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Scotsman
11-07-2025
- Business
- Scotsman
Readers' letters: Taxing the super wealthy further will fuel exodus from Scotland
A reader suggests that Scottish Greens leadership candidate Ross Greer has never heard of the Laffer curve Sign up to our daily newsletter – Regular news stories and round-ups from around Scotland direct to your inbox Sign up Thank you for signing up! Did you know with a Digital Subscription to The Scotsman, you can get unlimited access to the website including our premium content, as well as benefiting from fewer ads, loyalty rewards and much more. Learn More Sorry, there seem to be some issues. Please try again later. Submitting... Ross Greer, in his bid for leadership of the Greens, launches a drive to tax the super wealthy (Scotsman, 11 July), as if taxing people has no impact on behaviour. We have already seen an exodus of millionaires from Britain following Rachel Reeves' taxation policies, and taxing people even more heavily in Scotland will simply drive these wealthy taxpayers elsewhere. The top one per cemt of taxpayers already pay 30 per cent of all income tax, so driving away these taxpayers means the rest of us have to shoulder more of the tax burden to plug the gap. Has Mr Greer never heard of the Laffer curve? Advertisement Hide Ad Advertisement Hide Ad Why on earth can't politicians expend their energy on creative solutions that grow the economy which would increase the size of the tax cake rather than constantly fighting about how to share a tax cake that they make smaller by their own actions? Perhaps Mr Greer and other politicians need to look more closely at all the obstacles they place in the way of wealth creation and of building businesses. Businesses are the lifeblood of the country but every day they get more red tape, more restrictions, more interventions from government. If only each and every councillor and MP and MSP was forced to run a small business for a month or two, they might find just how difficult it is to keep businesses afloat. These businesses employ people known as taxpayers on whom Mr Greers' grandiose spending plans depend, but in his ivory parliamentary tower with guaranteed income and excessive taxpayer-funded pension contributions, he has way too much time on his hands dreaming of how to spend other people's money. Brian Barbour, Prestonpans, East Lothian Greer v Trump I listened to the Radio Scotland's Morning Call on Thursday about Donald Trump visiting his golf course in Aberdeen. Most of the first 20 minutes was devoted to Ross Greer's hysterical rants. If his Green party colleagues and supporters aren't ashamed of him they should be – and they should reflect on just how much freedom of speech there is in this country when a man beside whose name not one of Scotland's 4.3 million voters put a cross beside in the last Holyrood elections. and whose party got a grand total of 34,000 list votes, gets so much airtime. I hope when Trump comes to Scotland he points to the massive offshore wind farm a few miles out that, when I looked last night, was standing idle, and tell the world's media about the SNP, Greens and Labour's crazy wrecking of the oil and gas industry, and the sinister woke policies that the Greens promulgate. Advertisement Hide Ad Advertisement Hide Ad And that he poses the rhetorical question of Mr Greer, whether he, as a hater of Isral and supporter of Palestine, would be as apoplectic if the UK Government hosted a visit by Ayatollah Khamenei. Allan Sutherland, Stonehaven, Aberdeenshire Resignation Is Rachel Reeves genuinely 'disappointed' by the latest GDP figures? Considering everything that's happening these days, I think a weary sigh is the best we should expect. Steve Hayes, Leven, Fife Far-left fantasy Neil Anderson (Letters, 9 July) wonders about the chances of a far-left party in the Holyrood election. Here's his answer: a snowball's chance in hell. Tommy Sheridan's Scottish Socialist Alliance was the exception that tested the rule – led by a whip-smart, handsome natural orator and leader perfect for the modern era where the aesthetic matters more than the content. Advertisement Hide Ad Advertisement Hide Ad But Scotland's Toytown Revolutionaries were an inverted British army of the Somme, a Lion leading Donkeys packed with has-beens and never-would-bes whose clown car antics and utterances damned them long before Sheridan's court case. Since its messy collapse, we've had all manner of 'cunning plans' such as RISE which despite, saturation plugging by the media, got fewer votes in the 2016 Holyrood elections than even the Scottish Christian Party, and promptly vanished. Little has changed in the alternative realities of Scotland's far-left – the so-called current 'electoral success' of Scotland's Greens came as being the SNP's sock puppets, for which in 2026 they will pay dearly. The brand is so self-tainted it has ceased for some time to be a viable option, and all the shouty machismo street posturing of its bully-boy adherents aren't going to change it. Mark Boyle, Johnstone, Renfrewshire Party time I understand that Zarah Sultana and Jeremy Corbyn are about to announce a new political party. Far be it from me to anticipate a sub-editor's job but I pass it on to The Scotsman anyway. It surely must be called the Fruit 'n' Nut Party? Paul F Galloway, Edinburgh Defence of realm How much grovelling did it take for this SNP government to win over the contract with BAE Systems to create three structural units at Ferguson Marine for the Royal Navy (Scotsman, 9 July). Advertisement Hide Ad Advertisement Hide Ad No doubt this will be an awe-inspiring lifeline contract, that will be monitored closely by Kate Forbes for any delays, given that the security of the realm depends on it. Archie Mackinnon, Glasgow Something fishy Steuart Campbell offers good possibilities for the attribution of sightings of Nessie (Letters, 8 July). Donald Campbell's Bluebird was badly affected by the waves he had created on his first pass along Coniston Water in 1967, resulting in his death. It seems perfectly credible that a wave could be mistaken for a solid shape in the water. Reports first became general after veterinary student, Arthur Grant claimed to have seen something on the road beside Loch Ness at night while riding there on his motorcycle in 1934. My father came into college one day, soon after. Grant was speaking to some qualified vets who were laughing at what he told them. He turned to my father to ask, 'You'll believe me, won't you?', saying that he had actually seen a large shape crossing the road ahead of him, lit by the motorcycle headlamp and slipping into the loch. When the qualified vets said that what he had seen was a cow, the latter replied that, if he couldn't identify a cow, then he had no business being a vet. However, I would add another possibility to the others I have read, including