dampening economic growth and that’s what the Reserve Bank board wants it to do. That’s because wages growth is still significant. Inflation in some services remains too high, and it isn’t clear that the pace of growth in housing costs has sustainably come off the boil. If inflation starts to pick up, then not only will rates be on hold, but there will also be talk of higher interest rates. As I said, it is probably the most begrudging rate cut of recent times.
2. Has the RBA mucked up its communications strategy?
The fact that the Reserve Bank had little option but to cut rates this week means the central bank’s messaging hasn’t been that crash hot. Everyone from politicians, unions, business leaders and community groups through to everyday Australians had called for it, and within 15 minutes of the 2:30 announcement, lenders were advertising their new lower rates on radio stations across the country. The central bank doesn’t like surprising financial markets, but this week’s decision was too well telegraphed. By the time the board sat down, it had little option. Since last year, Governor Michele Bullock has been fronting press conferences and has done a good job. But every word she utters is interpreted and used as reasoning for a shift in rates. The Governor, and the central bank, had fewer options because of the transparency. But that isn’t necessarily a good thing. The economy is a moving beast, and things change quickly, be that inflation, the employment market or the latest pronouncement from President Donald Trump. The RBA still needs to work out how to give a message and keep its options open.
3. The future is copper & things we learnt from reporting season
Halfway through reporting season and it's clear companies with high quality results - Commonwealth Bank and JB HiFi, even BHP - have gotten the best reaction. Some quick takeouts at the halfway point. BHP's future is in copper and potash, not iron ore. Australia's future needs to be in commodities used in electrification, not steelmaking. There are smaller, niche companies doing very, very well. HUB24, the wealth management platform is a great example. Its technology is easier to use and more adaptable than its competitors. But finding these gems is difficult with many more mid-size companies like Challenger, Aurizon and IAG disappointing. There's good news for REITs. According to Dexus, there is life in the office market. The shift away from work-from-home is real, and that's helping the long-beleaguered sector. And the Donald Trump era continues to cause havoc in terms of the outlook for companies. CEO after CEO has had to admit they just don't know what the future holds.
4. In management, trust is key
Continuing our leadership theme in the weekly newsletter, today's message is on trust. Fear & Greed's Adam Lang recently listened to two experts highlight the importance of trust. Adam Grant is an organisational psychologist, bestselling author, and host of ReThinking, and he is known for applying behavioural science to leadership, work, and decision-making. Rachel Botsman is a leading authority on trust, lecturer at Oxford, TED speaker, and author of How to Trust and Be Trusted. These are Adam's take-outs:
The key to trust is not transparency. It is integrity and reliability.
There is nothing more important than following through on your commitments and making it clear that people can count on you when it counts most.
Trust enables teams to navigate uncertainty and take risks. Leaders who build trust foster openness, psychological safety, and the ability to challenge ideas without fear—essential for innovation and high performance.
Being an energiser in chief is important. Demonstrating trust through consistent integrity and reliability is even more so.
BEST OF THE WEEK
IF YOU MISSED THIS GUEST, CATCH-UP NOW
Everything you need to know about interest rates, inflation, and why we may still see another rate cut in May - and all in just ten minutes. Gareth Aird, Commonwealth Bank's Head of Australian Economics, is one of the best communicators around, with a great theory about what happened behind the closed doors of the RBA board meeting this week.
"There are winners and losers from an interest rate cut. I get that anyone with a home loan would benefit from a reduction. But who actually loses?"
AND ONE LAST THING...
The world's skies are getting crowded - and it's raising concerns about safety. The number of passenger planes in the sky is tipped to increase by a third to 36,000 by 2034. And they won't be alone up there - consultancy Bain says by that time, there'll be 10,000 electric air taxis also cruising around.
It sounds like science fiction, but in December US company Joby conducted FAA testing on its electric Vertical Take Off / Landing aircraft (eVTOL - but let's just call them air taxis). Sure, the cabin looks a little cosy... but this is seriously cool.
