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News and Reviews

How Core Inflation Affects the Economy and Interest Rates

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How Core Inflation Affects the Economy and Interest Rates

By Ian Rogers

Core inflation is a critical measure that excludes volatile items such as food and energy prices, which are more susceptible to short-term fluctuations. It provides a clearer picture of long-term inflationary trends, making it a crucial factor in economic decision-making. Here’s how core inflation affects different aspects of the economy and interest rates:

Impact on Interest Rates

  • Guides Central Bank Policy: Central banks, such as the Reserve Bank of Australia (RBA), closely monitor core inflation to decide on interest rate changes. If core inflation remains high, it indicates persistent underlying price pressures in the economy, prompting the RBA to either maintain or increase interest rates to curb inflation.
  • Interest Rate Increases to Control Inflation: When core inflation is high, the RBA raises interest rates to cool down the economy, reducing demand for goods and services, which helps bring prices down. Higher rates make borrowing more expensive and encourage saving, reducing consumer spending and business investment.
  • Interest Rate Cuts if Core Inflation Drops: Conversely, if core inflation falls to within the RBA’s target range (2-3%), the central bank may lower interest rates to stimulate economic activity. Lower rates make borrowing cheaper, encouraging spending and investment, which can help boost economic growth.

Economic Growth

  • High Core Inflation Can Slow Growth: Elevated core inflation indicates rising prices for a broad range of goods and services, reducing purchasing power. Consumers and businesses face higher costs, leading to reduced spending and investment. In response, central banks might raise interest rates, which can further slow economic activity.
  • Low Core Inflation Encourages Growth: When core inflation is stable and low, it creates an environment conducive to economic growth. Lower inflation typically means stable prices, allowing consumers to spend more confidently, while businesses are encouraged to invest in expansion, leading to economic growth.

Effect on Wages and Purchasing Power

  • Erodes Purchasing Power: High core inflation erodes the purchasing power of households. As prices for essential goods and services rise, consumers are able to buy less with the same amount of money, which can hurt living standards, especially if wages do not keep pace with inflation.
  • Wage Pressures: When core inflation is high, workers may demand higher wages to maintain their purchasing power. However, businesses facing higher wage costs may pass these costs onto consumers through price increases, creating a feedback loop that keeps inflation elevated.

Impact on Business Investment

  • Uncertainty for Businesses: High core inflation creates uncertainty for businesses as costs rise unpredictably, making it difficult to plan long-term investments. Businesses may delay or scale back investments, which can slow economic growth.
  • Investment Opportunities in Low Inflation: On the other hand, when core inflation is low and stable, businesses face more predictable costs, which encourages investment in new projects, technology, and hiring.

Financial Markets

  • Stock Market Volatility: High core inflation often leads to interest rate hikes, which can negatively affect the stock market. Higher borrowing costs reduce corporate profits and limit growth, leading to lower stock prices. Conversely, falling inflation can spur rate cuts, which tend to be favourable for stocks, as companies have lower financing costs and investors shift towards riskier assets.
  • Bond Market Influence: Core inflation directly impacts the bond market. Rising inflation erodes the value of fixed-income investments like bonds, leading to higher yields. When inflation is under control, bond prices typically rise, and yields fall.

Consumer Confidence

  • High Core Inflation Reduces Confidence: When inflation remains persistently high, consumers become more cautious, cutting back on spending. This dampens overall demand in the economy, which can lead to slower economic growth.
  • Low Core Inflation Boosts Confidence: With lower inflation, consumers are more confident about their future financial stability and are likely to spend more, supporting economic activity.

Conclusion

Core inflation is a key indicator that central banks like the RBA use to guide their interest rate policies. High core inflation typically leads to higher interest rates to control price increases, while lower core inflation can prompt rate cuts to stimulate the economy. Core inflation affects everything from consumer spending and wage growth to business investment and financial markets, making it a vital factor in both economic stability and growth.

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News and Reviews

Spiders Australian Tour 2024

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Not here to F@#k Spiders Australian Tour 2024 for Heath ‘Chopper’ Franklin

 

By Samantha Elley

Hold on to your hats and block your children’s ears, comedian Heath ‘Chopper’ Franklin is coming to town.

The winner of both the Comic’s Choice Award at the Melbourne Comedy Festival in 2018 and the Best Comedy at Fringe World 2018 is not here to f@#k spiders but he will be appearing at the Byron Theatre this Thursday, November 14 at 6.30pm.

The Northern Rivers Times decided to ask Mr Franklin a few questions.

What made you decide to get into the comedy business and how did  you get there?

I always liked making people laugh but I never thought comedy was a viable career so I just did it as a hobby at uni. Then with a bit of persistence and luck I finally got to turn my hobby into a job.

What was the hardest/easiest topics you had to cover? (ie. What has gotten the best/worst reaction from the audience?)

The hardest topic to cover is anything boring. Quarterly business activity statements for example aren’t fertile soil for comedy but luckily you don’t HAVE to cover that stuff. The easiest things to make comedy out of are things that don’t make sense but everyone accepts as normal. All you have to do is dismantle it in front of everyone and display its ridiculous components. Like explaining to people what’s in their sausage.