deer swimming across the loch. My own suggestion is that it is entirely possible that a catfish could have been released into the loch at some point. To those who might scoff, I would point out that such fish are spectacular and specimens of 9ft in length have been caught. Indeed, one measuring 7ft was caught in the Seine last month in Paris and an 8ft-long catfish was caught in England in 2024. Andrew HN Gray, Edinburgh Blessed peace Advertisement Hide Ad Advertisement Hide Ad Pope Leo XIV has offered to help broker a peace deal between Russia and Ukraine. Despite Russia's recent advances, they have been at great human cost, with over a million soldiers' deaths since the outset of the war in February 2022. While Ukraine may not win the war, as William Loneskie, suggests (Letters, 11 July), neither, I suspect will Russia. One can't overestimate the bravery and resilience of the Ukrainians for taking what was intended to be a three-day 'military operation' into its fourth year. They have achieved a stalemate. The Pope's offer should be grabbed with both hands, if only to prevent Donald Trump receiving the much coveted Nobel Peace Prize. Through his office and personal qualities, Pope Leo is likely to win the respect of Vladimir Putin, something that Trump has patently failed to do. Putin is, allegedly, a church-goer, albeit infrequently. President Vlodomyr Zelensky is a practising Roman Catholic. Pope Leo XIV, with his worldwide power and perspective, is ideally suited for a role as peacemaker. After all he has a higher power on his side, who might just clinch the deal. Ian Petrie, Edinburgh The Enemy's NHS Advertisement Hide Ad Advertisement Hide Ad Now into my second week on holiday in deepest Englandshire, an example of the utter uselessness of devolution shows up. I realised that my inhaler was about to run out so I had to visit the local pharmacy in Chipping Norton – home of Lord Clarkson of Diddly Squat fame, to facilitate a replacement. This was a complete nightmare as our NHS doesn't talk to the Enemy – sorry English – NHS unless ridiculous numbers etc are known. Full name, date of birth or even a National Insurance number are look I got when I said we don't have an app was one of consternation. Thankfully the next day I was seen by another pharmacist and she just shook her head and said 'you need this don't you' and sold it to me – just to get it done. Why is it that the app in England isn't here in Scotland? Because of the SNP. This one example highlights the ridiculous them and us mentality of devolution and the SNP and their desperation to be different. David Millar, Lauder, Scottish Borders First past the post Advertisement Hide Ad Advertisement Hide Ad Until today, I assumed that when I posted a letter with a first-class stamp, that meant next-day delivery. Now, I understand that I'm wrong. My local Post Office tells me that first flass now means one to three-day delivery and second class is three-five days. So sorry to my friends and relations whose cards and parcels have arrived late. I'll bear this in mind at Christmas! Fiona Garwood, Edinburgh Write to The Scotsman
Scotsman
05-07-2025
- Politics
- Scotsman
Readers' letters: Labour rebels were elected with a welfare reform mandate
A reader says Rachel Reeves' tears would be understandable if they were about Labour rebels wrecking her work to reform the benefits system Sign up to our daily newsletter – Regular news stories and round-ups from around Scotland direct to your inbox Sign up Thank you for signing up! Did you know with a Digital Subscription to The Scotsman, you can get unlimited access to the website including our premium content, as well as benefiting from fewer ads, loyalty rewards and much more. Learn More Sorry, there seem to be some issues. Please try again later. Submitting... If Rachel Reeves had said she was crying because a large section of Labour MPs comprehensively destroyed her and Work and Pension Secretary Liz Kendall's hard, vital work and plans to make a few small steps to reform the benefits system and booted it into the long grass I doubt there'd be so much puerile fuss, including the undertones on BBC Scotland's Morning Call that narrowly avoided diagnosing it as a girlie thing. The truth is these rebels were elected on a manifesto that included welfare reform, so the basics of it were well known – as were the dire financial implications of the current torrent of claims and claimants. Advertisement Hide Ad Advertisement Hide Ad Perhaps these two ministers should just have resigned, explained why, precipitated the increasingly inevitable Greece 2009 collapse facing this country and trigger the brutal policies that entails. Rachel Reeves looked visibly tearful as Keir Starmer spoke during Prime Minister's Questions in the House of Commons on Wednesday (Picture: House of Commons/UK Parliament/PA Wire) The world has moved on from the draconian undertones of the 1834 Poor Law's 'deserving and undeserving poor' but surely few could disagree with the argument put forward by former Labour MP Tom Harris in the media this week that the objectives of reform should be aimed 'squarely at those who have given up trying to get a job and have decided they would prefer to rely on benefits long-term'. Allan Sutherland, Stonehaven, Aberdeenshire Reform imperative Wednesday's backbench rebellion has undermined the Prime Minister's reputation and that of his Chancellor. In effect it has driven a coach and horses through planned savings on welfare of £5 billion and has imperilled the sanctity of the Chancellor's 'fiscal rules'. Politically sensitive tax rises in the Autumn Budget are now a virtual lock-in. Ouch! It's enough to bring tears to the Chancellor's eyes. However, none of this should be allowed to obscure the challenges of welfare reform that remain. Advertisement Hide Ad Advertisement Hide Ad The Institute of Fiscal Studies has reported that more than four million people of working age currently receive some kind of health benefit (ten per cent of the workforce). This is expected to rise to around 5.5 million by the end of the Parliament. This is unsustainable! We have a system unfit for purpose, and one which can be easily gamed. The failure of Labour (soft and hard) to acknowledge the consensus around these shortcomings perhaps says more about ideological desires to pursue redistribution policies – albeit by the back door – regardless of the wider social and economic consequences. The inefficiency of the present system is an obvious misuse of scarce public resources. The real injustice here is the diversion of these resources away from those who are most in need of genuine welfare support. Moreover, cost-cutting can never be the primary justification for fundamental change in this sensitive policy area: fundamental reform remains an urgent imperative in and for its own sake! Ewen Peters, Newton Mearns, East Renfrewshire Head over heels