As lovers gaze at pictures of themselves and fake flowers on Instagram get likes and messages from people they don’t even know, shares will be dumped as our stock market prepares for a bad day at the office.

 

The world is changing and the threat of change is currently worrying Wall Street and it’s a concern for stock markets globally. Of course, this means that today shares here are set for a bad day at the office.

This comes as we learn the new age changes are such that Valentine’s Day is becoming less loved, with only one in 10 people in NSW planning to buy a gift for tomorrow’s day of celebrating that “crazy little thing called love”.

The Daily Telegraph reports that the “Australian Retail Council (ARC) and Roy Morgan have found NSW trails the national average, with only 11 per cent of residents opening their wallets in the name of romance”.

That said, the state is tipped to fork out $160 million on gifts, flowers and experiences. However, this is a $50 million drop in spending. When explaining tomorrow’s scabbiness of lovers in this country’s biggest state,

economists would blame the combination of the cost of living, rising interest rates on mortgages and the fact that NSW has the most expensive housing, as well as the biggest home loans.

While ARC’s chief industry engagement officer Fleur Brown says households are making careful choices about “non-essential spending”, there’s another explanation offered by Sydney florist Jai Winnell.

With a vested interest in understanding Valentine’s Day and what people spend on flowers, this business owner has pinpointed the digital age as a problem.

He argues that in the “age of Instagram”, Valentine’s Day has become more about who sees the gift

rather than the gift itself.

This might shock normal people who haven’t been absorbed by the “look at me” generation. “So, you know that if you get flowers, you are going to post it on social media. There is more pressure now than there used to be. It’s kind of about who sees it,” Winnell told the Telegraph’s Anna Shreeves.

The new internet age is delivering this new offering called Artificial Intelligence that’s threatening the stock market. Right now, sell-first ask-questions-later share players are dumping the stocks of great businesses because there’s a worry that other business using AI will undermine the profits of great businesses such as Xero, REA and other software as a service businesses.

CNBC explained the current market negativity this way: “Stocks dropped on Thursday as investors began to worry about the negative side of the artificial intelligence buildout, which threatens to disrupt the business models of whole industries and raise unemployment.”

Overnight on Wall Street, financial and real estate businesses were given the dumping treatment. Short-term market players sold down stocks such as Morgan Stanley, CBRE and even a trucking business because AI will possibly streamline the logistics business.

Our stock market is expected to open 0.7% down at the start of trade today.

While this is all speculation and could be absolutely baseless, the worry about losing money can make investors sell when panic builds.

Investment strategist at Baird, Ross Mayfield, got it right when he told CNBC: “That’s just pure crowd-like psychology, in my opinion. It’s sell first and kind of do the analysis later, but don’t get stuck holding the bag.”

While AI is bound to create winning and losing businesses, right now speculation and the fear of losing money are driving down stock prices for great companies that are seen as AI losers, when history might prove they will use AI to be even greater companies.

The old world that once celebrated Valentine’s Day with roses, gifts and nights out now is being threatened by a virtual experience highlighted on some social media platform that attracts likes and a lot less dollars spent.

In 1966 a film was made called Stop the World — I Want to Get Off. As AI and the rest of the internet age brings changes to conventions, the economy and people themselves, I suspect many normal people might relate to this film.

While I know this mightn’t be all that romantic, buying a share such as Xero for your lover might prove to be a more rewarding gift than flowers. And it certainly should have more value than a photo of flowers and a whole pile of useless, forgettable likes from family, friends and people you don’t even know!

Get prepared for higher taxes on your super and if the Greens get their way, the tax torture will be even more intense!

Treasurer Jim Chalmers has legislation set to be presented in Parliament to up the tax on ‘super’ superannuation savers. However, he’ll need the Greens in the Senate to get his way, and they want him to hit the wealthy harder! And one of their demands is likely to be a tax on unrealised gains for big super balance accounts.

Right now, while the Treasurer dumped this proposed tax on gains (that are only really paper gains for a super fund), it was something he advocated until the backlash from investors, farmers and even Paul Keating made him change his mind on that subject.

