Hedge Clippings |31 October 2025

31 Oct 2025 - FundMonitors.com

Inflation Surprise Upsets the Cup Day Celebrations

It's that time of year again when the Melbourne Cup and the RBA's Cup Day meeting collide - and once again, inflation has thrown a spanner in the works.

31 Oct 2025 - Hedge Clippings |31 October 2025

By: FundMonitors.com

Hedge Clippings | Inflation Surprise Upsets the Cup Day Celebrations - 31 October 2025

It's that time of year again when the Melbourne Cup and the RBA's Cup Day meeting collide - and once again, inflation has thrown a spanner in the works.

On Wednesday, the Australian Bureau of Statistics (ABS) released the September quarter CPI numbers, and they weren't what mortgage holders or rate-cut hopefuls wanted to see. The Consumer Price Index rose 1.3 per cent for the quarter and 3.2 per cent annually, up sharply from 2.1 per cent in June. It marks the highest annual rate since June 2024, when inflation peaked at 3.8 per cent.

The key drivers were Housing (+2.5 per cent), Recreation and Culture (+1.9 per cent), and Transport (+1.2 per cent). Within Housing, electricity prices surged 9.0 per cent, fuelled by the unwinding of temporary rebates and ongoing energy-supply pressures. In other words, the cost-of-living squeeze is far from over.

The detail beneath the headline numbers tells a broader story. Goods inflation climbed from 1.1 per cent to 3.0 per cent, reversing much of the progress made earlier this year as supply chains normalised. Meanwhile, Services inflation - the stickier component watched closely by the RBA - also nudged higher to 3.5 per cent, from 3.3 per cent in June. Combined, the data painted a picture that's uncomfortably hot for a central bank looking for reasons to ease.

Many economists, like borrowers, were caught off guard. But not everyone was surprised. Hedge Clippings caught up with our regular contributors Nick Chaplin of Seed Funds Management and Renny Ellis of Arculus Funds Management, both of whom had been warning that the downtrend in inflation might stall before year-end. Both agree that Governor Michelle Bullock will have no choice but to keep rates on hold next Tuesday, and they go further - suggesting a December cut is off the table too.

As Ellis put it bluntly: "The RBA won't risk credibility by cutting while inflation is still moving the wrong way." Chaplin added that the composition of this quarter's CPI - especially the strength in services and energy - "potentially pushes any talk of easing into mid-2026 at best."

You can watch the video here.

That might sound pessimistic, but their reasoning is sound. The RBA has made it clear that returning inflation sustainably to the 2-3 per cent band is its top priority. A 3.2 per cent print that's trending upward rather than down doesn't leave much room to maneuver.

If anything, the latest figures raise the uncomfortable question of whether the next move could be up rather than down. A small but growing group of economists now think the RBA might have to nudge the cash rate higher in early 2026 if inflation fails to cool. While that remains a minority view, it's no longer unthinkable - especially given the RBA's concern about inflation expectations becoming embedded.

For households, that's hardly welcome news. Mortgage stress is already biting, and consumer sentiment remains fragile. The risk is that households tighten their belts further heading into Christmas, dragging retail sales and discretionary spending lower.

On the flip side, a resilient labour market continues to provide a buffer. Unemployment remains low, wage growth is steady, and migration-driven demand for housing and services keeps economic activity ticking over - even if it also adds fuel to inflation.

Financial markets, meanwhile, have dialled back their earlier optimism. Futures markets are now pricing no rate cuts until the second half of 2026, and the Australian dollar has firmed modestly on expectations that local rates will stay higher for longer.

All told, this week's CPI figures confirm that the inflation battle isn't over - it's merely entered a new phase. While prices aren't surging at 2022 levels, the "last mile" of disinflation is proving the hardest. For the RBA, patience will remain the key word. For borrowers, it means holding tight for a little longer - and hoping that the inflation genie finally goes back into the bottle before the RBA feels compelled to reach for the rate-hike wand again.