The Labour government has made so many U-turns that Keir Starmer doesn't know whether he is standing on his head or his heels, but he has a number of options. Advertisement Hide Ad Advertisement Hide Ad He could resign, which is unlikely, or he could threaten to call a snap election, which would frighten many of his MPs who have got used to their £90k salary, index-linked pension and other freebies, but have Reform UK snapping at their heels. Many welfare recipients have got used to their easy life and in fact have become institutionalised, as the balance between work and welfare is quite narrow and many just don't want the bother of having to work. One easy solution which would not come into force immediately would be to freeze welfare payments just as the the personal tax allowance has been frozen. James Macintyre, Linlithgow, West Lothian Dig deeper Perhaps, the highly gutted Welfare Reform Bill will turn out to be a benefit in disguise for a beleaguered Labour government. With the loathsome moves withdrawn, we're left with a reasonably decent Bill at some cost. Advertisement Hide Ad Advertisement Hide Ad Welfare is not the only aspect of government that is broken. The NHS and education are also stretched to breaking point, and I would suggest that the tax system is broken too. Only defence seems exempt. Rachel Reeves is constrained by her own self-imposed fiscal limits. If they were removed, as the German equivalent was recently, so much that is broken could begin to be repaired. Quite frankly, all of us who can afford it should be paying more tax, and those who can't, less. The Patriotic Millionaires, for example, are desperate to increase their share. For far too long, raising taxes has been the elephant in the room, which has never been a vote winner. Perhaps, just perhaps, it is now. If we could be assured that our increased taxes went towards the urgent repair of our NHS, education and welfare, we'd be prepared, I'm quite sure, to delve deeper into our financial pockets. All three deserve nothing less. Ian Petrie, Edinburgh Forced laughter Advertisement Hide Ad Advertisement Hide Ad We have all been to that family wedding where unpopular members of the extended family attend whom, normally, we avoid. We engage in the forced laughter, the exaggerated smiles and back slapping to ensure the day is not ruined. Equally risible was that wonderfully over the top public show of support as Rachel Reeves unexpectedly turned up to join Sir Keir Starmer and Wes Streeting at the launch of the ten-year plan for England's NHS in East London. It surely gave 'fake news' new meaning. John V Lloyd, Inverkeithing, Fife Turn back time The election of Keir Starmer with a near-landslide majority last year I considered great news. I confess freely that was mainly because he deflated the SNP. To say I have been disappointed since would be a gross understatement. The trouble is, if I abandon Labour, where could I possibly turn? The Tories are in as bad if not worse a mess; the Lib Dems are wishy-washy and the Greens in Scotland a gender-obsessed joke; the SNP unthinkable. Advertisement Hide Ad Advertisement Hide Ad Can we turn the clock back please to the halcyon days of pre-devolution? Alexander McKay, Edinburgh Critical thinking I was disappointed to read Jenny Lindsay's latest opinion piece: 'Self-righteous zealots driven by hate decided I was a 'genocidal Terf'' (Scotsman, 3 July). Surely Scottish feminism is not this myopic? Without a doubt, the ongoing genocide in Gaza is one of the world's most pressing feminist concerns. Tens of thousands of Palestinian women and girls are being killed, maimed, displaced, bereaved and subjected to sexual violence by Israel's military forces, according to the UN. War is always a feminist issue. Palestinian women at the forefront of their nation's cause are supported by an international network of feminists that stretches all the way to Scotland. In the last few years, I have met so many incredible women from all over the country who are marching, writing, fundraising and speaking out for peace. This is the reality of the pro-Palestinian movement. Advertisement Hide Ad Advertisement Hide Ad I know many women are bruised by Scotland's shockingly toxic debate on gender reform in recent years. Like Jenny, I took my fair share of misogynistic abuse as a candidate at the last Scottish Parliament election. I don't doubt people are still saying appalling things to gender critical women on the internet. But social media doesn't represent real people or real movements. Its profit-seeking algorithms feed on and amplify hate and abuse. It's time for Scottish feminists to pull themselves out of the maelstrom. There is so much real work to do. Catriona MacDonald, Glasgow Publicity seekers I don't understand some of the comments amongst readers about Kneecap and Bob Vylan's controversial outbursts during performances at Glastonbury, the latest being Lewis Finnie (Letters, 3 July). The real reason for the behavior of these so-called artists is to draw attention to themselves and seek publicity. They have little interest in the people of Gaza. If they did, they would be actively helping them rather than mouthing off about the IDF. Benjamin Netanyahu and his despotic regime control the IDF and it is they that should be condemned. The BBC should ban airing 'high risk' labelled acts such as Bob Vylan, not just live feeds. With all the publicity, these acts portray themselves as martyrs and gain sympathy amongst the weak-minded. Prancing on a stage and getting fans wound up through hate speech is one thing, it's another to donate their fee to help the Gaza victims or be called out as hypocrites. Advertisement Hide Ad Advertisement Hide Ad Mr Finnie suggests that the war will end with the elimination of Hamas, I would beg to differ. Leaving Netanyahu in power risks a wider conflict in the Middle East and tens of thousands more innocent civilians deaths in another bloodbath. By stating 'yes innocents die' he dismisses the current apocalypse as collateral damage. Really? Neil Anderson, Edinburgh Seating plan On a recent visit to Haymarket station in Edinburgh I was dismayed that the large waiting hall before the ticket barriers had seats for coffee concessions – but not a single public seat for the travelling public or those meeting them. That simply isn't good enough. Christopher Ruane, Lanark, South Lanarkshire Write to The Scotsman
New Statesman
04-07-2025
- Politics
- New Statesman
A year of crisis and political fragmentation
