NEWS
30 Oct 2026 - Hedge Clippings |30 October 2026
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Hedge Clippings | 30 October 2026 The Melbourne Cup and the Reserve Bank share a Tuesday, with another rate rise looking the shorter-priced bet. September inflation of 4.3% has lifted the odds of a fifth increase this year as high as 90%. Elsewhere, central banks are taking different paths. The Cup Day squeeze: inflation at 4.3% makes the Reserve Bank Tuesday's shortest priced runner. Headline inflation has swung with oil, whilst underlying inflation has crept higher and stayed there. Australians looking for a Melbourne Cup tip next Tuesday may find the shortest odds attached to the Reserve Bank. Unfortunately for borrowers, any winnings from backing another rate rise may already be spoken for by the next mortgage repayment. Wednesday's inflation figures left the RBA with little comfort. Annual headline inflation rose to 4.3% in September from 4.0% in August, with prices up 0.8% in the month. Housing, up 5.2% over the year, was the largest contributor. The quarterly trimmed mean rose 1.0%, above the 0.8% in the Bank's August forecasts, taking the annual rate to 3.7%. Inflation in every capital city is above the 2% to 3% target band, ranging from 4.0% in Melbourne to 5.3% in Hobart. Fuel remains a large part of the problem, rising 9.4% in September and 23.6% over the year. But the pressure is broader: services inflation is 4.1% and non-tradables inflation is 4.5%. An expensive tank of petrol is painful enough; persistent increases across the household budget are harder for both borrowers and the RBA to absorb. Markets lifted the probability of a November rise from around 60% before the release to between 85% and 90% afterwards. All four major banks now expect a 25 basis point increase to 4.85%, the fifth rise this year and the highest cash rate since late 2008. Governor Michele Bullock told Senate Estimates that inflation remained far too high and supply shocks could not be ignored entirely. She also pointed to strong investment in data centres and renewable energy, while weak productivity limits how quickly the economy can grow without adding to inflation. Treasurer Jim Chalmers defended the government's fiscal position, pointing to the Middle East conflict and stronger private investment. Four of every five dollars of demand are private, he noted. Treasury Secretary Jenny Wilkinson said real government spending grew 1.3% over the latest year, against a median of 2.9% this century. Those are relevant distinctions, but inflation responds to total demand relative to supply. Public spending still matters at the margin, especially where it adds demand before expanding productive capacity. Tuesday's race will be over in a few minutes. The interest rate decision will stay with household budgets rather longer. For Mr Albanese and Dr Chalmers, each month of stubborn inflation makes the promise of relief harder to sell. With another rise largely priced in, the new Statement on Monetary Policy deserves close attention. August's forecasts put December headline inflation at 3.6%, and the trimmed mean at 3.3%. If the revisions leave underlying inflation above 3% well into 2027, investors will need to consider how income funds, property holdings and fixed-rate bonds would fare with the cash rate near 5% for longer. Spring stalls: sales fall 20.9%, stock builds and borrowing power shrinks by about $90,000. The spring market is not being swamped by sellers, it is simply not clearing. September home sales fell 20.9% from a year earlier to 39,747, while median selling time rose from 26 to 41 days. New listings fell 7.9%, yet advertised stock increased 19.1%. Homes are taking longer to clear. National values are 5.2% below their March peak, and Sydney is 8.6% below its February high. Four rate rises have also reduced a median income household's borrowing capacity by about $90,000, or 9%. Lower prices do not necessarily make a purchase easier to finance. Slower sales deserve particular attention in property lending. Development loans often rely on completed homes being sold to repay principal. When selling times lengthen, interest continues to accrue, and repayment may arrive later than the lender expected, even if the eventual sale price holds up. Central banks take different paths as Australian rate expectations support the dollar. Australia already has the highest policy rate of the six, and is the most likely to lift it next.
Australia's relatively high rates support the currency. A stronger dollar reduces the local value of unhedged overseas holdings, making currency exposure an important consideration for global equity and credit investors. December remains a focus for several major central banks, but Tuesday's RBA guidance could move Australian markets sooner. If the Governor leaves further rises firmly on the table, Australian short-dated yields could move higher relative to US yields. That difference matters for bond returns and the currency, although rate expectations are only one influence on exchange rates. Oil stays high as markets weigh developments in China, Europe and the Americas. The EIA expects oil to fall by about a third by late 2027, but Australian inflation forecasts cannot bank on it. Brent settled at US$115.32 on Wednesday, almost double its level at the start of the year. JPMorgan attributes part of the price to a geopolitical premium over a fundamental value nearer US$94. OPEC+ is expected to leave December output targets unchanged on Sunday. China's Fifth Plenum offered little on stimulus. Saturday's manufacturing PMI should give Australian resources investors a clearer indication of demand. Germany's Ifo index rose for a sixth month to 90.2, although assessments of current conditions weakened. Brazil's Ibovespa fell 13.88% after Lula won a fourth term, illustrating the risk of positioning around an expected political outcome. Oil prices and AI investment are adding to inflation pressure even as household demand slows. Interest rates cannot directly resolve either, but central banks still have to consider their effects on broader spending, wages and inflation expectations. News | Insights New Funds on FundMonitors.com Manager Insights | East Coast Capital Management September Quarter 2026 Update | FundMonitors and Altor Capital Airlie Australian Share Fund quarterly update | Airlie Funds Management September 2026 Performance News |
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Australia's economy is slowing. Unfortunately, inflation appears reluctant to follow.
