612 ABC Radio Brisbane with Steve Austin.
Well the Reserve Bank has left interest rates or cash rate on hold, citing the recent pickup in inflation, the I-word. So how healthy is Australia’s economy? Well Peta Tilse is Head of Funds Management at NatGen. I asked her about the RBA’s decision first of all.
Steve, essentially they’re on hold. Just with the language that was used, it’s actually possible that we mightn’t get any more interest rate cut. Like 3.6% as a cash rate might be what they call the terminal rate, the last sort of bit of movement. Are you telling me that, particularly
I’m interested in homeowners and people have mortgages obviously. I mean that’s it guys, this is as good as it gets. We’re pretty close to it. So the main reason for all of this is inflation and that they’ve been watching that data closely. They’ve been taking, they say they take the signals from the inflation data and they actually released as well yesterday the statement of monetary policy which is kind of their quarterly outlook I guess on the Australian economy and where they see various data points moving in the future.
They did point to that some of the things that came through in our last inflation print in their mind were temporary. So things like those electricity rebates we’ve all been getting that they’ve sort of washed through.
I mean like electricity for instance for the quarter was up 18% because of that and annualised it’s about 12%. So they’re very significant sort of numbers but Michelle Bullock called that a blip so to speak. Although in my mind what that showed was that the so-called electricity subsidy was just disguising the true cost of electricity. Yes absolutely.
The band aid I think as we’vesort of been calling it to get us through. All right Michelle Bullock said this. Keeping inflation low and stable enables strong and sustainable employment growth. Is she saying that’s what
we’re focused on in the future? What’s she saying there Peta Tilse?
Yes absolutely. So there’s been this kind of in the markets they’ve been because they’re always I mean they’re focused on price stability and full employment. So it’s a trade-off. So do you sort of go hard on inflation or do you go hard to get to full employment?
And I guess we’re kind of at that point where we’re getting that soft landing we need hopefully if we can keep inflation in that sort of two to three percent band which is their goal to keep that price stability. In the statement of monetary policy though that three their sort of forecasts for inflation have risen ever so slightly.
So we should be seeing in the incoming quarters that rate rising to about I think it’s 3.1 or 3.2 percent but just marginally above. So they will be watching that like a hawk so to speak. Let me play this.
When combined with the fact that we hadn’t raised rates particularly high this could mean that less easing in monetary policy is needed in this episode compared to previous ones. So that’s what you’re referring to Peta Tilse?
Yes that’s right. And the other thing too Steve is when you do have a higher inflation rate let’s call it just roughly speaking okay we’ve got a cash rate of 3.6 percent and let’s say the inflation rate’s 3.6 minus 3 percent. The real cash rate is about 0.6 if you follow. So basically if you strip out the inflation from the actual rate just roughly speaking it’s actually kind of stimulatory.
Okay so really what does this say then about the underlying fundamentals of the Australian economy? Is it healthy? Is it strong?
Is it weak? What is it Peta Tilse? I guess we’re kind of in that what they’d call the soft landing phase. So we’re okay at this stage. Inflation is what they’re watching as we’ve said so anything sort of above that 3 percent they’ll be watching like a hawk.
Growth is positive it’s at 2 percent that’s kind of trend but you know you’ve got to temper that with what’s going on with population growth and the unemployment rate while it did blip up to four and a half percent last month you know it’s not bad in the scheme of things like we’re not at five and a half percent put it that way. So we’re okay.
Could be better, could be worse, we’re okay is how I would describe it.
Peta Tilse I’ll leave it there thank you very much for your time once again.
Pleasure Steve.
Peta Tilse head of funds management at NatGen.

You’ll hear it on 612 ABC Radio Brisbane.
So let’s look at the latest unemployment data.
So Queensland, interestingly, unemployment in Queensland went down slightly.
In other words, things improved here job-wise.
Unlike the rest of the country, where there was a surprise, the unemployment rate went
up around the rest of the country.
So what does this mean?
Particularly when, say, you’re sitting around the board table of a reserve bank saying,
OK, we can ease the pain on Australians, or we’re going to keep the pain level where it is
if they want a mortgage.