Photo byOne year ago today, people across the UK went to the polls and overwhelmingly voted for change. When the exit poll landed at 10pm it showed Keir Starmer's Labour party on track for a three-figure majority – and right on cue the New Labour anthem 'Things Can Only Get Better' began playing at the New Statesman election night party. The following morning, Keir Starmer stood outside the door of No 10 Downing Street (despite the common misconception, there aren't actually any steps), and promised a new type of politics to 'end the era of noisy performance, tread more lightly on your lives, and unite our country'. Well, here we are. The media is awash today with reflections on how the last year has gone for the Prime Minister. You can read one of them, in which David Edgerton argues that Keir Starmer's government does not represent the true Labour Party, on the New Statesman website today. You can also listen to our special anniversary episode of the New Statesman podcast with Anoosh Chakelian, Tom McTague, Andrew Marr and me, where we try to unpack quite what has happened – and where it could go next. So instead of rehashing all of that, I thought we could zoom out and look at some of the other things the election and subsequent 12 months have taught us. British politics is fracturing in all directions. First-past-the-post and Labour's huge (though not unsurpassable, as we saw with the welfare cuts rebellion) majority masked an electoral landscape that more closely resembles multi-party European politics. The Electoral Reform Society (whose chief executive I interviewed in May) has calculated the parliament we ended up with was the least representative ever in terms of how people actually voted. The 2024 result was the first time four parties had received over 10 per cent of the vote: Labour, the Conservatives, the Liberal Democrats and Reform. In the May local elections, that went up to five with the addition of the Greens. The latest YouGov poll, conducted just ahead of the election anniversary, has both Reform and the combination of the Lib Dems and Greens on 26 per cent each. That's a Brexit-referendum majority opting for someone other than the two main parties. Those two parties, meanwhile, are languishing around the 40 per cent combined mark: Labour on 24 per cent and the Conservatives on 17 per cent. It would take too long to list all the things they've both done to deserve that (please see previous Morning Call emails over the past, say, five years) but the point is they're down together – following an election that gave them the lowest joint vote share in history at 57.4 per cent. That's new: for 50 years the combined Tory and Labour vote would be a number in the high 70s. This seems to have caught both parties off-guard. Last week I chaired an event at the Mile End Institute entitled 'Does the Conservative Party have a future?' (a question to which no one felt too confident about). Politics lecturer Dr Nigel Fletcher, an expert in the history of oppositions, borrowed an analogy from Game of Thrones: a wheel that sees the great families cycle up and down, some rising while others fall. Dragon-wielding Daenerys Targaryen is determined not to stop the wheel, but to break it. This is, Fletcher argued, essentially what Nigel Farage and Reform are trying to do, breaking the cycle whereby the fall of Labour automatically leads to the rise of the Tories, and vice versa. Subscribe to The New Statesman today from only £8.99 per month Subscribe The Conservatives' recovery from what they thought was their electoral nadir last July (until it transpired their poll ratings could actually drop further) has, in a strange way, been hampered by a misconception that Labour's sharp fall in popularity would help them by default. It hasn't. All it has done is fuel the narrative that both establishment parties are falling short and thrown Kemi Badenoch's failure to begin repairing her party's fortunes into starker relief. Similarly, many Labour figures assumed one year ago that however difficult the political and economic situation they were inheriting, they could be reassured by the toxicity of their main opponents. Labour could afford to make some early mistakes, because the Tories would be in no position to take advantage of them. What they didn't count on was fringe parties muscling in to suck up disaffected supporters. In a shock move last night, left-wing MP Zarah Sultana, who has had the Labour whip suspended since last July, announced she was quitting Labour and setting up her own party with Jeremy Corbyn to challenge Starmer from the left. Corbyn himself has been suspiciously quiet about Sultana's announcement so far – although he did spend this week hinting about some kind of new movement to bring together left-wing independents. Even before all of that, though, data suggests nearly three times as many 2024 Labour voters are moving to the Lib Dems or the Greens than are eyeing up Reform. But the geographical distribution of the election win (think of the sandcastle analogy) means both left and right defectors pose a serious challenge. They squeeze Starmer in two directions, leaving him trapped. Rishi Sunak would sympathise. What does this mean going into year two of this parliament? In short, things are going to get bumpy. For the first time ever, Nigel Farage is being seriously talked about as a future prime minister (including, in this week's New Statesman magazine, by Andrew Marr). The Greens are holding a leadership over the summer and could select an eco-populist to galvanise the left, or an insurgent Corbyn-led movement could yet emerge. The Lib Dems have set their sights on eating further into what the Tories used to consider their heartlands – if it doesn't get eaten by Reform first. Elections in Scotland and Wales in 2026 look set to become contests of who the electorate hates and fears the least. Wednesday's bond market wobble and subsequent Rachel Reeves love-in means it looks less likely we'll have a new Chancellor than it did last week, but it's pretty inevitable we'll get a new front bench – and quite possibly a new opposition leader too, if the Tories' 'extinction-level territory' polling situation doesn't improve. Who knows, we may even have a serious debate about electoral reform and whether first-past-the-post still works in a landscape like this. In other words, politics isn't going to get quieter. Sorry to disappoint. This piece first appeared in the Morning Call newsletter; receive it every morning by subscribing on Substack here [See also: The bond market has rescued Rachel Reeves from Keir Starmer] Related
The Advertiser
21-05-2025
- Business
- The Advertiser
Rate cuts, recession a risk on Trump's 'rollercoaster'