23 Oct 2026 - Hedge Clippings |23 October 2026
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Hedge Clippings | 23 October 2026 Slowing down, but still running hot Australia's economy is slowing. Unfortunately, inflation appears reluctant to follow. That leaves the Reserve Bank contemplating another interest rate increase, the Treasurer preparing weaker growth forecasts, and households wondering how much more slowing they are supposed to accommodate. Speaking at today's Citi A50 Australian Economic Forum, Jim Chalmers acknowledged that higher inflation and interest rates would probably mean softer growth and slightly higher unemployment. There was an encouraging qualification: Treasury now expects business investment growth this financial year could exceed 5%, compared with May's forecast of 2.5%. The economy is losing momentum unevenly, with investment providing support while households feel the squeeze. Two days earlier, RBA Deputy Governor Andrew Hauser delivered the less comforting side of that picture. The inflation outlook had become "materially worse" than anticipated in August. Higher oil prices, strong AI-related demand and domestic capacity constraints were all contributing. More concerning was evidence that some businesses increasingly regarded inflation of 3-3½% as normal. Once that expectation influences pricing decisions, bringing inflation down becomes harder. The Treasurer and the RBA can therefore both be right about slowing growth. The disagreement is over how much slowing is necessary, and which policies should deliver it. Chalmers emphasised today that public demand growth had halved last financial year while private demand growth had tripled. That is relevant. It does not, however, settle whether government spending is adding to inflationary pressure. Slower growth in spending still leaves spending growing. And its effect depends on the economy's ability to supply the workers, materials and services being purchased. When capacity is constrained, public spending competes for resources alongside private spending. The RBA responds to the total. Nor does public demand capture the entire fiscal picture. Tax cuts and transfers affect household purchasing power without all appearing as government purchases in the national accounts. The RBA itself notes that budget balances provide a broader indication of fiscal policy's effect because they incorporate taxes and transfers as well as spending. May's Budget projected Commonwealth cash payments of 26.8% of GDP and an underlying cash deficit of $31.5 billion, or 1% of GDP, for 2026 - 27. Those are forecasts awaiting December's update. Neither figure tells us precisely how much inflation fiscal policy causes, and a deficit alone does not establish that policy is becoming more expansionary. But the scale of spending deserves scrutiny alongside the Treasurer's emphasis on its slowing growth. The fair criticism is that fiscal restraint could share more of the work currently being done by interest rates. The government cannot control world oil prices. It can control spending priorities, the targeting of assistance, and whether new commitments are offset elsewhere. Productivity-enhancing investment can expand supply over time, although construction spending adds demand before those benefits arrive. That creates an uncomfortable political choice. Broad relief is popular, but it supports spending when the RBA is trying to restrain it. Better-targeted assistance and credible savings offer a more disciplined response. Claims that Canberra caused all inflation are implausible; the Treasurer's suggestions that its choices have little bearing on the task are equally unconvincing. The housing market shows how uncomfortable this combination has become. Domain's September Quarter House Price Report, released on Thursday, recorded falling median house prices in every capital city - the first simultaneous decline in 15 years. Combined capital city house prices fell 4.7% over the quarter. Domain identified higher interest rates, persistent living costs and changes to housing investment taxes as contributing pressures, with investors pulling back. Albanese and Chalmers may be tempted to present cheaper houses as evidence that their affordability policies are working. Before claiming victory, they should consider whether prospective buyers can actually afford the repayments. Lower prices reduce the deposit and loan required, which certainly helps. But higher mortgage rates reduce borrowing capacity, while persistent inflation eats into the income available to service the loan. For buyers dependent on substantial borrowing, those pressures can swallow the benefit of a cheaper purchase price. Affordability involves more than the number on the sales contract. Meanwhile, existing homeowners face the other side of the equation: falling property values erode their equity, even as repayments remain elevated. Recent buyers with small deposits are particularly exposed. The downturn was already underway before May's Budget, so Canberra cannot claim - or be assigned - all the responsibility. Its tax changes have nevertheless added another pressure to an already weakening market. A smaller deposit hurdle for tomorrow's buyer, a larger repayment burden, and less equity for today's owner. "Thank you, Albanese" may not be quite the electoral endorsement the government had in mind. For fund investors, that uncertainty now has a particularly tangible counterpart. Last week's Hedge Clippings covered the reliability of private asset valuations following the Firmus "fiasco" (which we expect still has a long way to run). This week MA Financial announced that its $106 million MA Secured Real Estate Income Fund would be wound