Will the RBA hold rates?

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But what explains the gap between the price of Brent Crude and petrol prices throughout the world? And what millions of Australians could be missing about their super funds? Welcome to ABC Business Daily. I'm Steph Charmers and I'm ABC Business Reporter Lynn Lynn. Thanks for joining us Lynn. As we mentioned, we've got the Reserve Bank in the next couple of hours I think gathering around the board table to kick off discussions ahead of the decision tomorrow. Really the market expectations seem to be that interest rates will be left on hold. What's behind the thinking and what do you expect going to be top of mind as they kick off these discussions? Yeah, indeed. I think that most of it will be around how the Reserve Bank looks at inflation because when we look at the most recent numbers, they are still both in terms of the headline, which is at 3.9% the core or the trimmed mean 3.6%. Those numbers are still well above the RBA's target band of 2 to 3%. But they did come in lower than what the market was expecting and also importantly lower than what the RBA itself was forecasting when it put out its last forecasts back in May. You will get a new set of forecasts during this week's meeting as well. But I think that could give the RBA that room to say, okay, we will give it a bit of space as Michelle Bullock has said in the past. Wait and see how the three successive interest rates that we've already had earlier in the year, how it permeates through the wider economy. I mean, we know that there are long and variable lags between an interest rate being instituted and then how it then flows through to the wider economy. So I think that seems to be the perception coming through from economists. Many are saying that expect just like the last meeting, Steph, that it's likely to be what they call a hawkish hold, right, which is that the cash rate will stay steady at 4.35%, but that Michelle Bullock is still going to be talking very tough on inflation and on keeping that kind of tightening bias, if you like. Yeah, I think as you say, there's no real reason yet for them to signal that they're changing their tune in any way, but they perhaps have a bit of ammunition there to sit on their hands as they've been signaling in the lead up. I was reading a note from ANZ's Head of Australian Economics Adam Boychan and he's kind of outlined what ANZ is predicting for those economic forecasts that you mentioned that'll be in that quarterly statement on monetary policy. And as you say compared to May, they see that the trimmed mean is actually lower than they expected. So they expect that to be revised down for the current quarter and the next quarter. And then they expect that those forecasts to roughly remain the same. I guess do you think it could be a unanimous decision or will they be debating a hike or a hold? Do you think even though they expectations are they won't move? Yeah, it's really interesting because if we think about, I guess, the most hawkish of the Big Four banks, it was Westpac, right? Lucy Ellis, the chief economist there, they had been predicting that there would be two additional interest rate hikes this year, but they've since revised that and now they're forecasting a potential cut next year, like far down the next year, right? But I think one thing that people might be wondering is what is happening in the housing market and how that then might inform the decision. And we know that the RBA does not target house prices, right? But also Michelle Bullock has said that they're looking at how the housing downturn then impacts on household spending and also investment decisions. But I think it was really interesting. The comments she made at the last meeting, which was in late July, where she acknowledged that the loosening in the market was more than they had anticipated, but she put out a number of caveats. She said, yes, we are seeing some of the falls, particularly in the two largest cities, Sydney and Melbourne. But if you look across the country, particularly medium and smaller capital cities, they've been holding up. And if you look at the year to date, the property prices are on average are actually still increasing, then she makes the point about those in negative equity, right? So, you know, meaning your own property now that is potentially worth less than when you bought it. She said that that's still showing in the data has been very limited, less than one percent, she said. And then also their data is suggesting that borrowers still have a lot of financial buffers. So when you take all of that, and then also Steph, I don't know if you saw the household spending numbers as well, a very volatile set of numbers, but still for June, it did surprise. And we saw that household spending rose 0.8% month on month. And the analysis from Combank suggests that quite a bit of that came from discretionary spending. So whilst we have seen time and time again that consumer sentiment is very low in the hard data, perhaps they're not seeing that yet. So again, that is perhaps another reason why the Reserve Bank might be wanting to just hold Pat for now and wait to see more of that data coming through. Yeah. And another aspect that the Reserve Bank is obviously focusing on as well is the jobs market. They've got that dual mandate to maintain full employment consistent with low inflation as well. That unemployment figures are slightly above where their forecasts were, but that perhaps takes some of the pressure off them as well, doesn't it? Because they would never like to say it, but having a really strong jobs market with high inflation does make it a bit difficult. Yeah, indeed. Indeed. And then it's interesting because we are right in the midst of the earnings season. We'll have Commonwealth Bank on Wednesday reporting its full year earnings. And I think that's a really important set of results, because it can probably tell us a little bit more about how the housing market is tracking, how the economy is tracking. And we also got WestPak. They gave us their trading update. So their quarterly update, really interesting to see that