Chips to Champagne

On Wednesday, Jonathan Pain alerted us to NVIDIA CEO Jensen Huang's rousing presentation in Washington D.C., outlining how artificial intelligence is reshaping the world faster than most of us (including Hedge Clippings) can process it. You can watch it here - it's long but the first 5-10 minutes will give you a taste if you want to continue.

The market clearly liked what it heard. By the end of the day, NVIDIA's market capitalisation had surged past US $5 trillion -- the first company ever to reach that milestone.

To put that in perspective, NVIDIA added more in value in a single day than the entire market cap of Australia's largest company, the Commonwealth Bank of Australia. Not bad for a business that started out making graphics cards for gamers.

Huang's message was that the old computing model is being replaced by a new one built around accelerated computing and AI -- and investors are buying the story in record numbers. Whether that's sustainable or another chapter in the tech hype cycle is a question for next week, but for now, it's hard not to be impressed.

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Hedge Clippings |24 October 2025

24 Oct 2025 - FundMonitors.com

Prime Minister Anthony Albanese returned from his long-delayed audience with Donald Trump looking pleased -- and perhaps relieved. The headline takeaways were confirmation that Australia remains firmly within the AUKUS fold and a new...

24 Oct 2025 - Hedge Clippings |24 October 2025

By: FundMonitors.com

Hedge Clippings | 24 October 2025

Albanese's Washington Waltz

Prime Minister Anthony Albanese returned from his long-delayed audience with Donald Trump looking pleased -- and perhaps relieved. The headline takeaways were confirmation that Australia remains firmly within the AUKUS fold and a new rare-earth minerals partnership aimed at cementing our role in the global supply chain. Both announcements tick diplomatic boxes and offer a political win-win narrative at home: defence strength and economic opportunity. But they also come with heavy price tags, and even heavier geopolitical baggage.

On AUKUS, Trump's assurance that the deal will continue may ease Canberra's nerves -- for now. But the reality remains that our nuclear-powered submarines are still many years, many billions, and several elections away. Even with bipartisan US support, the budgetary impact will be massive, and the timeline uncertain, even if the strategic and defence logic is inevitable. The promise of "interoperability" sounds impressive, but it translates into a dependency on US technology, training, and politics that's unlikely to get simpler under a second Trump presidency.

The rare-earths agreement, meanwhile, sent a brief shiver of excitement through the mining sector. Australia already sits on a treasure trove of the minerals critical to EVs, batteries, and defence technology, and Washington's push to reduce reliance on China gives the deal global relevance. But as always, the devil lies in the processing. If Canberra insists that production move onshore -- as early reports suggest -- the cost and environmental hurdles could easily blunt the commercial enthusiasm. It's one thing to dig; quite another to refine and manufacture competitively.

And then there's Beijing. Neither submarines nor strategic minerals are likely to make Australia's relationship with China any smoother - if anything, exactly the opposite. From Beijing's perspective, AUKUS still looks like containment, and any move to expand critical-mineral supply chains outside its orbit will be viewed through the same lens. Albanese may have brought back contracts and commitments, but not calm.

Trump, for his part, was characteristically unfiltered -- including his barbed (but possibly tongue in cheek) comments about Kevin Rudd, which put him in good, or at least plentiful, company. For Albanese, the trip was a study in diplomacy under pressure: balancing alliances, economic realities, and domestic optics. For Australia, it's another reminder that while Washington handshakes make for good headlines, they often come with an open-ended invoice.

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Hedge Clippings |17 October 2025

17 Oct 2025 - FundMonitors.com

Treasurer Jim Chalmers hasn't had the best of weeks. In politics, timing is everything -- and this week, everything seemed to arrive at once: economic warnings from the RBA, political rebukes from his own side, and data that suggests...

17 Oct 2025 - Hedge Clippings |17 October 2025

By: FundMonitors.com

Hedge Clippings | 17 October 2025

A Week Jim Chalmers Would Rather Forget

Treasurer Jim Chalmers hasn't had the best of weeks. In politics, timing is everything -- and this week, everything seemed to arrive at once: economic warnings from the RBA, political rebukes from his own side, and data that suggests Australia's economy is starting to creak under the weight of its own contradictions.