up. Its principal underlying investment, the MA Secured Loan Series, will suspend redemptions from 31 October until at least 31 March 2027. The retail fund's outstanding redemption requests lose their previous priority, with investors instead participating proportionately in the wind-up. MA also cited an insufficient sustainable scale. The notice does not establish investors' ultimate loss, but it establishes that access to their money has changed substantially. The issues facing private credit for real estate and property development are real, but need to be viewed as a separate sector from commercial and corporate private credit lending. While both are subject to valuation concerns and potential liquidity mismatches, the other issues each face are significantly different. Going forward, FundMonitors.com will be allocating the latter to a new Peer Group consisting solely of Corporate Private Credit to give investors and advisors a clear differentiation between the two. Next Wednesday's inflation release will sharpen the debate before the RBA meets in the first week of November for their "Cup Day" meeting. Persistent inflation, followed by a further rate rise will only add to the government's flagging electoral support. News | Insights Quarterly State of Trend report - Q3 2026 | East Coast Capital Management Market Commentary | Glenmore Asset Management September 2026 Performance News |
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16 Oct 2026 - Hedge Clippings |16 October 2026
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Hedge Clippings | 16 October 2026
News | Insights Manager Insights | Princeton Financial Services The 60/40 portfolio isn't broken - it was always incomplete | East Coast Capital Management The fuel price drag continues | Magellan Investment Partners September 2026 Performance News Insync Global Capital Aware Fund Seed Funds Management Financial Income Fund - Incl Franking |
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Those hoping September's US interest-rate increase was a one-off probably found little comfort in this week's release of the Federal Reserve minutes.
9 Oct 2026 - Hedge Clippings | 09 October 2026
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Hedge Clippings | 09 October 2026 The Fed, the RBA and the Politics of Higher Rates Those hoping September's US interest-rate increase was a one-off probably found little comfort in this week's release of the Federal Reserve minutes. The Fed raised its target range by 25 basis points to 3.75 to 4.00% in September, with every voting member in favour. More importantly, most participants thought another increase would probably be appropriate before year-end. Several judged the current rate to be either not restrictive, or only mildly restrictive. That doesn't necessarily mean another rise at the Fed's October meeting due at the end of the month. Governor Christopher Waller said this week there was flexibility over timing, and other Fed officials have indicated December may be more likely. But that rather misses the larger point: the debate has shifted from whether rates have peaked to how much more tightening might be needed, and how quickly. The reasons should sound familiar to Australians. The Fed is worried that inflation remains too persistent. Higher energy prices resulting from the Middle East conflict are part of the problem, but not all of it. Officials also pointed to resilient domestic demand, the extraordinary AI investment boom, rising business costs and evidence that companies have become more successful at passing those costs on to consumers. Short-term inflation expectations are elevated as well. And that matters because central banks can live with temporary inflation shocks; what they fear is those shocks becoming embedded in wages, prices and expectations. Unfortunately for Trump, the calendar isn't especially helpful The US midterm elections are on November 3rd. Trump isn't personally on the ballot, but control of Congress is, and presidents inevitably wear a fair amount of political responsibility for the economy. That makes higher rates awkward. Mortgage repayments, credit cards, car finance and business borrowing are exactly the sort of things voters notice directly. And in car mad America, fuel prices are probably top of the list. And the political backdrop is already uncomfortable. A Reuters/Ipsos poll released this week put Trump's approval rating at 32% and found a substantial enthusiasm gap between people who voted for Kamala Harris in 2024 and Trump voters heading into the midterms. That isn't an election forecast, but it demonstrates how important the economy and cost of living have become politically. Trump, of course, wants much lower interest rates. Yet the Fed is signalling that inflation may require still more restraint. There is an uncomfortable circularity here. Trump wants lower rates because they would ease pressure on households and support economic activity. The Fed is keeping rates high because inflation remains too high. And some of the risks identified by the Fed, energy prices, tariffs and the investment boom associated with AI infrastructure, are not problems monetary policy can solve directly. The Fed cannot produce more oil, settle geopolitical conflicts or build more generating capacity. What it can do is suppress demand sufficiently to stop those price increases spreading through the rest of the economy. Which is exactly what central banks do, however politically inconvenient. Meanwhile, back in Australia... The comparison is striking. The RBA has now increased Australia's cash rate four times during 2026, from 3.60% at the beginning of the year to 4.60% following September's increase. And Michele Bullock's