similar to some of the other information we're getting from some of the other banks like NAB, they're saying that their mortgage applications are down 20% since the federal budget. Yeah, that was interesting. And they've also forecast out next year where they see housing credit growth going. So for the current financial year, so that's to the end of next June, they see overall housing credit growth slowing to 4.7%. That's compared to 6.8%. In the last year, and owner occupiers and investors are kind of roughly similar there. But then if you look at the 2028 financial year, they see owner occupier housing credit being much stronger than investor housing credit. So they're obviously, you know, thinking that those budget changes are going to have a long term impact on investor home loan applications. So as you say, we'll get a pulse check on corporate Australia and the housing market when we get those CBA results. So that'll be interesting to see what that tells us about whether this is a broader theme in terms of investor housing in particular coming off the boil. And as you say, Commonwealth Bank, not only, you know, one of our biggest companies, but a major employer in Australia as well. So that should give us a good check of whether the economy is heading. Also affecting the economy are oil prices. And we've heard some developments in the state of Humours and with the negotiations or non negotiations between Iran and the US. What's been happening in the strait? We've been getting lots and lots of updates, but it sounds like in terms of the negotiations that Iran is having with Oman that they are in the final stages of some sort of a deal that might pave the way for restoring safe passage through the critical strait of Humours. But also we heard from Iranian officials saying we are not directly talking with the US and we are not opening these waterways until Washington meets a whole set of conditions, including providing compensation for the damage caused by the US attacks. We also heard at the weekend from the Secretary of Iran's top national security body. He had a number of other demands including the US removing that naval blockade in the Gulf lifting sanctions on Iran, releasing frozen Iranian assets that, you know, the US would not only stop its aggression against to run, but also its allies. So we know that as far as the market reaction is concerned, it jumps on every single headline. And this morning we've seen oil futures back up and running, and I think it's about one US dollar to the international bench market, the Brent crude. You know, it's just so uncertain. I think that's just really the way to put it. It's really uncertain. It's unclear exactly what is happening in terms of the rhetoric coming from the US as well. Last week we had the Treasury Secretary Scott Besson saying they were very close. Certainly, the US president sounded very confident. And then today he gave an interview to news outlet Axios saying that they are only semi negotiating with Iran. So I think taken all together, we are still very much in a weight and sea mode as far as the market is concerned in terms of where oil is headed, right? But Steph, I do think now where five months into this war, we know that stockpiles have been depleted. So any major escalation should have, you would think, a great impact, you know, on oil prices as well. So that is something to watch. Yeah, I think when you say where five months in it really does feel like we thought there would be some sort of concrete development beyond this point now, but as you say, it does very much feel like we're still in this at the whim of headlines mode in terms of prices. But of course, as you said, there's the physical situation with how much oil is left in stockpiles and then how the refiners are dealing with that oil and what they're charging for it. What are we seeing from the refiners that then actually is hitting people at the petrol bowser? Yeah. So I mean, petrol prices around the globe still remains quite high. And one of the reasons, according to analysts, is what they call the crack spread, which is essentially the margin that refiners make between the crude oil that they buy at the wholesale price, and the petrol, the diesel, the jet fuel that they then sell. We've seen it in some of the earnings results of, you know, big oil producers around the world that they're refining margins at a very, very high level, which means that these refiners are making a lot more money, even as we see that that underlying price in terms of oil prices is coming off a bit. So I think that's also something that's worth bearing in mind when we think about household costs and inflation as well. Yeah. And the ABC has a fuel tracker, which they've been maintaining and updating over the course of this war. And we of course, in recent weeks had the fuel excised discount finish, I believe it was this time last week that completely ended. And we saw prices spike kind of immediately up to around $2.11 for daily unleaded 91 prices. That's come off a couple of cents. But yeah, as you say, even though the underlying oil price is falling, it's not necessarily going to flow through to people's pockets. And then of course, which we keep talking about, but it still doesn't feel like we're there yet, the second round effects coming through the economy, you know, they're not going away either, and they probably haven't filtered through fully either. Yeah. And I think again, if you think back to, you know, the RBA meeting today and tomorrow, I think this is going to be another one of the main things that they will look at in terms of an external risk on the horizon. Because I think the last time they met, this was right after there was this announcement about the MOU, but of course, that's now no more. And so we are back in a more uncertain time than we were about five weeks ago. Yeah, you certainly don't envy them having to make these forecasts as well, those quarterly forecasts out, you know, a year or more trying to predict what's going to happen when things seem to be changing on a daily basis. Let's look at another story that's caught my eye this morning. This is from our colleague, Nassim Karem. She's quite invested in looking into the superannuation space, and obviously, super's an issue for all Australians who are working and putting their money towards their retirement savings. A survey has found that many Australians might not know where their super could go after they die. Could you talk us through what this is about? Well, stuff. It's called the death benefit nomination and super consumers did a national survey of about 5,000 people. This was done late last year. And what I found was pretty stark. So it said that 67% of people had not been contacted at all by their super fund about making a binding death benefit nomination. 