Australia is well placed to avoid a recession, even if Donald Trump's trade war takes a turn for the worse, the treasurer says. Forecasts released by the Reserve Bank of Australia on Tuesday painted a bleak picture of the economic blowback from a scenario in which the world descends into all-out tariff wars. "Uncertainty" was cited 132 times in the central bank's quarterly economic update, with forecasters forced to wargame different scenarios to help guide the board's decision-making in an era of heightened volatility. "It's been a complete rollercoaster," Ms Bullock said of the US president's ever-changing tariff pronouncements. The bank had been "completely blown out of the water by the scale and the scope" of the trade shock, she said, conceding there was an outside chance Australia could tip into a recession if the bank's worst fears came to fruition. Treasurer Jim Chalmers assured Australians that an economic downturn was unlikely. "In fact, the revised Reserve Bank forecasts that they released yesterday have growth stronger next year than this year, and so do our own Treasury forecasts," he told ABC News Breakfast on Wednesday. "And so our expectation is that our economy will continue to grow and that growth will strengthen next year." Australia was in a unique position of having inflation back on target, at the same time as the economy was growing and unemployment was low, Dr Chalmers said. "What that means is we are well placed and well prepared for this global economic uncertainty, which is coming from decisions taken in Washington, DC, but also from a slowing Chinese economy and conflict in other parts of the world." Despite the global uncertainty, mortgage holders can be consoled by the promise of more rate cuts this year if the Reserve Bank's baseline forecast is correct and inflation and the economy grow more slowly than previously expected. There was little doubt about the RBA's decision to slash the cash rate by 25 points to 3.85 per cent on Tuesday. Markets had fully priced in the central bank's second interest rate reduction of 2025 ahead of its board meeting, given inflation was back in its two to three per cent target band as a global trade war threatens the economy. And futures market traders were even more certain of further cuts after Ms Bullock's revelations that the board considered a bumper 50 basis point cut. NAB chief economist Sally Auld was alone in predicting a 50 basis point cut ahead of the meeting. While that didn't happen, a repricing following Ms Bullock's revelation sent a "jolt" through the market, which did not expect the board to be so dovish, Ms Auld said. "I think that unnerved a few people who weren't expecting it," she told NAB's Morning Call podcast. Following the announcement, the market is pricing in almost three more cuts before the end of the year, which Ms Bullock did not push back against, unlike after the board's first move down in February. Monetary policy was still restrictive, meaning the RBA had leeway to cut the rate further if inflation continues to ease, Ms Bullock said. But the glide path down depends on developments overseas. While it was a "confident cut", Ms Bullock said future moves were uncertain. In the bank's worst-case scenario forecast, in which all countries including Australia retaliate with higher tariffs, inflation would fall to the bottom of the RBA's target band. That would necessitate more rate cuts than the baseline scenario of three more by early 2026. But in a more optimistic scenario, where tariffs are lowered to 2024 levels, inflation would remain higher, meaning fewer rate cuts. Australia is well placed to avoid a recession, even if Donald Trump's trade war takes a turn for the worse, the treasurer says. Forecasts released by the Reserve Bank of Australia on Tuesday painted a bleak picture of the economic blowback from a scenario in which the world descends into all-out tariff wars. "Uncertainty" was cited 132 times in the central bank's quarterly economic update, with forecasters forced to wargame different scenarios to help guide the board's decision-making in an era of heightened volatility. "It's been a complete rollercoaster," Ms Bullock said of the US president's ever-changing tariff pronouncements. The bank had been "completely blown out of the water by the scale and the scope" of the trade shock, she said, conceding there was an outside chance Australia could tip into a recession if the bank's worst fears came to fruition. Treasurer Jim Chalmers assured Australians that an economic downturn was unlikely. "In fact, the revised Reserve Bank forecasts that they released yesterday have growth stronger next year than this year, and so do our own Treasury forecasts," he told ABC News Breakfast on Wednesday. "And so our expectation is that our economy will continue to grow and that growth will strengthen next year." Australia was in a unique position of having inflation back on target, at the same time as the economy was growing and unemployment was low, Dr Chalmers said. "What that means is we are well placed and well prepared for this global economic uncertainty, which is coming from decisions taken in Washington, DC, but also from a slowing Chinese economy and conflict in other parts of the world." Despite the global uncertainty, mortgage holders can be consoled by the promise of more rate cuts this year if the Reserve Bank's baseline forecast is correct and inflation and the economy grow more slowly than previously expected. There was little doubt about the RBA's decision to slash the cash rate by 25 points to 3.85 per cent on Tuesday. Markets had fully priced in the central bank's second interest rate reduction of 2025 ahead of its board meeting, given inflation was back in its two to three per cent target band as a global trade war threatens the economy. And futures market traders were even more certain of further cuts after Ms Bullock's revelations that the board considered a bumper 50 basis point cut. NAB chief economist Sally Auld was alone in predicting a 50 basis point cut ahead of the meeting. While that didn't happen, a repricing following Ms Bullock's revelation sent a "jolt" through the market, which did not expect the board to be so dovish, Ms Auld said. "I think that unnerved a few people who weren't expecting it," she told NAB's Morning Call podcast. Following the announcement, the market is pricing in almost three more cuts before the end of the year, which Ms Bullock did not push back against, unlike after the board's first move down in February. Monetary policy was still restrictive, meaning the RBA had leeway to cut the rate further if inflation continues to ease, Ms Bullock said. But the glide path down depends on developments overseas. While it was a "confident cut", Ms Bullock said future moves were uncertain. In the bank's worst-case scenario forecast, in which all countries including Australia retaliate with higher tariffs, inflation would fall to the bottom of the RBA's target band. That would necessitate more rate cuts than the baseline scenario of three more by early 2026. But in a more optimistic scenario, where tariffs are lowered to 2024 levels, inflation would remain higher, meaning fewer rate cuts. Australia is well placed to avoid a recession, even if Donald Trump's trade war takes a turn for the worse, the treasurer says. Forecasts released by the Reserve Bank of Australia on Tuesday painted a bleak picture of the economic blowback from a scenario in which the world descends into all-out