explanation could almost have been written in Washington. Inflation was already too high before the latest energy shock. Domestic spending and investment had been stronger than expected, productivity remained weak, the labour market was still somewhat tight and businesses were reporting cost pressures which they were increasingly passing on to customers. Then came sharply higher global energy prices and rising prices for technology-related goods associated with the AI boom. So perhaps the lesson from both central banks is essentially the same: Energy may have poured petrol on the inflation fire, but it didn't light the match. Both the Fed and the RBA are worried that a series of supposedly temporary shocks is turning into persistent inflation. And both appear prepared to keep policy restrictive rather than risk allowing inflation expectations to become entrenched again. For investors, that argues against assuming that the next move must be down simply because rates have already risen sharply. The Fed minutes leave another US increase this year very much alive. In Australia, the RBA will increasingly want to see what four hikes have already done to housing, household spending and demand. But if inflation refuses to cooperate, the Board has made it perfectly clear that returning inflation to target comes first. Albo might want to take note And then there is the politics. Anthony Albanese might reasonably take an interest in what is happening to Trump, even though the two political situations are obviously very different. Australia's next federal election is expected in 2028. Or about 18 months away. That sounds like plenty of time. Albanese's immediate difficulty is that with a volatile electorate, even many labour voters have lost faith in him. A recent RedBridge/Accent poll put his net favourability at minus 27, Labor's primary vote at 28%, and One Nation at 29%. A broader polling aggregation similarly has Labor and One Nation virtually level on primary vote, although Labor currently retains a narrow two-party-preferred lead over the Coalition. That alone is an extraordinary change from the political landscape at the last election. The government's opponents will continue to prosecute claims of broken election promises and attack Jim Chalmers' budget and tax changes. Labor will argue that global inflation, energy costs and external shocks have played a significant part in the economic squeeze. Ultimately, voters will decide which explanation they believe. But the economic reality is harder to miss, and ultimately the responsibility of the government. If inflation stays sticky, interest rates stay higher for longer. If rates remain higher, mortgage holders, businesses and consumers feel the pain. And if economic activity slows sufficiently to bring inflation down, the government then has to deal with weaker growth and potentially higher unemployment, and the possibility of a recession. None of those is particularly attractive eighteen months out from an election. Then there is Pauline Hanson and One Nation. At the last federal election, the suggestion that One Nation might be competing with Labor for the largest national primary vote would have seemed fanciful. Today it is showing up in actual polling. Whether that persists is another matter entirely, but its emergence changes the political equation for both major parties. Trump is discovering that an economy can look reasonably resilient in the national statistics while it still feels uncomfortable around the kitchen table or at the petrol station. Albanese has considerably longer before Australians vote again, but he faces much the same risk: voters tend to experience the economy through their mortgage, grocery bill and household budget rather than through GDP statistics or Treasury forecasts. As Harold Wilson is reputed to have observed, "a week is a long time in politics". If that's right, eighteen months is a very long time indeed. News | Insights AI, Inflation and a record IPO: Decoding the ASX reporting season | Magellan Investment Partners September 2026 Performance News |
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2 Oct 2026 - Hedge Clippings | 02 October 2026
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Hedge Clippings | 02 October 2026 Who's Fighting Inflation, and who's adding to it? News | Insights Property Update | Australian Secure Capital Fund August 2026 Performance News DAFM Digital Income Fund (Digital Income Class) |
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25 Sep 2026 - Hedge Clippings | 25 September 2026
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Hedge Clippings | 25 September 2026 Bond markets take most of the focus this week. The US 10-year Treasury yield pushed back to levels not seen since before the GFC, Australia's unemployment rate climbed to 4.6% despite employment increasing, and ASIC sharpened its warning to private credit managers. All of which sets up an interesting RBA meeting next Tuesday. Five per cent wasn't the ceiling: The US 10-year keeps climbing The US 10-year Treasury yield reached 5.20% on Thursday, its highest level since 2007, while the 30-year Treasury climbed to 5.48%, its highest since 2004. The move reflects a fairly uncomfortable combination of resilient US growth, inflation concerns, higher energy prices and government borrowing. It has also been part of a wider global bond sell-off rather than an isolated move in US markets. The reason the 10-year matters is that it is one of the main reference points for the global cost of money. When investors can receive around 5% lending to the US government, borrowers elsewhere have to compete with it. Refinancing becomes more expensive and investors expect greater