It started with a backflip that was as inevitable as it was overdue. The Treasurer finally dropped the proposed plan to tax unrealised capital gains in superannuation balances over $3 million (although the amount is irrelevant, it was the concept that was the problem) -- an idea that had baffled economists, infuriated fund managers, and confused just about everyone else. Even among Labor's supporters, the policy looked tone-deaf. The notion that retirees and super funds could be taxed on paper profits, particularly in volatile markets, was always destined for the scrapheap.

In the end, Chalmers bowed to a combination of political reality, a nudge from Paul Keating (never one to stay silent on superannuation), and what insiders describe as a not-so-gentle push from Prime Minister Anthony Albanese himself. The retreat was wrapped in the usual political spin -- "consultation," "refinement," "listening to stakeholders" -- but it was, quite simply, a climbdown from an idea that never should have seen daylight.

Unfortunately for the Treasurer, the week didn't get any easier from there. During a "fireside chat" in New York, RBA Governor Michelle Bullock followed up with a blunt reminder that Australia's fiscal trajectory is unsustainable. Government spending, she warned, is growing faster than national income. The RBA, already worried about sticky inflation, coupled with falling productivity, now faces the added complication of a budget that's not pulling in the same direction. Bullock's comments were unusually pointed, suggesting rising concern inside Martin Place that fiscal policy and monetary policy are working at cross-purposes.

And then came the kicker: fears that inflation is still running hotter than the RBA expected, her tone suggesting that the RBA might be preparing the public for the possibility that rates will stay higher for longer -- something neither homeowners nor the Treasurer will want to hear even if we are still two and a half years away from the next election. Whether Bullock's concerns are confirmed or not will be known on October 29th, when the ABS releases both monthly and quarterly inflation numbers for September. The June quarter annualised number was an encouraging 2.1%, but August's monthly figure (admittedly only partial) was a worrying 3.0%. If that trend continues, the central bank won't be loosening the reins on Melbourne Cup Day, so for anyone backing a rate cut, that might look like a long shot indeed.

They might be encouraged by yesterday's September unemployment rate, which rose to 4.5%, the highest since November 2021. Although still historically tight, it's a signal that the labour market, one of the last bastions of strength in the post-pandemic recovery, may be beginning to soften. Ordinarily, a rise in unemployment might nudge the RBA toward cutting rates to prevent a sharper slowdown -- but if inflation is still above target (or even worse, rising) and with government spending still climbing, the central bank's hands will be tied.

It's a classic economic tug-of-war: growth is faltering, inflation is lingering or rising, and the government's fiscal stance isn't helping either side win. For Chalmers, the optics are rough. After months of claiming Australia's economy is resilient and well-managed, the data is beginning to tell a different story -- one of slowing growth, weakening labour demand, and persistent cost-of-living pressures. The Treasurer can take small comfort in the fact that Australia is hardly alone in facing these challenges, but politically, that won't count. He's lucky the opposition is such a mess.

However, in a single week, Albo has forced him to back down on a politically toxic policy, he's fended off criticism from Keating, the architect of superannuation, and listened to the central bank warn that his budget settings could be fuelling inflation. Add a rising unemployment rate to the mix, and it's no surprise Chalmers might be wishing for a quiet weekend -- perhaps one spent far from the Canberra bubble.

Unfortunately, in the current environment, there's no such thing as a quiet week in economic policy.

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Hedge Clippings |10 October 2025

10 Oct 2025 - FundMonitors.com

The recent collapses of Shield and First Guardian have cast a spotlight on the interwoven responsibilities within the managed fund ecosystem. Regulatory bodies ASIC and APRA are scrutinising every link in the investment chain, such that...

10 Oct 2025 - Hedge Clippings |10 October 2025

By: FundMonitors.com

Hedge Clippings | Friday, 10 October 2025

The recent collapses of Shield and First Guardian have cast a spotlight on the interwoven responsibilities within the managed fund ecosystem. Regulatory bodies ASIC and APRA are scrutinising every link in the investment chain, such that the question arises: Is it time to reassess the role of research houses that are funded by the very product issuers they evaluate?

