RBA: rates could rise; judge hammers Gerry Harvey; Apple passes Nvidia

RBA: rates could rise; judge hammers Gerry Harvey; Apple passes Nvidia

News in brief

The S&P/ASX 200 closed up half a per cent yesterday to 8939 points, a new six week high. It started the day in negative territory, but a surge in some big companies including CBA, Wesfarmers, CSL, Telstra and Aristocrat Leisure meant the bourse closed in the black.

 

Apple has overtaken Nvidia as the world’s largest company after the latter’s share price sank five per cent, taking its fall since mid-May to 16 per cent. Investors fear that big tech companies like Microsoft, Meta, Amazon and Alphabet might slow down their spending on chips.

 

A Federal Court judge has singled out Gerry Harvey for scathing criticism, saying that the billionaire’s complete disregard for consumers was a key reason his company Harvey Norman must pay an outsize $35 million fine for a deceptive advertising campaign.

 

Origin Energy said the personal information of some 900,000 current and former customers was stolen in a hack this month, with thieves accessing names, addresses and phone numbers, along with incomplete bank and credit card numbers.

 

Europe’s richest man, Bernardt Arnault, is under fire over claims he doesn’t hire fat people. Journalists from newspaper Le Monde made the claim after visiting the Paris headquarters of LVMH, the luxury goods conglomerate that Arnault founded 40 years ago.

Fear-o-meter

HSBC chief economist Australia & NZ, Paul Bloxham

 

The RBA is in a different spot to many other central banks. Although, like most central banks, the RBA is focused on the high inflation challenge, unlike others, the RBA has already taken significant action to deal with it, with three hikes this year so far.

 

[Today’s] inflation print is expected to confirm that inflation was too high in Q2 - unsurprisingly given the Middle East conflict shock. But this is mostly history, and it is still far too early to have seen the full economic impact of the monetary tightening already delivered.

 

The key questions are: is the growth downturn underway enough to believe that inflation is expected to head back to target soon; and will it be soon enough, given core inflation has been above target for four years already? The first question is a tricky calibration exercise; the second is a judgement call about the RBA board's level of patience. Both are uncertain.

Fear & Greed Q+A today

On the outlook for financial markets ahead ahead of earnings season - and whether we're going to see another rate hike:

 

“Unfortunately, I think we've probably still got some more upside in interest rates. I've been worried about weak productivity, the lack of spare capacity in the economy and the fact that inflation has stayed above target for so long

 

If you include this year, inflation will have been above target for five of the last six years. The longer inflation stays above target, the less credibility the Reserve Bank has in getting it back under control. Michele Bullock's recent comments were, I think, on the hawkish side, and unless we get a really good inflation number - with underlying inflation actually falling rather than rising - I think the odds are we'll see another rate hike. Sometimes it's better to rip the band-aid off and get on with it.”

Reserve Bank governor Michele Bullock yesterday made it clear that the central bank will lift interest rates if inflation remains above target and warned Australian living standards will stagnate if weak productivity growth is not addressed.

 

Bullock said the slowdown in productivity growth made the economy more vulnerable to global shocks, and the best thing the bank could do to improve living standards was meet its dual mandate of low inflation and full employment.

 

She didn’t shy away from the potential for another rate rise, saying: “The board is prepared to act as required to achieve its mandate, including by increasing the cash rate further if needed.”

 

The full effect of the three rate rises was yet to hit the broad economy, Bullock said, and Australia’s inflation problem pre-dates the Middle east conflict.

 

Critical to any decision on interest rates is the June quarter inflation figures, due out today. If the underlying rate rises from the previous reading of 3.6 per cent, then the chance of a rate hike in a fortnight’s time will rise too.

Greed-o-meter

	Union	Membership (2025)
1	Australian Nursing and Midwifery Federation (ANMF)	341,990
2	Shop, Distributive and Allied Employees' Association (SDA)	196,257
3	Australian Education Union (AEU)	182,981
4	United Workers Union (UWU)	146,248
5	Australian Services Union (ASU)	135,627
6	Construction, Forestry, Maritime, Mining and Energy Union (CFMEU)*	132,225
7	Community and Public Sector Union (CPSU)	125,464
8	Health Services Union (HSU)	112,786
9	Communications, Electrical and Plumbing Union (CEPU)	110,877
10	Australian Workers' Union (AWU)	77,063

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The union movement in Australia is set for a major change, with ACTU secretary Sally McManus and president Michele O'Neil both announcing they'll stand down this year. According to the ABS, more than 13 per cent of employees (1.6 million people) in Australia are trade union members in their main job. So which unions in Australia are the biggest?

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* prior to the construction division being placed in administration.

Source: Fair Work Commission