compensation for taking additional credit, liquidity, or duration risk. It is also worth remembering that the Federal Reserve doesn't directly control this end of the market. The Fed can set overnight rates; investors ultimately decide what they are prepared to accept to lend money to the US for ten or thirty years. For most of the post-GFC period, markets became accustomed to unusually cheap money. That era is looking increasingly distant. Five per cent was supposed to be the scary number. The bond market seems to have decided it was more of a speed bump. Yields at these levels are proving a headache for Donald Trump, adding to what was a difficult week for him. His man at the FED has just raised rates against his wishes, US debt now stands at US$40 trillion, and has increased by $2.5 trillion over the past 12 months. If, (and it's a big IF) he wins the upcoming mid-term elections, his promise of $5,000 per adult is estimated to add another $1.2 trillion to next year's figure, adding further upward pressure on bond rates and further juicing up inflation. Elsewhere for Trump, his attempt to silence some of his media critics failed, firstly by a rare show of solidarity from his traditional media supporters, and then by the courts declaring his move unconstitutional. His rambling address to the UN General Assembly lasted almost 40 minutes (the average by his peers is around 15 minutes, and Albanese's earlier this morning lasted 19 minutes) focused on the war with Iran which he started, more than the war in Ukraine which he promised to stop. Both are driving global inflation, which will increase further if he follows through on his threat to limit US diesel exports. ASIC tells private credit the clock is ticking Private credit was back in the spotlight on Tuesday when ASIC Commissioner Simone Constant delivered the keynote address at CAFBA's Commercial Property & Development Finance Summit in Sydney. Her message wasn't particularly subtle: the "clock is ticking". Constant said ASIC is beginning to see the first significant cracks emerge as weaknesses in parts of the sector are tested under tougher conditions. Bathla is the obvious recent example, with 40 private credit funds reportedly exposed to the failed developer to the tune of 3.4bn. ASIC's concerns go considerably further than one borrower. Its review of 28 private credit funds found only four published information about the interest rates or ranges charged to borrowers, fewer than half had detailed written credit, impairment and default-management policies, and only two of the wholesale funds conducted stress testing as part of liquidity-risk management. For a sector ASIC estimates has grown around 500% over the past decade, the regulator's view is that governance, controls and underwriting standards haven't always kept pace. Constant described it rather neatly: parts of the sector have tried to "run before it could walk". Bathla also demonstrates why treating private credit as one homogeneous investment strategy isn't particularly useful. Concentrated lending to a property developer carries very different risks from diversified residential mortgages, corporate lending, medical finance or other asset-backed credit. The label tells you the broad sector, but not the underlying asset class. The loan book - if you can see it - tells you where the risk actually is. Unfortunately, and unhelpfully, the "private credit" label is being used too widely when not all private credit is the same, nor represents the same risk, even though ASIC's general warnings about reporting, valuations, terms and fee transparency are real. Australia added jobs and unemployment still rose. Both can be true. Australia added 39,500 jobs in August, almost twice market expectations, but unemployment still rose from 4.5% to 4.6%. The apparent contradiction is mostly explained by more Australians entering the labour force. Participation increased to 67.1%, meaning employment rose but not quickly enough to absorb everyone looking for work. There was some softness underneath the headline number. Part-time employment rose by 45,800 while full-time employment fell by 6,300. On the other hand, hours worked increased 0.7%, and underemployment edged down to 6.2%. So the labour market is loosening, but it is hardly falling off a cliff. Which leaves the RBA with a problem. The Board meets for 2 days on Monday, with its rate decision due at 2.30pm on Tuesday. The cash rate currently sits at 4.35%, while inflation remains stubbornly above the RBA's 2-3% target and Governor Michele Bullock has warned that some further upside inflation risks appear to be materialising. The Board therefore has evidence of a gradually cooling labour market on one side, and persistent inflation, elevated energy prices and rising global borrowing costs on the other. There is one more complication: the ABS releases the August 2026 CPI at 11.30am next Wednesday, less than a day after the RBA announces its decision. Nothing like making the rate call on Tuesday, and getting the inflation update on Wednesday. As usual, the explanation for the decision may prove just as interesting as the decision itself. With almost 100% of the market, and all the major banks expecting a hike of 0.25%, it is unlikely there will be any surprises, just further pain for borrowers, and pressure on the real estate market. No doubt Jim Chalmers, and Albo on his return from the UN, will have plenty of reasons to deny any responsibility. News | Insights Market Commentary | Insync Fund Managers August 2026 Performance News Bennelong Long Short Equity Fund |
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18 Sep 2026 - Hedge Clippings |18 September 2026
