The Invisible Hand

We have some big news, and congratulations are definitely in order for Domenique, who is expecting her first child. She’ll be taking a little step back from the podcast for a while, but will be back later in the year. Today’s show is about the RBA’s February rate hike, shifting global trade dynamics, and the growing debate over affordability. We kick off with What’s in the News focusing on the Reserve Bank of Australia’s February decision to lift the cash rate by 25 basis points to 3.85 percent. We unpack the inflation backdrop behind the move, what it means for mortgage holders versus savers, and why Australia now finds itself moving differently from much of the global central bank pack. We also talk through the announcement of Kevin Warsh as the incoming Federal Reserve Chair and the ripple effects that quickly moved across markets. That naturally leads into gold, which saw a remarkable surge in January before pulling back. Taken together, these developments highlight the ongoing tension between inflation pressures and relatively soft economic growth.The Hand then looks outward. The discussion explores how India and the European Union are deepening trade ties amid ongoing US tariff uncertainty, and why India’s economic trajectory is becoming harder for countries like Australia to ignore. Canada’s carefully managed thaw with China also enters the frame, offering another example of nations quietly adjusting their economic relationships without making dramatic breaks.In The Invisible, we discuss affordability, a word that’s everywhere in political messaging, but far more complex in practice. Is this truly a crisis, or are perception and macroeconomic data telling slightly different stories? Housing, electricity, wages, and consumer psychology all play a role as the episode closes on the structural forces shaping how people actually experience the economy.Episode Highlights: [04:22] The discussion opens with the Reserve Bank of Australia’s February decision to raise the cash rate by 25 basis points to 3.85 percent, the first increase since November 2023.[05:05] Inflation’s pickup through the second half of 2025 is identified as the central driver behind the RBA’s move.[06:00] Paul notes that while rate hikes are painful for mortgage holders, controlling inflation remains the RBA’s primary mandate.[07:10] Australia’s policy divergence from the US and Europe introduces uncertainty around exchange rates and global alignment.[08:20] Exchange rate volatility emerges as a key risk when central banks are no longer moving in lockstep.[09:05] The tension between rising interest rates and relatively soft Australian GDP growth comes into focus.[10:50] Government spending’s contribution to growth and its potential inflationary side effects becomes a central theme.[12:10] A surprise surge in household consumption during Q4 is highlighted as an important inflation pressure.[13:40] Export strength in iron ore, coal, gas, and gold is credited with supporting Australia’s recent growth.[15:10] State-level divergence sharpens, with Victoria struggling while WA and Queensland show strong demand.[18:10] China’s extraordinary expansion in electricity production is contrasted with the US’s relatively flat output since 2010.[19:45] The scale of China’s state-backed investment strategy is framed as a long-term positioning advantage.[22:29] Kevin Walsh’s nomination to replace Jerome Powell as Fed Chair sparks discussion on market reactions and policy expectations.[24:10] Gold’s surge above $5,000 per ounce and subsequent volatility reflect heightened global uncertainty.[26:20] India’s deepening economic engagement with the European Union is presented as a logical strategic pivot.[31:10] Paul emphasizes India as a major long-term opportunity for Australia’s export diversification.[34:20] Canada’s measured thaw with China is interpreted largely as geopolitical signaling rather than macroeconomic shift.[37:24] The conversation transitions to affordability, examining the gap between political rhetoric and economic data.[39:50] Inflation moderation in the US is contrasted with persistent consumer frustration over housing and utilities.[42:45] Electricity costs are identified as a structural pressure point driven by supply constraints and grid investment needs.[45:16] Housing affordability challenges are tied back to supply shortages rather than short-term policy fixes.[46:56] Structural problems are framed as slow-moving realities that resist quick political solutions.[48:00] Listener feedback on economic models and policy perspectives is acknowledged as a valued part of the show.[48:53] Best of luck for Dominique’s next chapter and stay curious!Resources & Links Related to this EpisodeThe Invisible Hand PodcastThe Reserve Bank of Australia (RBA)RBA Cash Rate Decision – February 2026Reserve Bank of Australia – Chart PackAustralian Bureau of Statistics – Inflation DataFederal Reserve – Monetary PolicyWorld Gold Council – Gold Market DataEuropean Commission – EU-India Trade RelationsGovernment of Canada – Trade Policy