However, Chalmers is still going after anyone who has done a great job doing what governments in the past forced us to do, that is, have super! It has to be one of the greatest slaps-in-the-face for those who decided to choose to build wealth via super, which was encouraged via attractive tax rates.

Well, for many Australians, those lower tax rates (for doing without their money until they retire) are about to go up.

This is what Dr Jim has cooked up in his bill:

1. Income on balances in someone’s super between $3 million and $10 million will go from 15% to 30%.
2. For balances over $10 million, the tax on income will be 40%.

The AFR’s Ronald Mizen captured what the Greens want with the following: “While the Greens support increasing the tax rate on high balance accounts, its MPs are angry about the decision to abandon tax on unrealised capital gains. They say it significantly reduces the effective tax paid by high balance accounts, including the top ten biggest self-managed super funds, which hit an average balance of $423 million in 2022-23.”

Wow! We are talking about some super savers when you find out that the top 10 biggest super accounts average $423 million. This has to be some of our great billionaires who got some really great financial and tax advice in the good old days before big budget deficits from huge spending treasurers meant super savers had to be targeted to reduce the government debt.

Given the Treasurer needs the Greens to get his tax changes through, let’s look at what they’re still demanding. Here goes:

1. The tax rate on income from super accounts above $10 million goes to 45%. The AFR says this would hit about 8,000 people.
2. They want to get rid of the 33% capital gains tax discount that super funds currently enjoy.
3. They also want the 50% capital gains tax discount reduced because they believe it has contributed to the house price gains that are shutting many people out of the home ownership market.
4. And they want unrealised gains on big super accounts to be taxed (that’s surfacing again!).

Mizen gave us a super history lesson reminding us that when Labor took a policy to curtail CGT discount to the 2016 and 2019 federal elections, “it explicitly excluded superannuation funds”. But then the budget was in a lot better shape.

So, that was then. This is now. And anyone with a big super balance will be watching this taxing affair play out in Parliament in coming weeks.

Of course, all changes to super are good for my financial planning business as we become more relevant. The irony of any changes to the tax on super could actually mean those thinking about selling their investment properties and putting the money into super to avoid any potential changes to the capital gains tax discount, now will be worried that a super tax trap is waiting for anyone who builds up their super!

The great US politician, inventor and writer, Benjamin Franklin made famous the observation that “nothing is certain in life other than death and taxes” and that rings very true today.

The numbers don’t lie when it comes to the apparent failure of the Albanese Government’s affordable housing program.

It’s a tough call but the numbers don’t lie when it comes to the failure that is the Albanese Government’s affordable housing program. The target was 40,000 homes over a five-year period that commenced two years ago. But wait for it, only 2% of that number have been built!

The Housing Australia Future Fund program earmarked $10 billion to deliver new social and affordable homes over that five-year time period.

Not helping has been Housing Australia (HA), which the AFR’s Michael Bleby explained is the agency overseeing the Housing Australia Future Fund program and “has also been under pressure after revelations of poor governance and the high-risk approach it took in the rush to get moving on Labor’s signature policy”.

However, HA reckons it has learnt from its failures to date and predicts “housing completions would more than triple this calendar year, with a further 9,485 homes under development and more than 8,000 in planning.”

Of course, this is a predicted future from a group that has underwhelmed to date, with Bleby showing that 895 social and affordable homes completed by December last year is equal to 4.8% of the 18,650 homes that have been commissioned in the first two years!

Like most government-led forays into what the private sector generally does better, there’s a battle between two ways HA engages developer/builders. “New figures show last year’s 895 completions comprise 556 homes from so-called applicant-led projects in which the successful bidder developed the dwellings itself, while just 339 were turnkey,” Belby explained. And “direct building of homes by successful bidders has delivered more homes than turnkey homes acquired from third-party developers”.

Housing Industry Association chief economist Tim Reardon said: “Engaging directly with a builder (through a turnkey procurement) to build a certain volume of homes is likely to achieve an efficiency gain, but this method has had less support”.

The alternative applicant-led approach has the positives “that it’s likely to be in a specific location where clients of CHPs (community housing providers) live. A turnkey purchase is likely to be in a greenfields site, without an established population, and requires clients to relocate,” Reardon pointed out.