The aftermath of these failures has to date only seen Macquarie Bank bearing the brunt of financial repercussions, with a substantial payout marking the cost of these missteps. Elsewhere the broader response has been one of deflection rather than accountability. Each party, from research house, to trustees and investment platforms, seems intent on shifting the blame to others to some degree, presumably hoping to evade the regulatory spotlight - or financial penalty.

One key issue is the potential conflict of interest inherent in a system where research houses are compensated by the issuers of the products they assess. This arrangement raises questions about the impartiality and rigor of the research provided. If research houses are beholden to the entities that fund them, can their evaluations truly be trusted?

There is no doubt more to be learned about the specific failures of Shield and First Guardian, but one has to question how, reportedly with no track record, they were able to obtain a research rating to start with?

Another issue lies in a "rating" by itself being enough to gain acceptance on a dealer group's APL, and then acceptance on a platform or platforms - both a pre-requisite to raising meaningful funds from investors - with or without dodgy advisors and/or sales techniques by promoters.

There are multiple other questions and issues along the distribution chain, including who is ultimately responsible for approving a fund for distribution. If the research house is not responsible or disclaims liability, will this lead to trustees and platforms taking over the research function. If so, who pays?

Other issues relate to the "gap" between a fund's approved rating, and its actual performance. How can a fund with long term (say seven year) fourth quartile performance still receive a recommended (or higher) rating? Qualitative assessment must be viewed in light of actual past performance. Even if the disclaimers state that past performance is no guarantee, "let the numbers do the talking" does provide hard evidence.

As a provider of research ourselves, FundMonitors.com is well aware we're potentially tarred with the same brush. However, for the record, our focus is on quantitative performance and risk analysis, and on our "Ratings" tab you can match performance ranking with a range of ratings and recommendations from leading research houses.

This situation calls for a critical examination of the roles and responsibilities across the managed fund landscape. Trustees and platforms must also be held accountable for their part in the due diligence process. Ensuring that each link in the investment chain operates with integrity is crucial not just for regulatory compliance, but for rebuilding trust with investors.

As the industry grapples with these challenges, it becomes evident that a collective effort is needed to realign incentives and responsibilities. Only through such reforms can the managed fund sector hope to prevent future debacles and restore investor confidence.

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Hedge Clippings |03 October 2025

3 Oct 2025 - FundMonitors.com

At its board meeting this week, the RBA kept the cash rate steady at 3.60 per cent - exactly as expected. In fact, so widely anticipated was the decision that it barely rated more than a passing mention in the media.

3 Oct 2025 - Hedge Clippings |03 October 2025

By: FundMonitors.com

Hedge Clippings | Friday, 03 October 2025

At its board meeting this week, the RBA kept the cash rate steady at 3.60 per cent - exactly as expected. In fact, so widely anticipated was the decision that it barely rated more than a passing mention in the media. What caught the RBA's attention was last week's partial monthly inflation number for August, which ticked up to 3.0 per cent - right at the top of their 2-3% target range. That result raises the prospect that the outcome for the full September quarter CPI, due out on October 29 (just in time for the Cup Day meeting), could spoil the party for homeowners still hoping for relief.

Governor Michele Bullock avoided conceding that inflation is on the rise, instead noting more cautiously that "the decline in underlying inflation has slowed." In doing so, she sidestepped any suggestion that the board had jumped the gun by cutting rates in August. She did, however, stress that outside the strong and steady labour market, the broader outlook remains uncertain, but that the RBA remains well placed to respond decisively to local and global developments as needed - giving her cover to move rates in either direction.

That said, if the RBA's next move is up, it will certainly make headlines - and dent the wallets of mortgage holders who have only just banked some repayment relief. Our take is that reversing the direction of rates after three cuts is the last thing the RBA will want to do, so if the September quarter CPI does disappoint, they'll likely hold them steady for longer. Looking ahead, we don't see inflation falling a great deal further, so the best borrowers can realistically hope for is one more cut before Christmas, and if they're very lucky, one more after that.