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Hedge Clippings | 18 September 2026 Higher for Longer, Whether We Like It or Not News | Insights Market Commentary | Glenmore Asset Management What the headlines are missing on private credit | Magellan Investment Partners August 2026 Performance News Airlie Australian Share Fund Active ETF (ASX:AASF) |
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11 Sep 2026 - Hedge Clippings | 11 September 2026
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Hedge Clippings | 11 September 2026 Oil closed above $100 again this week on the back of tit-for-tat strikes in the Strait of Hormuz, with Australia more exposed to the price of oil than almost any other developed economy. The RBA's deputy governor told the ABC that the country is "furious" about inflation for good reason, while in the US, strong job numbers and tonight's CPI figure are reshaping the case for a September hike. Oil is back above $100 on direct strikes against Iranian tankers, while Australia consumes more diesel per person than any other OECD economy Brent crude settled above $100 a barrel this week after US Central Command confirmed American forces destroyed Iranian oil tankers in the Gulf of Oman and near Kharg Island, Iran's primary export hub, while Iranian backed Houthis separately attacked Saudi energy facilities. It is Brent's first close above $100 since July, and Iran has vowed to intensify attacks if US strikes continue, a genuine escalation rather than the on-again, off-again diplomacy Hedge Clippings has tracked for months. US diesel hit a record US$5.94 a gallon on the news. The number matters disproportionately for Australia: per OECD data, Australia consumes 1.10 tons of oil equivalent of diesel per capita per annum, the highest of any OECD country and well above the 0.64 average, while CBA research puts Australian diesel consumption at 7.67 barrels per capita, roughly 80% higher than the US and eight times China's. Only around 13% of Australia's diesel is refined domestically, making it one of the world's largest diesel importers, with road transport, mining and agriculture together accounting for the bulk of demand. Every prior Hormuz escalation has fed directly into Australian headline CPI with a lag of one to two months, because diesel touches freight, food logistics and construction costs before it shows up in a fuel bowser, and the CPI. This is not a story to file under "offshore geopolitics." It is a direct input to inflation that the RBA will react to at its next meeting. "People are furious about inflation": Deputy Governor Hauser was unusually blunt, and the market still isn't fully buying the hawkish part RBA Deputy Governor Andrew Hauser told the ABC's 7.30 report on Tuesday that inflation is the economy's "one big problem" and that Australians are, in his words, "furious about inflation": "Everywhere I go, I hear cost, cost, cost, inflation, inflation, inflation, and that's our responsibility. We have to put that right." He named three specific forces keeping inflation elevated, the Middle East crisis, the global AI driven investment boom, and weakness in the economy's supply potential, and made the tightening bias explicit: "We could raise interest rates sharply, we could do it tomorrow," though he stressed the board isn't at that point because it still wants to protect employment gains and avoid an unnecessarily hard landing. Assistant Governor Sarah Hunter made similar remarks the same day, reinforcing the message rather than softening it. Headline inflation stood at 3.5% to July, trimmed mean has been at 3.6% for three months in a row, and all four major banks are now forecasting a hike by year end. The genuine tension is that this is some of the most explicitly hawkish language from the RBA all year, delivered three weeks ahead of the 29-30 September board meeting. Hauser's own framing supports that read Australia is "doing quite well" on unemployment and real household incomes, in his words, which is precisely the kind of language a central bank uses when it wants markets to take a hike seriously without actually committing the board to one. The next inflation number is due the day after the September meeting ends, meaning the board will vote without the data point markets might expect it to wait for. Coordinated hawkish messaging from two RBA officials in one day, with more interviews and commentary due next week, and ahead of a meeting where the board won't have the freshest inflation data, looks like a deliberate attempt to do some of the tightening through language rather than the cash rate itself. The RBA's next real lever is action, not more interviews. US Payrolls blew past forecasts, oil is surging, and tonight's CPI result lands five days before the Fed decides US non-farm payrolls for August, released on September 4th, rose 162,000 against a forecast of just 55,000, the strongest number since March and the first month of net job gains in five months, with unemployment steady at 4.1% and prior months revised up a combined 55,000. That will be the last major inflation data before the Fed's 15-16 September meeting, with economists expecting headline inflation to accelerate to around 3.4% annually on rising energy costs, while core CPI eases to roughly 2.4%. Fed Chair Kevin Warsh used his Jackson Hole speech last month to make clear he isn't ready to declare victory, in his words, recent readings "do not tell me that underlying trends have meaningfully improved." Rate hike odds have whipsawed for exactly that reason, and Brent's move back above $100 this week, combined with the payrolls number, is the fresh input markets are now pricing into a decision that looked closer to settled a fortnight ago. A strong jobs report and an oil shock landing in the same fortnight is the least convenient combination for a Fed trying to justify a pause. If tonight's CPI shows the energy pass-through Warsh has been warning about, the "coin flip" Hedge Clippings described a week ago tips meaningfully back toward a hike before next week's decision. News | Insights