It’s hard not to conclude that this is a typical failed operation, created by political/electoral objectives and has been run by a government body whose poor track record means it has to make bold, positive predictions about how this important project will get back on track.

However, the facts show it has never been on track. A lack of real political resolve by the Minister for Housing Clare O’Neil and the Prime Minister hasn’t helped.

The AFR listed some completed projects such as

“Assemble’s Swift Walk development in Melbourne, City West Housing’s Boronia Apartments in Sydney’s Waterloo and Unity Housing’s Coast development in Adelaide’s Henley Beach South”, which are part of the 895 social and affordable homes completed by the end of December.

Note that while these are in areas that would be better for potential social housing tenants, they would be more costly and more difficult to build than turnkey homes built by private builders in greenfield sites.

What the Government has seen built might be socially better but it’s economically hopeless, with only 2% of 40,000 homes built! Actual homes built for the homeless look like a better priority than what’s happening now.

Clearly, this project of homes for the socially disadvantaged is built on shaky foundations.

Gloves are off in a battle over tariffs we have imposed on subsidised Chinese steel manufacturers. But how hard will China hit back?

Here we go again, with China identified as helping its steel manufacturers to undercut local ceiling steel frame makers. So, the Albanes Government has slapped a 10% tariff on these cheaper imports. This justifiable tit-for-tat tariff play comes with problems attached: what will China do to retaliate? Will it hit our iron exports? “That added to interim tariffs of between 35 per cent and 113 per cent on a range of products, including bolts and hot-rolled coil steel, which began in December and could be made permanent,” the AFR’s Michael Reed informed us.

The body that works out who’s cheating when it comes to trade is the Anti-Dumping Commission, and Beijing officials clearly aren’t happy and raised the possible implications for iron ore.

Led by our globally great miners BHP and Rio Tinto, the resources sector right now has been a bright spot for our stock market, with the former’s share price up 21.7% in the past 12 months, after tumbling from $50 to $35 from the start of 2024 to April 2025.

The comeback for our mining sector made up for the gradual fall from grace from the likes of CBA, which peaked at $191.40 in July last year and slumped to $141 in January this year. Over a similar period, JB Hi-Fi fell 33% after hitting $121 in August 2025.

What I’m saying here is that our stock market and super funds don’t need a tariff fight with China, just as our central bank is tipped to raise rates further, which isn’t a great tonic for share prices generally.

JB Hi-Fi

This problem of subsidised Chinese producers isn’t an isolated incident, with manufacturers BlueScope Steel and another called Rondo registering complaints about unfair competition.

The AFR reports that the “Australian Steel Institute chief executive Mark Cain said the surge in steel product imports that started two years ago was distorting the market” and Treasurer Chalmers has asked the Productivity Commission to look at dumping from China and, undoubtedly, other steel exporters.

This flare up over steel that could hit our important iron ore exports (which also contribute a lot to the budget via taxes paid by the big miners) comes as the iron ore buying body in China called the China Mineral Resources Group calls for sales to be in yuan and not just US dollars.

While China has always played hardball on trade and tariffs, with the arrival of the Trump tariff era and a new ethos of ‘might is right’, Australia has to expect some China pushback on these new tariffs.

Given our stock market is up only 2.66% over the past 12 months, we need Beijing to slug BHP like we need a hole in the head!

Come along and learn from the best in money and business at an event I’m holding on February 24 at Sydney’s Shangri-La hotel.

While just about everyone wants business or career success and to get wealthier, all too often they don’t take the smart steps to make it happen. That’s why I’ve created the Switzer Investing Club, which has its inaugural breakfast, masterclass event at the Shangri La Hotel in Sydney on February 24! I hope you decide that it’s time you found out what you don’t know about being successful in business and wealth-building.

Some years ago, with the arrival of the Internet, when businesses were building websites, I was MC’ing a business conference in Brisbane. A weird looking accountant from one of the big firms showed up to present on stage in a T-shirt and long hair. He surprised many by giving the “SBS warning” that the audience could hear an F-word or two in his presentation. This was an unusual ‘outside the square’ accountant!

His main point in this emerging digital age throttling down the information superhighway was that he tells clients who wanted him to build websites for them that he doesn’t care about what they want because they don’t know what they can have!