Adding to Bullock's sense of uncertainty is the outlook offshore. In the US, Donald Trump's tariff policies continue to fuel concerns about inflation, but that's now being compounded by the impact of yet another US government shutdown - with no one quite sure how long this one will drag on. History suggests they're getting longer: Trump's previous effort in his first term lasted 35 days, Clinton's in 1995-96 ran 21 days, and Obama's in 2013 went for 16 days. Go back further, and the tally is just as messy: Reagan presided over eight shutdowns for a total of 14 days, Carter had five for 56, Clinton had two for 26, and this is Trump's fourth - already 40 days in total, and counting.

Beyond the trivia, and the cost to jobs and the economy, the potential is that Jerome Powell and his colleagues at the Fed risk being left without the economic data they need to frame their interest rate decisions. And if central banks are flying blind, that's when investors should fasten their seatbelts.

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Hedge Clippings |26 September 2025

26 Sep 2025 - FundMonitors.com

Across the Pacific, the US economy surprised to the upside in the second quarter. Revised figures show GDP running at an annualised 3.8%, well ahead of the initial 3.3% estimate and the fastest clip in almost two years. The driver was the...

26 Sep 2025 - Hedge Clippings |26 September 2025

By: FundMonitors.com

Hedge Clippings | 26 September 2025 - Helicopter view of the Economy

Across the Pacific, the US economy surprised to the upside in the second quarter. Revised figures show GDP running at an annualised 3.8%, well ahead of the initial 3.3% estimate and the fastest clip in almost two years. The driver was the consumer, with spending up 2.5%, supported by an upswing in investment in intellectual property - particularly software and AI.

Not all sectors pulled their weight, but financial services, information technology, and manufacturing made solid contributions. Economists, however, were quick to point out the obvious caveat: while the data looks strong, its durability is less clear. A still-uncertain trade policy environment, persistent tariff disputes, and the shadow of slowing global demand could yet put a lid on momentum, while the previous week's soft employment numbers, and the upward inflation pressures remain.

Back home, the inflation story also continues to play out. The monthly Consumer Price Index (CPI) indicator rose 3.0% in the 12 months to August 2025, according to the ABS - up from 2.8% in July, and the highest annual rate since July 2024. Housing (+4.5%), food and non-alcoholic beverages (+3.0%), and alcohol and tobacco (+6.0%) were the largest contributors.

The annual trimmed mean inflation rate edged down slightly to 2.6% in August from 2.7% in July, but the CPI excluding volatile items and holiday travel accelerated to 3.4%, compared with 3.2% previously. Housing inflation, in particular, reflected higher electricity costs, with the annual rise skewed by the expiry of one-off rebates. In August last year, households in Queensland, WA and Tasmania were cushioned by State Government rebates of $1000, $400, and $250 respectively. With those programs now finished, out-of-pocket costs have risen, leaving electricity prices up 5.9% year-on-year once rebates are stripped out.

On a monthly basis, however, electricity costs fell 6.3% in August, mainly due to NSW and ACT households receiving the first payments of the extended Commonwealth Energy Bill Relief Fund rebates. The shifting landscape of rebates makes the data noisy, and while the ABS' monthly indicator grabs headlines, the RBA remains more focused on the quarterly numbers - with the September quarter CPI not due until the end of October.

Which begs the question: what will the RBA Board do when it meets next week? Having just cut rates by 0.25% at their last meeting, was the Board a little too quick to bow to pressure from the media and the market? Our experts - Nick Chaplin (Seed Funds Management) and Renny Ellis (Arculus) - might be tempted to say, "I told you so." For now, it seems inevitable that the Board will sit on its hands until at least their November meeting. With some banks and economists starting to backtrack on their expectations of multiple cuts before Christmas, the latest inflation uptick adds an uncomfortable wrinkle.

Maybe only one at the most?