Well, Peta Tilse is head of funds management at NatGen.
Peta, tell me, explain the unemployment figures to me first of all, please.
Morning, Steve.
So essentially, the market was expecting about 4.3 per cent.
This is actually the highest number that we’ve recorded since 2021.
So that it is quite a bit of an outlier there.
And if you think back to 2021, that’s when we’re coming off those COVID highs of unemployment.
So it is quite interesting for the markets.
Over the course of this year, we’ve sort of been in about a 4 to 4.3 per cent band mostly.
So again, it’s sort of a bit of an outlier.
Now, when you’re looking at the detail, so jobs growth was about 15,000, and we were
expecting about 20,000.
Now, unemployment data does bump around a bit, I will say that.
I think when you and I have spoken previously, when I used to be on a trading floor, we used
to take bets on what we thought the number was and there was no real rhyme or reason.
You know, so it can bounce around a bit.
But what was interesting, what’s interesting for the economy is that it’s, you know, we’ve
been seeing a pick up in the consumer.
So you and I are spending more.
And also, this data kind of unravels a bit.
And this was in the Reserve Bank minutes, board minutes for the last meeting, that there’s been a slowdown in the government jobs and the government funded jobs.
So you think of the care economy, as they call it, like the NDIS, aged care, health,
but also bureaucracy.
So basically, four out of five jobs in the last two years has been created because of this economy.
And now basically government jobs or government funded jobs.
Correct.
Right.
And so that’s now slowing down, which means private sectors, the place where people are
getting jobs from here on in.
And I guess we in the private sector don’t hire as many people.
So depending on what people do.
Well, things are tough in the private sector at the moment.
So here’s what interests me, Peta.
Why are economic commentators saying this will change the equation when it comes to
the cash rate from the Reserve Bank, which, as everyone knows, has a significant effect on what my mortgage interest rates are.
Why will this affect that?
So you’ve got to remember what the Reserve Bank is trying to achieve with lower or higher interest rates.
And that’s their mandate is around inflation, the Australian dollar, and employment.
So this is one of those kind of factors.
And essentially the Reserve Bank Governor came out yesterday and she actually did say that policy is marginally tight.
So what that means for you and I with mortgages is there’s possibly one more rate cut coming.
Now that was pushed right out to next year after that inflation print that we had a few weeks ago, which surprised everyone, which was a bit higher than expected.
And essentially before this data came out, the market was pricing the possibility of
another interest rate cut at about 39%.
And now it’s about 70%.
So November and December meetings are in play.
We could see this.
The quarterly inflation print comes out in a few more weeks.
And that’s what they’ll be watching.
So we’ll know really in November what the RBA intends to do with the cash weight, which
will change the equation or may not for people with a mortgage.
Correct.
Peta, I really appreciate your help walking me through the mysteries of economics.
Peta Tilse, thank you very much once again.
Good on you, Steve.
Thank you.
Peta Tilse is Head of Funds Management at NatGen.

ABC Radio Brisbane. 
Before we look at the concerns about the pushing up of house prices, the RBA, the Reserve Bank, announced yesterday no change to the cash rate. 
So what does this mean for you and me? 
Peter Tilse Head of Funds Management at NatGen. 
What it means for you and me is our mortgages stay the same, Steve, so nothing done there. 
What was interesting is the why, of course. 
If we sort of cast our minds back about a week or so, the monthly inflation data came out and prior to that data coming out, there was a 70% chance that the November meeting we would see a rate cut. 
So that’s pretty much off the table now. 
Post that inflation data, it’s the chance of November rate cuts next to none. 
We are just expecting probably a 30% chance of an interest rate cut sometime next year. What we saw in that data, our Netflix costs are up. 
So that’s annualised, it’s up 9.4%. 
So although that’s not something that we all need to have in our households, that was something that stood out, wage costs are up. 
And they look at it in terms of what they call unit labour costs and that just means 
that whatever we’re doing, what’s the output we’re getting for it. 