This guy was an emerging legend in a space that has dominated business growth and stock market wealth-building over the past 20 years.

Over that time, I’ve learnt that legends do leave clues on how to be successful in your business or career and, importantly, how you build wealth.

Over the decades I’ve spent helping people understand business and money, I know the successful invest in their own success. They pay for business coaches and financial advisers, who show them stuff they’d never understand because they’re too busy working in their business or career.

These people who went on to create well-known businesses such as Aussie Home Loans, Wizard, Yellow Brick Road, Boost, Yo-Chi, Guzman y Gomez. Virgin and even Netflix, all learnt that others can show them to think outside the box to be uniquely competitive, and then wealth followed.

Others I’ve written about or advised as clients have worked out that while they were good at being a business owner, lawyer, radio host or whatever, they got people like me to help them invest wisely.

The enduring theme of success is that legends have clues. And really smart advisers, whether it be in business or executive coaching, or investing successfully, get to know these pointers for high achievement. The smart people I’ve met got even smarter people in fields where they have relative weakness to help them win.

John Maxwell who wrote the book The 21 Irrefutable Laws of Leadership argues that to succeed you have to get in your strength zone and let others help you where you’re weak. He also explained to me that one of the most impactful things that was ever spoken to him was from a mentor that his Dad arranged for him when he was at university, who asked: “John, what’s your plan for self-improvement?”

Maxwell admitted he didn’t have one! But after that day he has had one for the rest of his life. Leaders listen and learn and along with other great clues for business and wealth-creating success, that’s what I want to share with you at this event.

But it’s not a ‘one and done’ event, because I want to create a long-term relationship with those who become members of the Switzer Investing Club.

Wanting a great business or successful career and accumulating wealth is about investing your time, and these goals represent some of the greatest investments of anyone’s life. That’s why I’ve called this new venture the Switzer Investing Club.

The Club will give you insights from great business growers like Gerry Harvey, Mark Bouris, John Symond and the likes of Janine Allis who created Boost Juice and lately, along with her sons have built up Yo-Chi, which most parents know is a beloved product for many Aussie kids.

The Switzer Investing Club will give members daily access to tips and strategies to grow your wealth and your business. And if you’re an aspirational professional, we’ll give insights that will help you grow your wealth and your career.

I hope you can join us for this potentially tax deductible information event on February 24, at the Shangri-La Hotel in Sydney.

There are limited seats available and for $200 + GST you will:

1. Become a member of the Club
2. Receive a master class experience on business and wealth-building success.
3. Receive a copy of my book Join the Rich Club.
4. Hear from speakers who’ll share their insights on building wealth and businesses, with Aussie Home Loans, John Symond zooming in for this first event.
5. Other speakers include US sales mastery expert Todd Duncan, CommSec’s founding CEO Paul Rickard and one of the country’s top business coaches, Anna Samios of Performance7 Global.
6. And of course, I’ll present what I’ve learnt from some of the great legends of Australian and global business and money.

I’m not just creating one-off events. More than that, I’m offering an educational relationship, where I’ll share my network, their competitive insights and the means to help you go to the next level in business and wealth building.

I’d love to meet you at this event. Peter.

Faced with his $57 billion budget blow out over the next decade, the Treasurer’s on the hunt to collect more tax and his eye has spied the capital gains tax discount. How risky is this move for Jim and all investors?

After being blamed for being too soft and blowing out the budget deficit by $57 billion over the next 10 years, Treasurer Jim Chalmers could be taking ‘tough guy’ therapy, with the news he could reduce the capital gains tax (CGT) discount when investors sell assets that have grown in value.

Apart from being a financial kick-in-the-pants as well as the hip pocket of property and share players, potentially it could be a Bill Shorten-style election loser. And you can bet the Coalition would at long last have a policy they could get unified around, which would be to reverse any policy change linked to this tax discount.

For those not up with taxes, while the family home doesn’t attract a capital gains tax, all other assets that grow in value are taxed at the seller’s personal income tax rate on any gain made. However, if the asset (mainly property and stocks) is kept for over a year, then a discount of 50% applies.