Infrastructure in focus: The burning infrastructure issue from wildfires | Magellan Investment Partners August 2026 Performance News Bennelong Australian Equities Fund Quay Global Real Estate Fund (Unhedged) Active ETF (ASX:QGRU) Bennelong Concentrated Australian Equities Fund |
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4 Sep 2026 - Hedge Clippings | 04 September 2026
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Hedge Clippings | 4th of September 2026 This week: Domestically, Long bond yields broke multi-year ceilings this week, as Australia's GDP result complicated rather than clarified the RBA's task, and the one place investors actually found reward in reporting season was the part of the market nobody was watching. US 10 year yields hit a 3 year high, Japan's crossed 3% for the first time since 1996, and both moves share the same root cause Long bond yields broke through multi-year ceilings on both sides of the Pacific this week. The US 10-year Treasury rose from 4.65% on 29 August to a three-year high of 4.818% on 3 September, before easing to around 4.74% overnight on dovish Fed commentary. Japan's 10-year JGB climbed from 2.83% to 3.02%, crossing 3% for the first time since 1996, before a strong 30-year auction steadied the market. Two forces are driving both moves. The first is fiscal and monetary. In Japan, concern is building around the Takaichi government's expansionary stance, while US Treasury Secretary Bessent reportedly told Bank of Japan Governor Ueda that Washington wants Japan to raise rates further. In the US, the implied probability of a rate hike next week after the FOMC meeting on 15th and 16th jumped from around 33% before Fed Chair Kevin Warsh's 28 August Jackson Hole speech, to 66% immediately after. The second is structural. Nomura chief macro strategist Naka Matsuzawa argued that AI hyperscalers' willingness to borrow at higher rates is lifting yields more broadly. An estimated US$1.5 trillion of AI-related corporate debt has been issued this year, competing with sovereign borrowing for capital, while core PCE inflation remains at 3.7%, well above the Fed's 2% target. The odds for a FED hike were around 63% to 66% before reversing sharply overnight as Fed Governor Christopher Waller said he would support holding rates steady if inflation continued to ease, sending CME FedWatch odds down to 50.4%. The next major test is tonight's August non-farm payrolls report, with about 56,000 jobs expected and unemployment forecast to remain at 4.1%. The US$730 billion hyperscaler capex story covered a fortnight ago and this week's bond sell-off are increasingly the same story. With a named strategist now linking AI borrowing directly to higher yields, the pressure looks structural rather than cyclical, meaning it may persist beyond the current rate cycle. That makes tonight's US payroll figures more consequential for Australian portfolios along with the RBA upcoming deliberations. Australian GDP beat forecasts, real wages are back to 2011 levels, and insolvencies are still running well above pre-pandemic norms The ABS Q2 National Accounts, released on Wednesday, showed GDP rising 0.4% for the quarter and 2.1% annually, above consensus forecasts of 0.3% and 1.8%, but below Q1's 2.5% annual pace. The composition was more hawkish than reassuring. Household consumption rose just 0.4%, with the ABS noting continued caution as higher Middle East-driven fuel and travel costs weighed on spending, while mining exports and government expenditure supported the headline result. Domestic cost pressures also remained firm: the final demand deflator accelerated from 0.5% to 0.8% and real unit labour costs rose 0.9%. Multiple economists concluded that another RBA hike could come as soon as this month. That sits uneasily beside the wages data. The June quarter Wage Price Index rose 3.2% annually, below headline CPI of 3.8% and trimmed mean inflation of 3.6%, leaving real wages lower for a third consecutive quarter. Economist Bill Mitchell estimates real wages are now 6.4% below their June 2020 level and back to their September 2011 purchasing power. Most of the decline occurred in 2022 and 2023, but recent quarters have extended it. Construction captures the tension most clearly. Despite persistent skills shortages and repeated RBA concern about capacity constraints, real wages in the sector are falling while insolvencies remain elevated. ASIC recorded 14,152 company insolvencies in FY2025-26, down from 14,722 in FY2024-25 but still around 73% above the pre-COVID baseline of roughly 8,200. Construction remained the largest contributor, with 3,472 external administrations on ASIC's Series 1 count to 9 August, although that was 3.4% lower than the prior year. Bathla's well documented woes won't assist unless an unlikely rescue package eventuates. Reporting Season: While large caps went nowhere, small caps had their best reporting season in years: our conversation with Cyan's Dean Fergie