tariff wars. "Uncertainty" was cited 132 times in the central bank's quarterly economic update, with forecasters forced to wargame different scenarios to help guide the board's decision-making in an era of heightened volatility. "It's been a complete rollercoaster," Ms Bullock said of the US president's ever-changing tariff pronouncements. The bank had been "completely blown out of the water by the scale and the scope" of the trade shock, she said, conceding there was an outside chance Australia could tip into a recession if the bank's worst fears came to fruition. Treasurer Jim Chalmers assured Australians that an economic downturn was unlikely. "In fact, the revised Reserve Bank forecasts that they released yesterday have growth stronger next year than this year, and so do our own Treasury forecasts," he told ABC News Breakfast on Wednesday. "And so our expectation is that our economy will continue to grow and that growth will strengthen next year." Australia was in a unique position of having inflation back on target, at the same time as the economy was growing and unemployment was low, Dr Chalmers said. "What that means is we are well placed and well prepared for this global economic uncertainty, which is coming from decisions taken in Washington, DC, but also from a slowing Chinese economy and conflict in other parts of the world." Despite the global uncertainty, mortgage holders can be consoled by the promise of more rate cuts this year if the Reserve Bank's baseline forecast is correct and inflation and the economy grow more slowly than previously expected. There was little doubt about the RBA's decision to slash the cash rate by 25 points to 3.85 per cent on Tuesday. Markets had fully priced in the central bank's second interest rate reduction of 2025 ahead of its board meeting, given inflation was back in its two to three per cent target band as a global trade war threatens the economy. And futures market traders were even more certain of further cuts after Ms Bullock's revelations that the board considered a bumper 50 basis point cut. NAB chief economist Sally Auld was alone in predicting a 50 basis point cut ahead of the meeting. While that didn't happen, a repricing following Ms Bullock's revelation sent a "jolt" through the market, which did not expect the board to be so dovish, Ms Auld said. "I think that unnerved a few people who weren't expecting it," she told NAB's Morning Call podcast. Following the announcement, the market is pricing in almost three more cuts before the end of the year, which Ms Bullock did not push back against, unlike after the board's first move down in February. Monetary policy was still restrictive, meaning the RBA had leeway to cut the rate further if inflation continues to ease, Ms Bullock said. But the glide path down depends on developments overseas. While it was a "confident cut", Ms Bullock said future moves were uncertain. In the bank's worst-case scenario forecast, in which all countries including Australia retaliate with higher tariffs, inflation would fall to the bottom of the RBA's target band. That would necessitate more rate cuts than the baseline scenario of three more by early 2026. But in a more optimistic scenario, where tariffs are lowered to 2024 levels, inflation would remain higher, meaning fewer rate cuts. Australia is well placed to avoid a recession, even if Donald Trump's trade war takes a turn for the worse, the treasurer says. Forecasts released by the Reserve Bank of Australia on Tuesday painted a bleak picture of the economic blowback from a scenario in which the world descends into all-out tariff wars. "Uncertainty" was cited 132 times in the central bank's quarterly economic update, with forecasters forced to wargame different scenarios to help guide the board's decision-making in an era of heightened volatility. "It's been a complete rollercoaster," Ms Bullock said of the US president's ever-changing tariff pronouncements. The bank had been "completely blown out of the water by the scale and the scope" of the trade shock, she said, conceding there was an outside chance Australia could tip into a recession if the bank's worst fears came to fruition. Treasurer Jim Chalmers assured Australians that an economic downturn was unlikely. "In fact, the revised Reserve Bank forecasts that they released yesterday have growth stronger next year than this year, and so do our own Treasury forecasts," he told ABC News Breakfast on Wednesday. "And so our expectation is that our economy will continue to grow and that growth will strengthen next year." Australia was in a unique position of having inflation back on target, at the same time as the economy was growing and unemployment was low, Dr Chalmers said. "What that means is we are well placed and well prepared for this global economic uncertainty, which is coming from decisions taken in Washington, DC, but also from a slowing Chinese economy and conflict in other parts of the world." Despite the global uncertainty, mortgage holders can be consoled by the promise of more rate cuts this year if the Reserve Bank's baseline forecast is correct and inflation and the economy grow more slowly than previously expected. There was little doubt about the RBA's decision to slash the cash rate by 25 points to 3.85 per cent on Tuesday. Markets had fully priced in the central bank's second interest rate reduction of 2025 ahead of its board meeting, given inflation was back in its two to three per cent target band as a global trade war threatens the economy. And futures market traders were even more certain of further cuts after Ms Bullock's revelations that the board considered a bumper 50 basis point cut. NAB chief economist Sally Auld was alone in predicting a 50 basis point cut ahead of the meeting. While that didn't happen, a repricing following Ms Bullock's revelation sent a "jolt" through the market, which did not expect the board to be so dovish, Ms Auld said. "I think that unnerved a few people who weren't expecting it," she told NAB's Morning Call podcast. Following the announcement, the market is pricing in almost three more cuts before the end of the year, which Ms Bullock did not push back against, unlike after the board's first move down in February. Monetary policy was still restrictive, meaning the RBA had leeway to cut the rate further if inflation continues to ease, Ms Bullock said. But the glide path down depends on developments overseas. While it was a "confident cut", Ms Bullock said future moves were uncertain. In the bank's worst-case scenario forecast, in which all countries including Australia retaliate with higher tariffs, inflation would fall to the bottom of the RBA's target band. That would necessitate more rate cuts than the baseline scenario of three more by early 2026. But in a more optimistic scenario, where tariffs are lowered to 2024 levels, inflation would remain higher, meaning fewer rate cuts.