Right now, the Treasurer hasn’t ruled it out for the May Budget and the Greens have been big fans of reducing the discount.

The ALP went to both the 2016 and 2019 elections promising to halve the rate to 25% for all assets. These ideas weren’t well-received by voters and it showed in the related election losses.

In the 2025 poll, the Greens took a policy of allowing the discount for one investment property and killing it for shares. And they were smashed in the poll as the Albanese Government won 94 of the 150 seats in the Federal Parliament’s House of Representatives.

On Wednesday, when asked about the discount being reduced, the Treasurer said the issue should be discussed because of intergenerational issues.

The Daily Telegraph’s John Rolfe tells us: “The CGT discount is expected to cost the budget $21.8 billion this financial year, Treasury estimates show [and] about 830,000 people used it in 2022-23, which is the most recent data”.

And 80% of these taxpayers were in the top 10% of income earners.

The Parliamentary Budget Office calculates that the discount on residential properties will cost $6 billion this financial year and $78 billion over the next decade.

That’s the saving. But what would be the effect of this change? Try these:

1. Some people would sell their investment properties before the discount was reduced or taken away.
2. This would increase the supply of houses for sale and home prices would fall, which current homeowners wouldn’t like.
3. Some banks could close out loans on investments properties that are no longer as valuable and would sell for less if the borrower was in financial trouble.
4. Some investors would simply never sell or hang on to their investment property to earn income and avoid the bigger capital gains tax.
5. This wouldn’t be good for the long-term supply of housing. And homes built for investors would fall.
6. The Federal Government’s budget deficit would improve.
7. If the discount was taken off stocks as well, the share market would slump as sellers would rush for the exit to get the discount before it ends.
8. Super funds would be negatively affected if shares lost the discount and their returns to their members would be reduced.
9. If stocks were spared from a reduced discount, then it would make stocks more attractive and push share prices up, but when a crash comes more Australians would suffer losses.
10. This would mean a stock market crash would have a greater likelihood of leading to a recession.

Property prices in Australia tend to rise and this helps consumer confidence but if more households are more exposed to stocks, then a big fall in share prices would undermine confidence and spending during those times. This could lead to more and deeper recessions.

And by the way, recessions play havoc with budget deficits as they kill businesses and jobs, which leads to less tax collections and more outlays for those on the dole queue.

The economy is a complicated beast and investments that drive the economy and the creation of jobs have been helped by the CGT discount.

Note to Jim: take this one away at your peril. A bigger GST with income tax cuts might be a smarter play.

While being the country’s Treasurer is a tough job, the buck stops with the politician in charge of keeping this country’s books in good order.

Being the country’s Treasurer or keeper of the books is a tough job. And if the nation’s central bank raises rates because inflation is too high, the buck stops with the politician we listen to on the second Tuesday in May called Budget night.

That guy is Jim Chalmers, despised by conservative voters because they’re often distrusting of Labor for whole host of reasons, and many business owners who find the current economy better suited to being an employee than employer.

Those business owners should blame former Minister for Employment and Workplace Relations Tony Burke, who oversaw changes that pleased his union colleagues and lots of workers. While pay and conditions improved because of Burke, costs to business spiked and productivity didn’t follow upwards. And that also hurts the cost of doing business.

And let’s not praise the work-from-home trend as a productivity creator until credible tests are performed to pass judgement. There are lot of bosses who think their businesses would be better if their workers turned up for work.

I could go on with other developments that hit productivity, such as employees falsely using mental stress to avoid being sacked and the fear of bosses being accused of harassment if they make suggestions to improve an employee’s performance.

It used to be called training or mentoring but now many bosses are gun shy about doing what used to be seen as leadership in the workplace.

Remember productivity boosts production and reduces costs and is great for profits and helping to reduce the need for a business to increase prices.

While productivity sounds boring, it is the business magic pudding, as it can deliver profit to the employer and better wages for the employee.

While Chalmers isn’t directly responsible for all the causes of lower productivity and rising inflation, it could be argued he has a ‘charming’ approach that has come back to bite him. Treasurers like Paul Keating and Peter Costello were tough nuts at times and would take on a colleague whose agenda undermined what they were trying to achieve. Often sparks would fly when the Budget loomed and ministers wanted money for their pet projects, which to be fair, could have been important for the welfare of the population and future election outcomes.