One example he gave was Janus Electric Holdings (ASX: JNS), which has risen from 20 cents at a capital raise backed by Cyan to a 52-week high of 67 cents and a market capitalisation of about ~$100 million. The company reported FY2026 revenue of $1.7 million but is targeting roughly $50 million, with the investment case centred on converting diesel truck fleets in California to exchangeable battery power under supportive state incentives. Another holding, BLS Pharmaceuticals (ASX: BLS), increased revenue about 150% from $29.3 million in FY2025 to $75 million, alongside roughly $20 million of EBITDA. Despite weak consumer confidence, higher rates and bond yields, the Middle East conflict and falling property prices, Fergie argues small caps can still provide company-specific opportunities: "That's the beauty of small caps, you can look anywhere for businesses that can perform even in a bad economy." News | Insights Manager Insights | Cyan Investment Management Property Update | Australian Secure Capital Fund July 2026 Performance News |
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28 Aug 2026 - Hedge Clippings | 28 August 2026
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Hedge Clippings | 28 August 2026 This week: Sticky inflation keeps the RBA's boot on the throat of leveraged borrowers, and a $3.2 billion Sydney developer which finally buckled under a mountain of debt leads to private credit funds restricting redemptions. Trimmed mean stuck at 3.6% for a third month The July CPI data surprised consensus expectations, but broadly matched those of Seed Funds Management's Nick Chaplin. Headline inflation eased to 3.5% from 3.8% in June, above the 3.2-3.3% consensus, while trimmed mean inflation held at 3.6% for a third month. Chaplin said forecasts underweighted the partial reversal of fuel excise relief, with automotive fuel prices rising 7.5% in July, alongside persistent rental inflation. Three of the big four banks now expect the RBA to raise rates by 25 basis points in September, with another increase possible before Christmas. Chaplin argues the RBA should instead raise rates by 40 basis points on 29 September, given inflation has remained above the 2-3% target band for more than four years. Chaplin also questioned whether the 4.5% unemployment rate fully reflects private-sector labour conditions given rising government employment, suggesting the RBA has greater scope to tighten. In his view, returning inflation to target may require weaker economic conditions, with property a likely pressure point. The bottom line is that the RBA hasn't taken the hard decisions required to bring inflation back into their target band, seemingly hoping that "talk the talk" will work more than having to "walk the walk". Currently, the RBA is not expecting their strategy to succeed until late next year or maybe they're hoping the government's taxation changes will do the job for them, while not wanting to say so publicly. Whether or not the RBA agrees with Chaplin's 40 basis point prescription, the property market is already doing some of the tightening for it. Bathla Group's $3.2 billion in debt finally gave way As has been well reported in the AFR and financial news sites, Bathla Group, a family-owned Western Sydney developer founded in 1997, entered voluntary administration on 25 August. The bottom line is that it owes most of its $3 bn plus debt to private credit funds rather than banks. Bathla now joins Jon Adgemis, whose hospitality operation collapsed in November 2024 with over $1.8 bn in debt, much of it from private credit funds, as a major problem for the private credit sector and its investors. ASIC now warns of "the first significant cracks" in Australian private credit According to per EY estimates, Australia's private credit market has grown from around $35 bn in 2015 to roughly $213 bn by the end of 2024, a more than sixfold expansion that has outpaced the market's exposure to a genuine credit cycle until now. ASIC has been concerned for some time about Private Markets, and the Private Credit sector in particular. The response is now visible across the sector with an increasing number of Australian non-bank lenders, including Merricks, Longreach Credit, Centuria Bass and CVS Lane, restricting investor redemptions as they run into their own liquidity constraints. The problem for the Private Credit sector as a whole is the risk of "redemption contagion" as evidenced by ASX listed MA Financial announcing this week that redemptions from one of their funds would be limited to 1% per month. Although property debt makes up a significant component of the sector, private credit covers a wide range of underlying assets as well as property, including corporate loans, and equipment and asset backed lending. Simply put, not all private credit is the same. Many funds specifically exclude lending for property or property development from their investment mandate. However, they still face the risk of redemptions either through investor misunderstanding the underlying assets, or those redeeming from an open fund simply because they need to, and can't access their investment in a restricted fund. Alternatively, some will make a general move to cash or more liquid listed assets simply as a precaution. While it is prudent for a manager to retain a sensible level of cash to provide liquidity for redemptions, the amount has to be carefully managed. Too much can lead to a "cash drag" on performance, while too little risks imposing restrictions, as are being experienced at present. For the investor there are some basic rules of investing in private credit and private markets in general:
This is exactly the risk highlighted in the FundMonitors Income and Credit review: appraisal-priced credit can report Sharpe ratios above 12 because infrequent valuations suppress reported volatility. A redemption run exposes the gap between reported smoothness and actual liquidity risk. News | Insights Expert Analysis of Australia's July CPI Result Manager Insights | Coller Capital July 2026 Performance News Bennelong Emerging Companies Fund |
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