The Advertiser
19-05-2025
- Business
- The Advertiser
'A given': rate cut to bring mortgage relief
Home owners can expect more mortgage relief if the Reserve Bank cuts interest rates as widely expected but those looking to break into the housing market could see property prices rise even higher. Traders are pricing in a 95 per cent chance the RBA board will cut its key interest rate to 3.85 per cent when its two-day meeting wraps up on Tuesday. Nicola Powell, chief economist at property portal Domain, said it's pretty much a given. Underlying inflation moderated to 2.9 per cent in the first three months of the year, which will reassure the RBA that they can take some restrictiveness out of the economy. Meanwhile, Donald Trump's tariffs bolster the case for a cut to support the economy amid an anticipated global slowdown. "Obviously, it's going to be at the forefront of their mind, the impacts that that is going to have on the domestic economy," Dr Powell told AAP. "When you look at trimmed mean inflation, it's now within their (target) band (of two to three per cent). And we know that the RBA likes to really be guided by that trimmed mean inflation." Most economists agree that the central bank will cut rates by 25 basis points. That would result in the median mortgage-holder with a $600,000 debt having to pay about $90 less per month in interest repayments, assuming the banks pass it on in full. Dr Powell said she would be surprised if they didn't, given competition among the banks for customer retention and acquisition of new loans was high. NAB remains an outlier in calling for a 50 basis point cut, although the likelihood of that happening now has diminished following an easing in trade tensions between the US and China and strong domestic labour market data, NAB's head of FX strategy Ray Attrill concedes. "We're still very convicted in the view that the case for policy remaining restrictive has fast disappeared, it's in the rear view mirror as far we're concerned," he told NAB's Morning Call podcast. "Therefore, to get rates down to something closer to neutral will require the best part of 100 basis points of cuts." If the RBA does slash rates by 100 basis points - or 75 as the market is predicting - by year's end, house prices are likely to surge. Increased borrowing capacity for home buyers will cause demand to rise, and with the provision of new supply still hampered by high construction costs and planning bottlenecks, prices will follow, Dr Powell said. Even before the cut is passed through to buyers, higher confidence already shows up in stronger demand. "In the lead up to the first rate cut that occurred in February, we were already starting to see an improvement in sentiment coming from inquiry data," Dr Powell said. And that is likely to flow through quicker in the more expensive capital city markets like Sydney and Melbourne, which are more sensitive to changes in interest rates, she said. A model developed at the Reserve Bank by economists Trent Saunders and Peter Tulip, now at the Centre for Independent Studies, found interest rates falling one percentage point lifts home prices six per cent higher in the first year than they otherwise would've been. Home owners can expect more mortgage relief if the Reserve Bank cuts interest rates as widely expected but those looking to break into the housing market could see property prices rise even higher. Traders are pricing in a 95 per cent chance the RBA board will cut its key interest rate to 3.85 per cent when its two-day meeting wraps up on Tuesday. Nicola Powell, chief economist at property portal Domain, said it's pretty much a given. Underlying inflation moderated to 2.9 per cent in the first three months of the year, which will reassure the RBA that they can take some restrictiveness out of the economy. Meanwhile, Donald Trump's tariffs bolster the case for a cut to support the economy amid an anticipated global slowdown. "Obviously, it's going to be at the forefront of their mind, the impacts that that is going to have on the domestic economy," Dr Powell told AAP. "When you look at trimmed mean inflation, it's now within their (target) band (of two to three per cent). And we know that the RBA likes to really be guided by that trimmed mean inflation." Most economists agree that the central bank will cut rates by 25 basis points. That would result in the median mortgage-holder with a $600,000 debt having to pay about $90 less per month in interest repayments, assuming the banks pass it on in full. Dr Powell said she would be surprised if they didn't, given competition among the banks for customer retention and acquisition of new loans was high. NAB remains an outlier in calling for a 50 basis point cut, although the likelihood of that happening now has diminished following an easing in trade tensions between the US and China and strong domestic labour market data, NAB's head of FX strategy Ray Attrill concedes. "We're still very convicted in the view that the case for policy remaining restrictive has fast disappeared, it's in the rear view mirror as far we're concerned," he told NAB's Morning Call podcast. "Therefore, to get rates down to something closer to neutral will require the best part of 100 basis points of cuts." If the RBA does slash rates by 100 basis points - or 75 as the market is predicting - by year's end, house prices are likely to surge. Increased borrowing capacity for home buyers will cause demand to rise, and with the provision of new supply still hampered by high construction costs and planning bottlenecks, prices will follow, Dr Powell said. Even before the cut is passed through to buyers, higher confidence already shows up in stronger demand. "In the lead up to the first rate cut that occurred in February, we were already starting to see an improvement in sentiment coming from inquiry data," Dr Powell said. And that is likely to flow through quicker in the more expensive capital city markets like Sydney and Melbourne, which are more sensitive to changes in interest rates, she said. A model developed at the Reserve Bank by economists Trent Saunders and Peter Tulip, now at the Centre for Independent Studies, found interest rates falling one percentage point lifts home prices six per cent higher in