A Treasurer has two big jobs to do: make sure the economy is growing nicely and contain inflation. The Reserve Bank is a partner in this dual goal. That’s why the likes of Paul Keating at time blasted the central bank for being late to the party, in say cutting rates or raising them.

However, the fact that there is a ‘party’ going on in the economy that needs to be checked, quietened or shut down is often because the Treasurer mismanaged the whole show from the beginning.

And this is where the charming Mr Chalmers is in the frame for the predicament that those with big mortgages and business debt find themselves in as interest rates rise.

Even though the RBA Governor chickened out when asked if big government spending was at the heart of this inflation problem by sidestepping the issue, economists know that if Jim had been a bastard-like Treasurer like the ones of yesteryear, rates wouldn’t have gone up yesterday.

Sure, while unemployment would be higher and the economy would be growing slowly with some businesses in trouble, that’s what Treasurers and central banks do when inflation is seen as persistent and undermining the future of the economy.

Shane Wright in the SMH agrees with me in his piece headlined: “More rate hikes are on the way unless Chalmers finds savings in May.” And no one with economics training would disagree with that headline.

Here are Wright’s main points:

• Raising interest rates after the RBA cut rates six months ago says we have long-term budgetary problems.
• The RBA says a lack of productivity is at the heart of the problem.
• While Government support for the economy via wage increases, tax cuts, energy rebates, infrastructure spending and other social welfare programs have helped consumers and businesses to spend, this has created inflation.
• The RBA doesn’t see inflation getting back into the 2-3% band until mid-2027, which is 17 months away.

So, what’s my take on all this?

Well, Chalmers has allowed the economy to grow and has got one part of his job right: he has created jobs and economic growth but has failed on inflation and is the prime cause of rising interest rates.

Next, the RBA’s forecasters have failed to understand our economy and have arguably cut rates too early in February last year and gave too many cuts. It also could be argued that it was too soft on us when they were raising rates because the Kiwis did go harder on rate rises. They got a recession and now inflation there is 3.1%, where we are at 3.8% and set to go to 4.2% this year.

I expect unemployment will rise this year with rates set to rise.

Wright does say productivity isn’t easily boosted and “former treasurers Wayne Swan, Joe Hockey, Scott Morrison and Josh Frydenberg” aren’t famous for turning productivity around but they weren’t famous or infamous for being too generous to create inflation and a big interest rate problem.

Chalmers bowed to his political masters and helped create a great election win last year. But the price has been inflation and now rising rates.

Paul Keating was a Treasurer who tackled the unions and got concessions to boost productivity. The likes of Peter Reith took on the wharfies. And Costello and John Howard improved the tax system that helped our economy grow without worrying inflation for nearly two decades.

The May Budget needs to be tough to reduce the need for the RBA to keep raising rates. The remedy is in the hands of Dr Chalmers. I hope this toughness will be about not raising taxes. The Treasurer has to cut spending and give up his charming ways with his colleagues. It gets down to “no guts no glory!” Jim.

Let’s check out how many ‘experts’ think that the RBA will raise the interest rate curtain.

What follows is guesswork about something that will happen eight times this year. Guess what it is? Yep, it’s the Reserve Bank board’s interest rate meeting. And today, the money market experts have the chance of an increase at 72%.

While all four big bank economics teams think a 0.25% rate rise is on the cards, these highly trained number crunchers have been wrong before. AMP chief economist Shane Oliver and his colleagues are backing no change. This is what Shane wrote on the weekend: “We think the RBA will probably hold. On balance we think that, given the cross currents and in particular the downtrend in trimmed mean inflation, the RBA should and probably will leave rates on hold and wait for more information. But it’s a close call and not one we have a lot of confidence in. We would put the probability of a hike as being around 49% versus 51% for a hold. If there is a 0.25% hike, given the above considerations, we would see it as a case of being one and done. In this context, money market pricing for a 66% chance of a hike on Tuesday is too high – 51% would be more reasonable! – and the pricing in of more than two rate hikes is a bit too much.”