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Hedge Clippings |19 September 2025

19 Sep 2025 - FundMonitors.com

The US Federal Reserve did what markets had been anticipating - and Donald Trump has been crying out for - cutting rates by 25 bps and flagging that two more are on the way. Trump will claim the credit no doubt, and his new FED appointee...

19 Sep 2025 - Hedge Clippings |19 September 2025

By: FundMonitors.com

Hedge Clippings | 19 September 2025

Hedge Clippings - All about the Donald!

The US Federal Reserve did what markets had been anticipating - and Donald Trump has been crying out for - cutting rates by 25 bps and flagging that two more are on the way. Trump will claim the credit no doubt, and his new FED appointee Stephen Miren - direct from his day job at the White House - voted against the move, instead arguing for a .50% cut. However, Jerome Powell stuck to his guns, and it went by the numbers, 11-1 in favour of 0.25%. The move came off the back of weaker employment numbers as job growth has slowed, partly due to Trump's immigration policy, and despite stronger inflation, which Powell described as "somewhat elevated".

But the complication is tariffs. While Trump won't admit it, his trade barriers are acting as a tax on consumers, pushing up the cost of goods and feeding through to inflation. So, while the Fed is easing with one hand, they're fighting a tariff policy that is tightening the screws with the other. For investors, it's a case of celebrating cheaper money while simultaneously wondering what it says about the health of the US economy - and whether tariff-induced inflation could yet bite harder.

Still on Trump, across the Atlantic, the UK was busy polishing the silverware for his visit to Windsor Castle. King Charles, who has seen his fair share of world leaders, rolled out a stunningly lavish welcome. The photo-ops were dutifully staged, but one can't help speculating what was said behind closed doors once the motorcade departed. Did Charles turn to Camilla and mutter, "Thank goodness that's over", or perhaps, "Best to count the cutlery." Sadly, we'll never know.

Jokes aside, markets remain in the uncomfortable space between policy and politics. Rate cuts are meant to provide reassurance, but they also underline fragility. Trade barriers are meant to project strength, but they tend to hurt the very economies that impose them, and the people who voted for them. And while royal pageantry makes for colourful headlines, investors would do well to tune out the theatre.

As we often say, "let the numbers do the talking". Right now, in the US those numbers point to an uneasy mix: slowing growth, stubborn inflation risks, and the hope that monetary stimulus buys enough time for the economy to adjust. Whether it does so depends less on the pomp at Windsor, and more on how long consumers and businesses can shoulder the contradictions of easy money, and expensive trade.

What's next on the local front? Albo's off to New York, where he's hoping to have a more successful time persuading Donald to see his point of view than he did this week while trying to keep PNG and Vanuatu out of the clutches of Beijing. Hopefully (not that hope is a reliable strategy), Trump, fresh from Windsor, will still have his warm and fuzzy side on show.

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Hedge Clippings |12 September 2025

12 Sep 2025 - FundMonitors.com

The Federal Reserve faces a delicate balancing act ahead of its September meeting: inflation remains stubbornly above target while the US labour market shows signs of weakening. Markets are betting on a rate cut, but whether it marks the...

12 Sep 2025 - Hedge Clippings |12 September 2025

By: FundMonitors.com

Hedge Clippings | 12 September 2025

All Eyes on the Fed:

Inflation's still sticky, jobs are wobbling, but the Fed's next move should make The Donald happy.

Markets were given plenty to chew on last night with the latest batch of US data - and the reaction was as mixed as you'd expect when inflation is still running hot, but the jobs market looks increasingly fragile.

Headline CPI rose 2.9% year-on-year in August, with core inflation (stripping out food and energy) at 3.1%. That's down from earlier in the year, but still well above the Fed's 2% comfort zone. The message? Inflation isn't beaten yet.

On the other side of the ledger, the labour market is flashing warning signs. Weekly jobless claims jumped to 263,000, the highest in almost four years, and previous payroll numbers have been revised down. Taken together, the picture is of an economy where price pressures remain sticky, but the jobs engine is beginning to sputter.

