INTHEBLACK July 2022 - Magazine - Page 35
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THE ROAD BACK
TO “NORMAL”
Warren Hogan, chief economic advisor at Judo
Bank, shares his thoughts on Australia’s economic
outlook over the next few years.
N O R M A L I S AT I O N Q U E S T
“We have a platform of strong demand, low rates,
available credit and low unemployment. And really,
I think the economic outlook now is all about what
I’d call ‘normalisation’. It’s about getting back
onto an even keel over the next few years and
laying the platform for an extended expansion of
our economy over the decade ahead, and I think
it’s going to be based on a refitting of our capital
stock and our labour skills for a post-pandemic,
much more digitised economy.”
T H E D R I V E R S O F I N F L AT I O N
“The three main drivers that matter to the broader
community are housing costs, which includes rents
as well as the cost of building a house, as they put
it in the CPI. It’s energy, obviously, which hopefully
will start to come off, especially with the cut to
the fuel excise. And it’s food and grocery. But the
reality – and what I think worried the Reserve Bank
and forced them into that early rate hike in May – is
it’s broad-based. It’s actually seeing price increases
happen across the board.
“That’s what we’re seeing in the Northern
Hemisphere, particularly in the United States.
And that’s why it’s not so much a spike as is this
‘inflation bulge’. And it’s serious. We do need to
get interest rates back to at least a neutral setting
to ensure that the inflation bulge remains a bulge
and comes back down to target rather than
persisting, like we saw in the 1970s when there
were real inflation problems.”
L I S T E N T O T H E F U L L P O D C AS T
CRYPTOCURRENCY CARNAGE?
Dr Jana Schmitz, CPA Australia’s digital economy policy lead, discusses the recent
cryptocurrency upheaval and what it means for investors.
R E AS O N S B E H I N D T H E C R AS H
“There are a couple of macroeconomic factors that are to blame here. We are
currently in a high inflation environment, so central banks all around the world are
trying to bring inflation down by increasing interest rates. Additionally, the world is
facing geopolitical instabilities caused by the Ukraine war and some other threats.
It is basically the combination of those factors and events that created very strong
headwinds for crypto. Also, we should consider that, at times like this, high-risk assets
such as cryptos are usually the first ones to be offloaded by investors. And let’s not
forget the recent collapse of the stablecoin TerraUSD, which was previously termed a
‘stablecoin darling’. Unfortunately, it has lost almost all its value within 24 hours. That
happened in May this year, and the event has pulled down the entire market.”
CAUSE AND EFFECT
“A lot of exchanges and other crypto service providers are struggling because
customers and investors are withdrawing their money and many investors have
stopped buying. Some exchanges and platforms have announced cost-cutting
measures and staff layoffs. We heard from Coinbase a couple of weeks ago that it will
be reducing its headcount by 18 per cent, acknowledging that the company grew too
quickly and adding that labour costs have grown too high to effectively manage this
uncertain crypto market.”
WHY THE CONCERN?
“We are finding ourselves in a very high inflationary environment, and one of the
developments is that the share market has also tanked significantly over the last
months as a consequence of interest rate hikes and high inflation. So equity investors
and analysts are questioning whether crypto markets are actually correlated with
financial markets.”
L I S T E N T O T H E F U L L P O D C AS T
intheblack.cpaaustralia.com.au July 2022 35