Inflation has turned upward again, and this month’s news brings a shift that economists and households alike will feel. In What’s in the News, we start with the first official monthly CPI release from the ABS, which shows headline inflation rising to 3.8 percent. We walk through what’s driving the move including housing costs, food prices, and the sharp jump in electricity bills. We also look at why the RBA is expected to hold rates despite the reversal in trend.In The Hand, the conversation shifts to the real pressure point behind the scenes: structurally higher energy costs that rebates have been masking for more than a year. We examine how years of policy instability have stalled long-term investment in baseload generation, why emerging technologies like hydrogen remain far from cost-effective, and how the rollback of subsidies is exposing the true cost of the system Australians rely on every day.Then in The Invisible, we turn to the widening housing shortfall, where record population growth is colliding with weak construction activity. Domenique outlines the gap between migration and dwelling supply, and Paul breaks down why the Housing Australia Future Fund has fallen dramatically behind its targets. Together, we connect these trends to the structural forces shaping inflation, affordability, and opportunity across the economy.Episode Highlights: [00:06] We open with a look at the first official monthly CPI print released by the ABS.[01:01] Listener encounters at a securitisation conference spark a conversation about academic roots and shared backgrounds.[02:09] Interest grows around the idea of a live event as the two of us gauge audience enthusiasm.[03:36] The What’s in the News segment begins with a deep dive into the October CPI reading, which shows inflation rising to 3.8 percent.[04:20] Discussion turns to why Australia shifted from quarterly to monthly CPI reporting and how the ABS constructs the new series.[06:36] Key inflation drivers include housing, electricity, and food come into focus as we unpack the pressures behind the latest numbers.[08:16] The conversation revisits the RBA’s rapid tightening cycle, from the 0.1 percent cash rate to the 4.35 percent peak.[10:09] Temporary electricity rebates are examined for how they distorted inflation on the way down and again on the way up.[11:09] Rising food and beverage costs are added to the broader cost-of-living picture.[12:44] Record government expenditure, now sitting at 26.5 percent of GDP, is identified as the largest underlying driver of inflation.[14:15] Health, defence, and the NDIS emerge as the categories fueling sustained fiscal pressure across government budgets.[16:30] Connections are drawn between government spending, tax receipts, and Australia’s dependence on resource exports.[18:40] The question of an RBA hold or hike prompts a discussion shaped by timing, data trends, and the approaching holiday period.[19:23] This month’s CPI print is framed as a turning point that signals a new phase in the economic cycle.[21:31] The Hand segment begins with an exploration of energy bill rebates and the sharp increases appearing as those supports roll off.[23:22] The political timing of the rebates is questioned, along with the broader economic logic behind them.[25:46] A recent visit to a hydrogen facility highlights the steep technological and financial challenges of emerging energy solutions.[27:35] Long-term energy planning hurdles are traced back to more than 15 years of policy instability and shifting priorities.[28:59] The realities of baseload replacement are discussed, noting why renewables still struggle to compete with ageing coal assets on cost.[30:35] Government trade-offs come into focus as electricity costs, health spending, defence needs, and tax policy collide.[32:13] The Invisible segment begins by contrasting record migration levels with Australia’s slow construction output.[34:16] The scale of the housing shortage becomes clear through vacancy rates, construction gaps, and CBRE’s projected 75,000-unit apartment deficit.[35:00] Attention turns to the Housing Australia Future Fund and its promise to deliver 55,000 homes for $10 billion.[37:19] Reality falls far short of the target, with just over 4,000 dwellings counted so far and fewer than 400 actually built.[38:41] Dwelling costs under the program are unpacked, showing average figures between $800,000 and more than $1 million per home.[40:15] Migration trends, construction slowdowns, and rising costs are connected to Australia’s widening housing imbalance.[40:44] Structural challenges in energy, housing, and inflation are reframed as areas of opportunity for households and businesses able to adapt.[42:51] The episode wraps with a preview of next month’s annual Predictions episode and a look at the political and economic forces ahead.Resources & Links Related to this EpisodeThe Invisible Hand PodcastThe Reserve Bank of Australia (RBA)Australian Bureau of Statistics – Monthly CPI IndicatorHousing Australia Future FundCBRE – Residential Market Reports