Oliver is at odds with the majority on what the RBA does today and here’s why:

1. The monthly trimmed mean inflation number has progressively trended lower from 0.47% month-on-month in July to 0.23% in December.
2. The quarterly trimmed mean fell from 1% in the September quarter to 0.9% in the December quarter.
3. He expects this trend to continue and thinks RBA modelling will be saying the same thing.
4. Business surveys show output price indicators running around levels consistent with the inflation target.
5. Consumer spending is likely to take a hit if we go so quickly from rate cuts to hikes, as mortgage stress likely remains high.
6. The rise in the Australian dollar is a de facto monetary tightening that will help lower imported inflation.

These are pretty compelling reasons why the RBA board should think long and hard about a cash rate hike today. But what’s the other side of the argument?

Shane looked at these and came up with:

1. All key measures of inflation are now well above the target of 2%-3%.
2. The December quarter trimmed mean is above what the RBA was forecasting last November.
3. Services inflation edged up in the December quarter.
4. Goods price inflation is well up from its lows.
5. The gap between the proportion of items seeing price rises above 3% year-on-year and those seeing less than 2% year-on-year widened further.
6. Unemployment has fallen from 4.4% in September to 4.1% in December meaning the economy looks like it’s getting stronger, not weaker, which would have been a reason for no rate rise.

While this does suggest the RBA could err on the side of caution and wait another month or two, most economists are leaning towards a rise. This was a survey of prominent economists from abc.net.au:

• Nicki Hutley: Rise

• UNSW’s Richard Holden: Rise

• CEDA’s Cassandra Winzar: Rise

• William Buck’s Besa Deda: Rise

• Monash University’s Robert Brooks: Hold

If unemployment hadn’t fallen to 4.1% and the December quarter inflation numbers generally were steady rather than higher, I think the RBA would have been keener to hold. But the case to scare spending Australians and to stop price-setting businesses from raising prices will be an important argument at the board meeting today.

Shane Oliver makes a number of good points. I hope the RBA does continue a wait-and-see approach, because like me, they might not trust those ABS job numbers. But my gut feeling is that the big bank will raise today.

Undoubtedly, the mortgage belt has been feeling the pinch but older Australians with either no mortgage or a small one on valuable properties and ballooning super may well be the greatest contributors to inflation. They’re neither in debt nor are they feeling the RBA’s squeeze on their bottom lines via interest rates.

In fact, a rate rise will increase term deposit rates, which will be a plus for those very same people, who enjoy higher interest rates on their investments.

What follows is an economic assessment that says Treasurer Chalmers ha been ‘gilding the lily’ when it comes to his role in the huge blow out in the budget deficit over the next decade.

This isn’t a political take on Treasurer Jim Chalmers. What follows is an economic assessment that says he’ s been ‘gilding the lily’ when it comes to his role in the huge blow out in the budget deficit over the next decade. The AFR’s Economics Editor John Kehoe has accessed calculations by the Parliament Budget Office, Treasury, economists Chris Richardson and Steve Anthony (who were ex-Treasury number crunchers) and they’ve found two-thirds of this $57 billion budget blow out is because of “future spending” linked to Labor-created policies.

Many of these ‘promised’ policies must have had a big impact on the sensational election win by the Albanese Government in May last year.

Last week, the AFR made the point that it was too much committed spending that had rocked the budget’s expected spending figures but on Sky News Treasurer Chalmers refuted this saying it was because of lower tax receipts.

Kehoe kept hounding the Treasurer for proof that it was taxes rather than too much spending causing the ballooning budget down the track, but nothing was delivered.

This has left Kehoe to conclude the following: “Analysis of new figures provided by the PBO using Treasury’s 10-year budget data confirm the cumulative budget deterioration was between 60 per cent and 70 per cent due to higher spending. About 30 per cent to 40 per cent was due to weaker projected tax revenue over the final seven years to the middle of next decade.”

On this information, we can forget about budget surpluses for the next 10 years, unless something like a resources super boom comes along to bankroll promises made by the current Government.

What are the implications for this over-spending?