What are your thoughts on:

  1. Israel/Gaza conflict

I think there’s no shortage of opinions on this one and I don’t see how adding mine makes things any better.

  1. Trump back as president

It was America’s election, and they picked the person they wanted and good luck to them. I think there is an idea that the president is always an amazing righteous person but most of them lately have been corrupt, riddled with Alzheimer’s or sex pests so it’s only really movies and tv where the US President is infallible and upstanding.

  1. Lydia Thorpe

I think it’s great that we live in a country where you can publicly disagree with a monarch, but I also think that particular instance did more to raise her profile than champion her cause.

4. Gen Z

I’ve started getting more young people to my shows lately and it’s awesome. I think everyone sees the version of Gen Z that’s on the internet and that is the most annoying version of them and not representative of the whole generation. Everyone forgets that you can just ignore all the dumb stuff people say on the internet.

As you will be performing at Byron Bay, would love to know what you like about the place (If you haven’t been here before, feel free to tell us what you think it’s like).

I haven’t been there to do shows ever, and I haven’t been there for about 20 years. I assume it’ll just be me hanging with Chris Hemsworth on the beach all day.

Chopper will be covering a host of other topics in his show including e-scooters, UberEats, Bluey, vegans, cyclists – everything gets a serve in this award-nominated show.

A genuine Aussie comedy icon, Heath Franklin has been nominated for two ARIAs, a Logie, won the Comic’s Choice at the Melbourne Comedy Fest and sold more than half a million tickets worldwide. So, harden up and book now to join Chopper for the best night out in yonks.

To book your tickets visit here.

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News and Reviews

NRAR Pilot Boosts Water Compliance

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NRAR’s Maitland Pilot Program Highlights Importance of Face-to-Face Engagement for Water Compliance

A recent inspection program conducted by the Natural Resources Access Regulator (NRAR) in the Maitland region has demonstrated the effectiveness of direct, face-to-face engagement with water users in improving compliance with water laws.
The reinspection pilot program targeted 93 properties that had previously breached water regulations. Following an initial visit from NRAR outreach staff, 78% of landholders took positive action to address compliance issues. However, 22% (21 properties) were still found to be non-compliant.

Common Compliance Challenges

Keeley Reynolds Head of Communications

NRAR Director of Education and Engagement Keeley Reynolds

Keeley Reynolds, NRAR’s Director of Education and Engagement, highlighted recurring issues in the Maitland region, including:
• Oversized water works.
• Expired approvals.
• Inaccurate or incomplete logbook records of water use.
“These visits were an opportunity for us to confirm whether the rules are being followed and to help landholders better understand their obligations,” Ms. Reynolds said.
She expressed optimism about the program’s outcomes:
“The effective management of water in NSW relies on accurate and consistent water use measurements. These site visits show that engaging directly with landholders fosters better compliance outcomes.”

Addressing Non-Compliance
NRAR is actively working with non-compliant landholders to ensure they meet regulatory obligations. Ms. Reynolds warned that continued non-compliance could lead to enforcement actions, ranging from fines to suspension of approvals or, in serious cases, prosecution.

Understanding the Hunter Water Sharing Plan Area
The Maitland region forms part of the Hunter Water Sharing Plan, covering over 20,000km². Bordered by the Liverpool Ranges to the northwest and the Great Dividing Range to the west, it extends further inland than any other coastal region in NSW.
This diverse and expansive area underscores the importance of tailored, region-specific outreach to ensure water users understand and comply with regulations.

NRAR’s Commitment to Outreach
The NRAR’s Outreach Program visits thousands of licence holders annually to provide education and hear directly about their water management practices. During these visits, NRAR officers guide landholders on their obligations, fostering collaboration and compliance.
For more information about NRAR’s education and engagement initiatives, visit the NRAR website.

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Local News

Blueberry Prices Fall as Australian Supply Peaks Amid Seasonal Overlap

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Blueberry Prices Fall as Australian Supply Peaks Amid Seasonal Overlap

 

By Ian Rogers

Blueberry prices across Australia have dropped significantly, with punnets now selling for under $2.50 in most capital cities due to a seasonal surge in supply. Earlier in the year, a gap in supply led to prices soaring up to $20 a punnet in some areas. However, with production in full swing, Australians are enjoying more affordable prices as local farms reach peak output.

In Western Australia, this price decline is fuelled by a strong local supply, as blueberry production in the northern region winds down while production in the south ramps up. “What you’re seeing is a crossover between the two regions. This [price level] will be consistent for the next month,” explained Joshua McGuinness, Mountain Blue’s general manager of sales and marketing.

While many of WA’s blueberries are locally sourced, some are typically imported from the eastern states. However, recent biosecurity measures to mitigate fruit fly risks have limited imports, creating more demand for locally grown berries and supporting WA farmers.

Rachel Mackenzie, Executive Director of Berries Australia, noted that low prices in peak season do not pose a significant concern for growers, who base profit margins on annual averages. “We need to consider the whole season’s average price to ensure growers can turn a profit,” Mackenzie said.

With demand variations across the country, WA farmers are also taking advantage of interstate opportunities. Berrysweet owner Anthony Yewers shared that he plans to send fruit to South Australia to help meet supply gaps caused by recent adverse weather in the eastern states.

 

For more local news, click here.

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