So if you think of building a house or whatever and your trade only comes for a couple of days a week and then serves the rest of the week, well, that’s not being super productive because you’re only getting them working two or three days a week instead of five days a week like we would ordinarily. 
Little things like that, but it all adds up and it all is all inflationary. 
But what we also saw too is that household demand is growing faster than they expected. 
So that means what we’re buying as you and I is increasing more so. 
And that was a bit of a shock because previously it was actually government spending. 
That’s been kind of driving the economy. The unemployment rate, so that’s still sitting around about that 4.2 percent level, which is, I guess, a bit higher than the sort of 4.1 we’ve been at. 
But it’s still considered around about that full employment level. 
So they are watching the employment data and that could possibly be the one thing 
that might trigger them moving in the future if that continues to sort of stagnate, I guess. And yeah, the economy is growing stronger than expected. 
So there really was no real reason to move. 
So they didn’t. And the inflation data is the monthly data. 
So it’s a bit more volatile, but they’ll be watching that quarterly number when it comes out toward the end of the month or later on in October. 
Now, the day before yesterday, Treasurer Jim Chalmers gave the very strong impression that he felt inflation, that the government, the actions of the government have conquered or beaten inflation. 
On the basis of the RBA’s lack of movement yesterday, is that a reasonable position? 
Probably not, because I’ve just said, you know, we’ve still got electricity costs rising and all these other sort of things rising. 
And these are the components that feed into it. 
So is it likely that electricity costs are going to continue to rise? 
I think so, yeah, because at the end of the day, the amount of changes that are happening within the grid with net zero, etc., increasing generation with whether it’s your rooftop solar or whether it’s wind farms, etc. 
Networks have to be upgraded. 
That all costs money. 
There’s demand for those types of components. 
But, you know, it all just adds up. 
It all just increases. 
So it’s short of government subsidies, which are band-aids. 
The real costs are still there. 
Now, you’re in commercial property. 
Let me ask you about residential property. 
The cost of housing is continuing to nearly 1% a month here in Brisbane in a month on month. 
That’s, you know, what does this reveal? 
Peter Tilse supply demand, Steve, anything that moves price, it’s all to do with supply and demand. 
We don’t have the supply coming online to fulfill the demand. 
So we’ve been this this number is expected to keep increasing because we just don’t have the bandwidth to increase supply. 
So and we’ve got half a million people coming into the country every year 
and they all need to live somewhere. 
And whether they’re all in Queensland or Southeast Queensland, they’re not. 
But yeah, and we’ve also got a lot of things being built at the moment, 
a lot of infrastructure like, you know, I mean, gosh, cast your eyes around the state and you’ve got things like the Tumbo Hospital being built,you got Hospitals being built, you’re getting road upgrades, all of these other sort of things which creates demand for concrete aggregate and steel and everything else. 
And it all just creates demand for those products. 
And again, the more demand for things, prices increase. 
And yeah, it’s it’s kind of like a bit of a vicious cycle. 
So bottom line, everything is very hot and we’re not talking about the weather. 
That’s a good way to put it. Yes. 
Peter Tilse, thank you very much for your time. 
Pleasure, Steve. 
Peter Tilse is head of funds management at NatGen.

Australian banks are offering a sweet deal to certain professions. If you’re a doctor or a lawyer,
perhaps in financial services, or even a pharmacist, Australia’s banks are revealed that they will
write you a mortgage without the need for mortgage insurance. Peta Tilse is head of funds management at NatGen. Peta, what is Lenders Mortgage Insurance or LMI? Morning, Steve. So, Lenders
Mortgage Insurance is what it says it is. So, it is actually insurance for the lender. So,
when you’re buying a property or a house, there’s a certain amount you can borrow
before this Lenders Mortgage Insurance kicks in. So, if we’re talking like a $500,000 house or
property, you might only have a certain amount of deposit. So, let’s say you only had $50,000,
which is 10%, which is a really nice deposit. That means that you’d be borrowing 90% of the
remainder from the bank to purchase the property. So, what actually happens in that instance is
the bank says, well, we would prefer that you had a 20% deposit. So, and then therefore lend you
80%. Because there’s that kind of 10% difference, they want you to take out Lenders Mortgage
Insurance, i.e., insure the bank against your own personal risk. So, protect themselves, basically.