Economists suggest the following:

1. Too much Government spending fuels inflation.
2. This could lead to the RBA raising the cash rate from the current 3.6% to 3.85%.
3. A lot of this spending increase was front-loaded, which makes it look to be politically-driven, given cost of living pressures was a big pre-election issue, and still is.
4. Kehow tells us: “The higher spending and bigger deficits were not included in the PEFO, which was independently signed off by the then heads of Treasury and the Department of Finance, Steven Kennedy and Jenny Wilkinson, during the election campaign in April.”

Both Kennedy and Wilkinson are bound to be grilled over this revelation.

This whole affair indicates the Treasurer has a case to answer. And so do his top public servants.

As a government, while the Albanese team can decide to spend money, they can’t try and cover up any blow out in the Budget by saying it was a tax collection problem.

These guys are always telling us we must pay higher power bills to reduce our reliance on fossil fuels and that it’s only fair for future generations. Well, it looks like promises made today to win an election will be paid by future taxpayers over the next 10 years and even beyond.

US-based business speaker, Simon Sinek has said that “trust is built on telling the truth, not telling people what they want to hear.” Perhaps our Federal Treasurer needs to think about this.

Inflation news yesterday wasn’t good for mortgage rate worriers and here’s why.

The inflation news was in yesterday and it wasn’t good for mortgage rate worriers. The key measure the Reserve Bank monitors to assess if a cut or rise is necessary was on the high side, so the expectations of a 0.25% rate rise next Tuesday have heightened among economists.

The statistic in question is the CPI’s trimmed mean, which gives the central bank an insight into the persistent price movements of the core or underlying inflation that the RBA wants around the mid-point of the 2-3% band. It actually eliminates too big and too low price changes that could over-influence the inflation reading.

This number came in for the December quarter at 0.9% taking the annual rise to 3.3%, which is outside the 2-3% band. Worse still, the previous reading was 3.2%, so there’s a rising trend.

While I’d argue if the trimmed mean came in at 3.1%, the RBA board might have given the mortgage belt a “stay of execution”, instead I won’t be surprised if the cash rate is lifted from the current 3.6% to 3.85% next Tuesday.

By the way, the more volatile headline inflation rate for the year to the end of December was 3.8%, up from 3.4%, which will be another reason the RBA might want to hose down the buying of ‘stuff’ that’s clearly making price-setting businesses raise what they charge us. This chart graphically shows the U-turn that our inflation has taken since the middle of the year after we received three rate cuts.

This has led to critics of Governor Bullock and her board for cutting too early and too much.

Interestingly, the Government-commitment to saving the planet continues to push up energy bills. These bigger-than-expected inflation readings haven’t been helped by the end of energy rebates. This is bad news, especially as we’re being told that our power bills look set to rise by 20% this year!

The second most important driver of higher inflation was insurance costs. Zyft consumer finance expert Joel Gibson told news.com.au that “all of these increases combined would mean an average Australian household should stand to shell out an additional $2,192 over the course of this year.”

Betashares chief economist David Basanese looks on the money when he said: “All up, it appears to be game, set, match for a rate rise at the February policy meeting.”

And Basanese doesn’t rule out another rise in May. The only way he could be wrong would be if unemployment starts to rise and the CPI readings monthly and quarterly show that they’re on the slide.

Before these CPI revelations yesterday ANZ and While Westpac wasn’t in the ‘rate rise in February’ camp, they are now, joining the CBA and NAB economics teams who are all arguing Tuesday will bring a 0.25% rate rise, which makes it easier for Bullock to jack up rates.

The combined effects of a stronger-than-expected economy with falling unemployment and rising inflation means rate increases are to be expected. In the US overnight, Jerome Powell (who heads up the US central bank that’s known as the Federal Reserve) resisted Donald Trump’s call for another rate cut, arguing the economy is on the improve and doesn’t need one now.

The Fed’s statement said: “Available indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained low, and the unemployment rate has shown some signs of stabilization. Inflation remains somewhat elevated.”

Like here, inflation is the maker or breaker for rate cuts. Until it falls, we and the Yanks won’t see any more cuts. By the way, rate rises aren’t good news for stock prices and our super, though the outlook for our resources stocks is positive and that should provide some support for our overall market, which feeds into our super balances.