10% had, 10% said they could not remember. And just 13% said they had already done one. So all in all, that means that 87% of the people surveyed did not report having a binding death benefit nomination. Yeah. And obviously with huge numbers in the super system, extrapolating out that 87% who do not report having a binding nomination, that could be about 15.7 million people that may not have a binding death benefit nomination. And as you say, people might not even know this is something they need to have. It's really for if you pass away, where does your super money go? And you might think that, oh, that'll be covered by my will or it's just obvious. Or I've made, I've, you know, filled in a box. But there's some super funds have something called a non-binding nomination. But that can actually be overridden in certain cases. So I think this would be particularly relevant to people who might have a tricky family circumstance where they perhaps had a previous partner or they have a child that they don't want to leave the money to. It's in those circumstances where your wishes may not be fulfilled unless you have this legally binding nomination. And Nissim did some reporting into this last year as well and found out just how arduous it really is to make these binding nominations. You need multiple signatories like physical signatures, which in 2026 is obviously, you know, not a common process of needing to do that to mail it back to the fund. So it was really the audience response. I think she got from that that led her to keep following this. And some super members in our calling on the government to change the way it works. Some people might have even gone to all that effort, made the binding nomination and then not realized that in some cases it actually lapses after a couple of years. So their wishes wouldn't have even been fulfilled if they had passed away. So it is a really big and growing issue. I think obviously the super system has only gotten bigger over time and with the aging population we're going to see more people than ever with super passing away and then passing that money on. How do you think this kind of relates to, I guess the broader issue we're seeing now with super such a big system now, but not always kind of at the forefront of dealing with customers and customer issues. Yeah, I mean, I think that some of the comments that Asik has been making on this front is pertinent. So, you know, as you say, we've got so many super funds now, so much money tied up into the funds as well. So, you know, you've got some own constant of Asik saying the super funds should be come and should be more proactive in terms of ensuring that that information is communicated in a streamlined manner for their members. So I think that's something to take away. And I guess reading the article, I'm just wondering, what should people do? Should they be calling their super funds to figure out whether or not they have a valid death benefit nomination? In a place. I think even down to do you have a will, I think, is a question a lot of people should be asking. And then if you've made a non-binding nomination, that obviously means you have some idea of where you want your super to go. I guess just checking what type of nomination you have if it is non-binding, do you want to go through the process of making a binding nomination and talking to your fund? But yeah, I think we're going to be seeing these issues with super funds and the way customers can interact with them and how easy or not easy that is to do essentially, because people are very used to logging onto their banking app and being able to quickly move their money around. That isn't really the case with a lot of superannuation funds. And we saw the case of Hesta last year, which did a huge migration of customers over to a new platform in an effort to make it more user-friendly. But then that caused a whole lot of issues and a major delay there and some really bad consequences for some customers who weren't able to access their funds. So I think Asik is going to be increasingly, as you say, on top of this and trying to motivate these funds to get on the front foot, because we know they do have issues around communicating with customers around death benefits and they've kind of come under fire before for this is obviously a really stressful time in anyone's life when you're dealing with a death benefit. And then that added layer of all the bureaucracy and trying to deal with the forms when you might not have all the information. So yeah, I think the message would be, check what your current situation is and is there anything you can do there to make sure that what you want is going to actually happen. Yeah, especially given that we know that after that review last year, it found that claims with no nomination or non-binding nomination took the longest to process as well. So that's something to keep in mind. Yeah, definitely something for people to remember and get on top of Lynn. Thanks for joining us. That's it for today's episode of ABC Business Daily. We'll be back tomorrow with a special episode recorded on-site at the RBA unpacking the interest rate decision and the big takeaways from the statement on monetary policy. So keep an eye out for that. It will hit your feeds just a little later than usual and you won't want to miss it. Make sure you're following us on ABC Listen or wherever you get your podcasts and if you'd like to send in a question, email [email protected]. See you later Lynn. See you.