For the Federal Reserve, which meets again on 17 September, it's an uncomfortable balancing act. Their dual mandate - stable prices and maximum employment - is being tugged in different directions. Inflation argues for caution. The jobs data suggests the Fed may need to move sooner rather than later to ease financial conditions.

Markets, unsurprisingly, are betting the Fed will cut. A Reuters survey of economists puts the chance of a 25 basis point reduction at the next meeting as a near-certainty, with more to follow before year-end. Futures markets are broadly aligned, reflecting growing confidence that Jerome Powell and his colleagues will err on the side of supporting employment, even if inflation hasn't quite settled back to target.

But don't bank on a straight line of cuts. The Fed has been stung before by easing too soon, only to see inflation flare up again. With oil prices creeping higher and service inflation stubborn, there's little appetite in Washington for a repeat. Expect plenty of "data-dependent" caveats in Powell's press conference, even if the widely-expected cut is delivered.

For investors, the message is twofold. First, rate cuts may be back on the table, but they're unlikely to come in a rush. Second, the shifting balance between inflation and employment means volatility is likely to remain elevated. Bonds have already rallied on the jobs news, while equities are oscillating between relief that cuts are coming, and concern that inflation is persistent and possibly rising further, while the underlying economy is losing steam.

All in all, the September Fed meeting is shaping up as one of the most closely watched in recent memory. A cut looks more likely than not - but whether it's the start of a cycle, or a cautious one-off, remains very much an open question.

If there is a cut, it will be welcome news for The Donald, who, outside of being able to impose tariffs at will, hasn't had much luck influencing the Fed as he'd like to. All up, he's had a tough week with his mate Putin launching drones into Poland, (a US ally and NATO member), Netanyahu attacking Qatar, (home of America's largest air base in the Middle East), and high-profile MAGA supporter Charlie Kirk being assassinated at home.

So a cut next week while he's on a visit to the UK for a two-day stay with King Charles at Windsor Castle should cheer him up a bit. Meanwhile, his ambitions for a Nobel Peace Prize are not looking too good.

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Hedge Clippings | 05 September 2025

5 Sep 2025 - FundMonitors.com

Australia's economy found some momentum in the June quarter, with GDP rising 0.6 per cent (seasonally adjusted, chain volume) to leave annual growth at 1.8 per cent. For the 2024-25 financial year, the economy expanded by 1.3 per cent,...

5 Sep 2025 - Hedge Clippings | 05 September 2025

By: FundMonitors.com

Hedge Clippings | 05 September 2025

Economic Growth Rebounds, but Rate Cuts Still a Waiting Game

Australia's economy found some momentum in the June quarter, with GDP rising 0.6 per cent (seasonally adjusted, chain volume) to leave annual growth at 1.8 per cent. For the 2024-25 financial year, the economy expanded by 1.3 per cent, according to this week's figures from the ABS.

Tom Lay, head of national accounts at the ABS, noted that "economic growth rebounded in the June quarter following subdued growth in the March quarter, which was heavily impacted by weather events." In other words, the headline numbers suggest the economy is not rolling over, but nor is it firing on all cylinders.

For monetary policy watchers, the timing is tricky. With the next RBA board meeting set for 29/30th of September, there are precious few key data releases between now and then. August's monthly CPI will provide a guide, but as it still won't contain the full data set until November, it will have to wait the all-important September quarterly inflation figures, which don't arrive until the 29th of October--just days before the RBA's November meeting, which, as usual, coincides with Melbourne Cup day.

That effectively leaves the RBA on the sidelines for now. While the latest GDP result offers some reassurance that growth hasn't flatlined, inflation dynamics will remain the key driver. Without the benefit of fresh quarterly CPI data, Michele Bullock and her colleagues are unlikely to cut rates in September. Market participants will therefore be circling November as the next realistic window for a move--if inflation co-operates.

In short, the economy has shown a touch more resilience, but borrowers may need to sit tight a little longer before any further relief on rates from the current 3.6% materialises. By then of course things might be clearer for Jerome Powell in the US, although it's fair to say that the only guarantee there is that Donald Trump's tariffs will loom large over their inflationary outcome.