Protect themselves. So, in that instance, like if we’re talking about that $50,000 deposit on the
$500,000 loan, for that $450,000 that the bank’s going to lend you, you get the pleasure of paying
about $9,000 in Lenders Mortgage Insurance to protect the bank. So, that’s what it costs,
roughly, in that circumstance, right, about $9,000. That’s a lot of money.
It sure is on that sort of size line. So, I mean, and don’t forget you’ve got all those other costs
too, like stamp duty and building pest inspections and transfer duties and all sorts of loan
application fees. I never miss you there. But there’s all those other kinds of fees too. So,
when you’re buying that $500,000 property, all of a sudden you’re now up to about $525,000
all these other little bits and pieces of costs. The reason I asked this, Peta, is because the
Commonwealth Bank has just started waiving Lenders Mortgage Insurance for some specific
professions and they stand out in my mind. Which ones? It’s certainly not a journalist, is it, Steve? No. No. Okay. So, when you’re thinking about why banks would be doing something like
this, there’s a business aspect, of course, because the more they can lend, the more money they make.
But there’s also the risk aspect because they don’t want to be giving away money and losing money.
So, they obviously view various professions in a risk light. And if you think about
doctors and dentists, you can’t avoid them, right? So, those guys, because of who they are,
they can borrow up to 95% of a property without having to pay for Lenders Mortgage Insurance.
So, basically, with a 5% deposit, so back on that $500,000 property, they only need to
muster up $25,000. They don’t have to pay the Lenders Mortgage Insurance. So, Australian banks like CBA,
NAB, Westpac, ANZ as well? Yeah. So, and then even last year, apparently, ANZ went a step further and
was waiving Lenders Mortgage Insurance on 145 suburbs around the country. And it’s not
the ones that you think. It’s ones like Hamilton in Brisbane or Turac in Melbourne,
those sorts of suburbs. So, they were happy to double down, I guess, and let people have
smaller deposits there for those homes. So, these are the major, the big four banks saying,
well, if you’re a studied medicine or you’re a lawyer or you’re in financial services,
we think you are no risk to us and therefore you won’t have to, or less risk, and you won’t have
to pay this exorbitant mortgage insurance that all the rest of us, players, have to pay.
That’s it. And they’ve just added, apparently, pharmacists. So, pharmacists are now added to
that list. And apparently, a pharmacist can earn $100,000 instead of $150,000 a year
and still qualify for this exemption. Does this sort of thing happen often in the area of finance,
Peta Tilse? Privileged professions is how I describe it. Well, I don’t know about privileged
professions per se, but it’s, again, it comes down to risk. So, I guess, at the end of the day,
if there’s a recession, a doctor and a dentist will still have a job. Barristers and solicitors
always take care of themselves. Do you know what I mean? So, it’s kind of like, it’s all to do with
the risk aspect of things. And, you know, like a judge and a magistrate, well, they’re still going
to be employed. And it’s really like, if you’re a contractor or something like that, well, you
mightn’t have a job next week. So, they’re really just looking at it from a risk lens.
Peta Tilse is the head of funds management at NatGen. This is 612 ABC, Brisbane, Steve Austin’s
my name. Peta, I have to ask, like, you’re a, you are, you work at the coal face here in Brisbane,
you raise your own kids, you know, you’ve gone through all of the struggles that every other
family has gone through, yet you’re a professional. Is this sort of thing reasonable, Peta Tilse?
Is someone who works in the area of money and property, is this sort of thing reasonable?
Well, look, I mean, it’s commercial, sadly, and, you know, it comes down to risk. And
that’s just the way it’s viewed. And I guess they’ve got data to back certain professions,
certain roles in society, as being sort of, you know, less risk, I guess, in terms of lending.
Peta Tilse is head of funds management at NatGen.