Australia’s economy is growing, but the gains aren’t keeping pace with the past. Domenique and Paul open with a sharp focus on stalled productivity growth and why it matters. Along with how it shapes living standards, and why it feels like today’s prosperity is being borrowed from tomorrow. From there, what’s in the news takes over. We discuss housing prices climbing for the sixth straight month with Darwin leading the charge, commodities bouncing around on tariff headlines, solar panels and home batteries taking off as energy bills keep rising, and Trump’s tariffs ruled illegal by a federal appeals court but still hanging in limbo until the Supreme Court decides.With the headlines as backdrop, they turn to the hand that’s steering the bigger story: Australia’s productivity puzzle. Despite decades of growth, productivity has flatlined, and in some years even gone backwards. Domenique and Paul dig into why including slow adoption of new technology, a heavy reliance on mining, and government spending propping things up instead of real efficiency gains. The result is a gap with other economies that are moving faster, and GDP per capita that’s slipping instead of rising. They call it a kind of “intergenerational theft,” where today’s Australians are coasting on the work of earlier generations rather than building new strength for the future.The conversation closes with the invisible connections between energy and housing. Homeowners are cashing in on rooftop solar and rebates, trimming bills and even selling power back to the grid. Renters are largely left out with less than 10% of rental properties having solar. They’re stuck shouldering higher energy costs with none of the upside. Domenique and Paul go back and forth on whether governments should give landlords stronger incentives to install panels, or whether the real fix is helping more renters become owners in the first place. Either way, it’s a clear example of how ownership, incentives, and policy end up deciding who gets ahead and who falls behind.Episode Highlights: [00:06] Domenique and Paul open with protests, bridge closures, and a surprise story about Nauru’s costly deal with Australia.[03:07] They outline the episode structure: what’s in the news, the hand on productivity, and the invisible link between housing and energy.[03:44] Housing prices continue rising nationally, with Darwin up 2.2% and listings still down 20%.[04:27] Commodity updates: iron ore up 6%, oil down 4.1%, copper whipsawed by U.S. tariffs.[05:18] Rooftop solar now makes up 20% of Australia’s electricity, with battery installations up 62% year on year.[07:04] Trump’s tariffs were ruled illegal by a federal appeals court but left in place pending Supreme Court review.[08:36] The hand turns to Australia’s productivity puzzle, with stalled growth, weak tech adoption, and reliance on mining.[13:32] Discussion of services, government spending, and how low productivity erodes wealth slowly over time.[17:07] Tax reform flagged as the biggest lever to unlock productivity gains, though political will is lacking.[19:40] Productivity explained as growing the pie with efficient sectors like mining, banking, and education.[21:26] The invisible emerges in energy and housing, with one in three households now having rooftop solar.[23:30] Less than 10% of rental properties have panels, while wealthier households capture most benefits.[27:43] Debate over government incentives to push solar into rentals versus broader solutions to help renters buy.[31:03] Broader fixes suggested: education, jobs, health, and housing supply to move renters into ownership.[34:55] Closing thoughts on the government's role in providing core services like education, health, and safety.Resources & Links Related to this EpisodeThe Invisible Hand PodcastThe Productivity CommissionThe Reserve Bank of Australia (RBA)