As he will over the composition of the FED board itself.

There's rarely a dull day in Trumpland, or for that matter, Trump's World, although this week even The Donald Show was upstaged by President Xi and his cohorts in China. Meanwhile, it looks like Albo's travel plans to the UN in New York may yet include a long-awaited, and possibly overdue, meeting with the US President - as long as Trump's not too busy preparing for his own State visit to the UK, and a weekend in Windsor.

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Hedge Clippings |29 August 2025

29 Aug 2025 - FundMonitors.com

The Reserve Bank of Australia has long insisted that monetary policy is about patience and judgement. Yet when it cut interest rates earlier this month, patience was nowhere to be seen.

29 Aug 2025 - Hedge Clippings |29 August 2025

By: FundMonitors.com

Hedge Clippings | 29 August 2025

RBA Cuts First, Thinks Later

The Reserve Bank of Australia has long insisted that monetary policy is about patience and judgement. Yet when it cut interest rates earlier this month, patience was nowhere to be seen. Instead, Michele Bullock and her colleagues looked like they had finally caved under months of pressure - from homeowners wishing for lower mortgage payments, economists desperate to be proven right, and a Treasurer who could barely hide his eagerness for lower rates.

The applause was still ringing when the Australian Bureau of Statistics spoiled the party. July's inflation print came in at 2.8% annualised, up from the previous month, thanks largely to the expiry of the government's energy relief measures. In other words, exactly the kind of blip anyone paying attention could have anticipated.

The predictable surprise

The CPI spike - although monthly and therefore only covering part of the full basket of goods and services in the quarterly figures - wasn't a bolt from the blue. Everyone knew the energy subsidies ended in June. Everyone knew that would artificially bump July's inflation number. Yet the RBA still pulled the trigger a month too early, undermining its own credibility.

The whole point of central banking is to take the long view, to filter out the noise, to resist the temptation to "do something" simply because the mob demands it. On that score, this month's decision was a failure.

The few (or two) who stood firm

Not everyone was fooled. Among the chorus calling for cuts, Renny Ellis of Arculus Fund Management and Nick Chaplin of Seed Funds Management were notably cautious. While their peers cheered for immediate rate relief, Ellis and Chaplin argued in both our July and August video interviews that Michele Bullock should have "sat on her hands" and waited.

Their logic was blunt but correct. The lagged effects of earlier hikes were still feeding through the economy. The CPI would be distorted by expiring subsidies. Cutting before that noise cleared would be premature. Events have proved them right. The July data has handed them a victory that looks less like contrarian bravado than plain common sense.

Looking forward, with wages locked in for annual increases of at least three and a half per cent, low unemployment and zero productivity growth, inflation is likely here to stay.

The real cost

The risk isn't this single inflation print - it's the signal the RBA has sent. Central banks don't just move rates; they set expectations. When they wobble, markets wobble with them. Cutting ahead of a predictable distortion makes the RBA look reactive, not deliberate. It tells households and investors that the Bank can be pushed off course if the headlines get loud enough.

If inflation proves sticky - and history suggests it rarely fades neatly on cue - the worst case is that the Bank may have to reverse course, hiking again just months after easing. That would whipsaw borrowers and shred what remains of its credibility. Even if inflation eases again, the damage to independence has been done.

Independence under fire

The irony is that patience would have cost the RBA nothing. Waiting a few weeks for the July data to wash through would have allowed it to cut with confidence. Instead, it jumped first, and is now left explaining itself.

Ellis and Chaplin were the outliers who saw this coming. They warned against haste, and they were right. The central bank, having previously kept a steady hand and resisted the noisy clamour from the market and economists, acted more like a weather vane, twisting in the breeze of public pressure.

Independence isn't just about who makes the decision, but when and why. On that test, the RBA failed. And next time the clamour rises, Australians might reasonably ask: is the Bank running monetary policy for the economy - or for the headlines?

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