the first year than they otherwise would've been. Home owners can expect more mortgage relief if the Reserve Bank cuts interest rates as widely expected but those looking to break into the housing market could see property prices rise even higher. Traders are pricing in a 95 per cent chance the RBA board will cut its key interest rate to 3.85 per cent when its two-day meeting wraps up on Tuesday. Nicola Powell, chief economist at property portal Domain, said it's pretty much a given. Underlying inflation moderated to 2.9 per cent in the first three months of the year, which will reassure the RBA that they can take some restrictiveness out of the economy. Meanwhile, Donald Trump's tariffs bolster the case for a cut to support the economy amid an anticipated global slowdown. "Obviously, it's going to be at the forefront of their mind, the impacts that that is going to have on the domestic economy," Dr Powell told AAP. "When you look at trimmed mean inflation, it's now within their (target) band (of two to three per cent). And we know that the RBA likes to really be guided by that trimmed mean inflation." Most economists agree that the central bank will cut rates by 25 basis points. That would result in the median mortgage-holder with a $600,000 debt having to pay about $90 less per month in interest repayments, assuming the banks pass it on in full. Dr Powell said she would be surprised if they didn't, given competition among the banks for customer retention and acquisition of new loans was high. NAB remains an outlier in calling for a 50 basis point cut, although the likelihood of that happening now has diminished following an easing in trade tensions between the US and China and strong domestic labour market data, NAB's head of FX strategy Ray Attrill concedes. "We're still very convicted in the view that the case for policy remaining restrictive has fast disappeared, it's in the rear view mirror as far we're concerned," he told NAB's Morning Call podcast. "Therefore, to get rates down to something closer to neutral will require the best part of 100 basis points of cuts." If the RBA does slash rates by 100 basis points - or 75 as the market is predicting - by year's end, house prices are likely to surge. Increased borrowing capacity for home buyers will cause demand to rise, and with the provision of new supply still hampered by high construction costs and planning bottlenecks, prices will follow, Dr Powell said. Even before the cut is passed through to buyers, higher confidence already shows up in stronger demand. "In the lead up to the first rate cut that occurred in February, we were already starting to see an improvement in sentiment coming from inquiry data," Dr Powell said. And that is likely to flow through quicker in the more expensive capital city markets like Sydney and Melbourne, which are more sensitive to changes in interest rates, she said. A model developed at the Reserve Bank by economists Trent Saunders and Peter Tulip, now at the Centre for Independent Studies, found interest rates falling one percentage point lifts home prices six per cent higher in the first year than they otherwise would've been. Home owners can expect more mortgage relief if the Reserve Bank cuts interest rates as widely expected but those looking to break into the housing market could see property prices rise even higher. Traders are pricing in a 95 per cent chance the RBA board will cut its key interest rate to 3.85 per cent when its two-day meeting wraps up on Tuesday. Nicola Powell, chief economist at property portal Domain, said it's pretty much a given. Underlying inflation moderated to 2.9 per cent in the first three months of the year, which will reassure the RBA that they can take some restrictiveness out of the economy. Meanwhile, Donald Trump's tariffs bolster the case for a cut to support the economy amid an anticipated global slowdown. "Obviously, it's going to be at the forefront of their mind, the impacts that that is going to have on the domestic economy," Dr Powell told AAP. "When you look at trimmed mean inflation, it's now within their (target) band (of two to three per cent). And we know that the RBA likes to really be guided by that trimmed mean inflation." Most economists agree that the central bank will cut rates by 25 basis points. That would result in the median mortgage-holder with a $600,000 debt having to pay about $90 less per month in interest repayments, assuming the banks pass it on in full. Dr Powell said she would be surprised if they didn't, given competition among the banks for customer retention and acquisition of new loans was high. NAB remains an outlier in calling for a 50 basis point cut, although the likelihood of that happening now has diminished following an easing in trade tensions between the US and China and strong domestic labour market data, NAB's head of FX strategy Ray Attrill concedes. "We're still very convicted in the view that the case for policy remaining restrictive has fast disappeared, it's in the rear view mirror as far we're concerned," he told NAB's Morning Call podcast. "Therefore, to get rates down to something closer to neutral will require the best part of 100 basis points of cuts." If the RBA does slash rates by 100 basis points - or 75 as the market is predicting - by year's end, house prices are likely to surge. Increased borrowing capacity for home buyers will cause demand to rise, and with the provision of new supply still hampered by high construction costs and planning bottlenecks, prices will follow, Dr Powell said. Even before the cut is passed through to buyers, higher confidence already shows up in stronger demand. "In the lead up to the first rate cut that occurred in February, we were already starting to see an improvement in sentiment coming from inquiry data," Dr Powell said. And that is likely to flow through quicker in the more expensive capital city markets like Sydney and Melbourne, which are more sensitive to changes in interest rates, she said. A model developed at the Reserve Bank by economists Trent Saunders and Peter Tulip, now at the Centre for Independent Studies, found interest rates falling one percentage point lifts home prices six per cent higher in the first year than they otherwise would've been.
