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Hedge Clippings | 08 August 2025 The RBA meets next Tuesday, and following the June quarter's "trimmed mean"CPI number of 2.7%, Governor Michele Bullock and her board will be under pressure to reduce rates from the current 3.85%. Expectations from economists and the market for a cut are high, although that didn't stop the RBA from sitting on its hands in July, leading to widespread disbelief, disappointment and criticism from economists, mortgage holders, and the media. For followers of Hedge Clippings, there might not have been the same level of surprise following our interview with Nick Chaplin from Seed Funds Management, and Renny Ellis from Arculus Funds Management prior to the July meeting and decision. Both unanimously agreed that the RBA should hold rates then, so we reconvened earlier today to get their current take on next week's decision and the current economic outlook both here and the US. While not 100% in agreement on all points this time around, both Nick and Renny were of the view that not only was the July decision the correct one, but neither were convinced of the need to move next week from the RBA's "slow and steady"and look-through-the-numbers approach. In particular, Renny noted the six-to-nine-month lag between the initial easing in February, and the end of government support or rebates on energy bills. Both were also unconvinced that the slight uptick in unemployment to 4.3% (seasonally adjusted) was sufficient to cause alarm, and certainly don't hold the view of some bank economists, including the CBA, that a further two, or even three, rate cuts to the 3% region are scheduled by early next year. That said, while the CPI and unemployment numbers might say hold, the politics and the media pressure will be intense! You can watch the video here. In the US, the pressure on Fed Chair Jerome Powell to cut rates continues following the weaker-than-expected July employment numbers, and downward revisions to those previously announced. A slowdown in the US economy, at the same time as a tariff-induced increase in inflation, will create further uncertainty both in the US and Australia. Meanwhile Albo has scotched any expectations of changes to economic or taxation policy at or as a result of the upcoming 3-day Economic Summit scheduled for 19th of August, giving as his reason that he will only legislate tax changes during this term based on commitments made leading up to the last election. If there's to be no change, what's the benefit of the summit - unless it is to set in place changes post the 2028 election? Changes to the GST are a long-overdue necessity (along with a revamping of the tax system as a whole that it would enable) but are a political minefield for whichever government is left to introduce them. Maybe it is time for some rare bipartisan support? Instead we have a proposal to tax unrealised capital gains in superannuation. While it may initially only affect those with super balances over $3 million, watch out, it's the thin end of the wedge. When governments (of all persuasions) get the taste of a new source of income, they rarely lose it. Remember that Federal income tax was first introduced in Australia in 1915 as a temporary measure to help fund the war effort in the First World War. Video Expert analysis on what the RBA will do next Tuesday, August 12 | FundMonitors News | Insights The enemy within | Canopy Investors Pivot, don't panic: America's next act | Magellan Asset Management News & Views: One final round of rail consolidation? | 4D Infrastructure
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