What happens when political forecasts miss the mark, global rules evolve, and economic models don’t quite capture reality? In this episode, we dive into the major political and economic stories shaping Australia’s role on the world stage. Co-hosts Domenique Sherab and Paul Scanlon take you through a three-part format, delivering insightful analysis and grounded perspectives on the key forces driving markets and policy decisions.We start by unpacking Australia’s recent federal election, where the Labor Party achieved a historic re-election while the Liberal campaign faced an unexpected and significant setback which caught many by surprise. Next, Domenique and Paul turn their attention to the U.S. lifting long-standing sanctions on Syria, exploring what this move might mean for the region’s recovery, trade opportunities, and shifting geopolitical dynamics.Then our focus shifts to the Reserve Bank of Australia’s latest interest rate cut, highlighting the growing uncertainties in the global economy and the potential return of inflation amid changing trade landscapes.Wrapping up, the conversation broadens to a global scale with Moody’s recent downgrade of the U.S. credit rating, ending its AAA status, and what this signals about fiscal trustworthiness and the evolving rules around sovereign debt. Throughout, Domenique and Paul bring a distinctly Australian viewpoint to help make sense of a fast-changing economic environment.Episode Highlights: [00:57] Paul has recently returned from a holiday in South Africa and other African regions.[01:28] We'll be discussing the new government in Australia, Syrian sanctions, the latest RBA cut, and Moody's downgrade of the US economy in our segments: "What's in the News?", "The Hand", and "The Invisible".[02:06] What's in the news? The Australian election was on May 3rd. Anthony Albanese was re-elected. [03:52] We share our analysis of the election. [07:16] On May 12th, Donald Trump announced the US would lift sanctions on Syria.[10:30] The speed or pace at which Syria can benefit from that re-entry into global trading markets will be dependent on the speed and ability for it to rebuild that trade and economic infrastructure.[12:13] The hand: The RBA lowered rates last week.[15:31] The preemptive cut to stimulate the economy is appropriate.[16:27] How the rate cut will affect keeping inflation and unemployment rates stable.[25:54] A big shout out to the Odd Lots podcast. [28:35] Paul talks about what all this analysis means for his January predictions.[30:01] The invisible: On May 16th, 2025, Moody's downgraded the United States credit rating, making it the last major rating agency to strip the US of its AAA rating.[31:54] Credit ratings are important and they affect the price of your debt.[36:46] This debt issue is what Trump is trying to address.[37:28] How many countries have AAA credit rating? There are 12 including Australia.Resources & Links Related to this EpisodeThe Invisible Hand PodcastOdd Lots PodcastThe Butterfly Effect: How Your Life Matters

In this episode, Domenique and Paul throw out the plan for the episode to discuss the biggest economic news story of the day: the fall out from Trump's new tariff regime on the world.

In the 12th episode, Domenique and Paul discuss the latest Australian inflation print and economic decisions coming from the new Trump administration. In the second section, we discuss Deepseek and how it is disrupting markets and whether this will have long term global and Australian economic impacts. In our final segment, we discuss the current financial malaise in China and some local factors contributing to this.

In the final episode for 2024, Domenique and Paul discuss the RBA's latest decision to hold the cash rate in the face of weak wages and GDP growth and review Paul's economic predictions for the year to see how he fared.

In this episode, we discuss the latest economic data coming out of the Australian and Chinese economies, the upcoming US presidential election and, for our final segment, return to Paul's predictions for 2024 to see how he is tracking.

In our final episode for 2023, we talk predictions: will the cash rate go up, inflation down? Will the price of oil slump? Can China get out of its current economic malaise to bolster global growth? Tune in for the predictions to these and many more.

On this week of the Invisible Hand, we talk about the many variables that go into making decisions at the RBA, we take a look at the Australian economy and how the property market in China is faring and what impacts we can expect on the Australian economy.

For our second episode we discuss the reduction in inflation in Australia and whether the RBA will be able to walk the 'narrow path' for another economic miracle, the downgrading of the US long-term credit rating and we return to consider the deflationary pressures plaguing Australia's biggest trading partner.