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The Invisible HandAuthor: Paul Scanlon, Domenique Sherab Language: en-au Genres: Business News, News, Politics Contact email: Get it Feed URL: Get it iTunes ID: Get it |
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#22 - Australia’s Rate Shift with Global Trade Realignments and the Affordability Debate
Monday, 16 February, 2026
We have some big news, and congratulations are definitely in order for Domenique, who is expecting her first child. She’ll be taking a little step back from the podcast for a while, but will be back later in the year. Today’s show is about the RBA’s February rate hike, shifting global trade dynamics, and the growing debate over affordability. We kick off with What’s in the News focusing on the Reserve Bank of Australia’s February decision to lift the cash rate by 25 basis points to 3.85 percent. We unpack the inflation backdrop behind the move, what it means for mortgage holders versus savers, and why Australia now finds itself moving differently from much of the global central bank pack. We also talk through the announcement of Kevin Warsh as the incoming Federal Reserve Chair and the ripple effects that quickly moved across markets. That naturally leads into gold, which saw a remarkable surge in January before pulling back. Taken together, these developments highlight the ongoing tension between inflation pressures and relatively soft economic growth.The Hand then looks outward. The discussion explores how India and the European Union are deepening trade ties amid ongoing US tariff uncertainty, and why India’s economic trajectory is becoming harder for countries like Australia to ignore. Canada’s carefully managed thaw with China also enters the frame, offering another example of nations quietly adjusting their economic relationships without making dramatic breaks.In The Invisible, we discuss affordability, a word that’s everywhere in political messaging, but far more complex in practice. Is this truly a crisis, or are perception and macroeconomic data telling slightly different stories? Housing, electricity, wages, and consumer psychology all play a role as the episode closes on the structural forces shaping how people actually experience the economy.Episode Highlights: [04:22] The discussion opens with the Reserve Bank of Australia’s February decision to raise the cash rate by 25 basis points to 3.85 percent, the first increase since November 2023.[05:05] Inflation’s pickup through the second half of 2025 is identified as the central driver behind the RBA’s move.[06:00] Paul notes that while rate hikes are painful for mortgage holders, controlling inflation remains the RBA’s primary mandate.[07:10] Australia’s policy divergence from the US and Europe introduces uncertainty around exchange rates and global alignment.[08:20] Exchange rate volatility emerges as a key risk when central banks are no longer moving in lockstep.[09:05] The tension between rising interest rates and relatively soft Australian GDP growth comes into focus.[10:50] Government spending’s contribution to growth and its potential inflationary side effects becomes a central theme.[12:10] A surprise surge in household consumption during Q4 is highlighted as an important inflation pressure.[13:40] Export strength in iron ore, coal, gas, and gold is credited with supporting Australia’s recent growth.[15:10] State-level divergence sharpens, with Victoria struggling while WA and Queensland show strong demand.[18:10] China’s extraordinary expansion in electricity production is contrasted with the US’s relatively flat output since 2010.[19:45] The scale of China’s state-backed investment strategy is framed as a long-term positioning advantage.[22:29] Kevin Walsh’s nomination to replace Jerome Powell as Fed Chair sparks discussion on market reactions and policy expectations.[24:10] Gold’s surge above $5,000 per ounce and subsequent volatility reflect heightened global uncertainty.[26:20] India’s deepening economic engagement with the European Union is presented as a logical strategic pivot.[31:10] Paul emphasizes India as a major long-term opportunity for Australia’s export diversification.[34:20] Canada’s measured thaw with China is interpreted largely as geopolitical signaling rather than macroeconomic shift.[37:24] The conversation transitions to affordability, examining the gap between political rhetoric and economic data.[39:50] Inflation moderation in the US is contrasted with persistent consumer frustration over housing and utilities.[42:45] Electricity costs are identified as a structural pressure point driven by supply constraints and grid investment needs.[45:16] Housing affordability challenges are tied back to supply shortages rather than short-term policy fixes.[46:56] Structural problems are framed as slow-moving realities that resist quick political solutions.[48:00] Listener feedback on economic models and policy perspectives is acknowledged as a valued part of the show.[48:53] Best of luck for Dominique’s next chapter and stay curious!Resources & Links Related to this EpisodeThe Invisible Hand PodcastThe Reserve Bank of Australia (RBA)RBA Cash Rate Decision – February 2026Reserve Bank of Australia – Chart PackAustralian Bureau of Statistics – Inflation DataFederal Reserve – Monetary PolicyWorld Gold Council – Gold Market DataEuropean Commission – EU-India Trade RelationsGovernment of Canada – Trade Policy
