The Morning Edition

Episode: ‘Numbers, numbers everywhere’: Interest rate rise likely, but what does it all mean?
Date: January 28, 2026
Host: Tammy Mills (filling in for Samantha Selinger-Morris)
Guest: Shane Wright, Senior Economics Correspondent

Episode Overview

In this episode, The Morning Edition dives into Australia’s latest inflation spike and explores what it means for interest rates, the national economy, and everyday Australians. Senior economics correspondent Shane Wright breaks down the recent numbers, highlights what’s driving these changes, and explains how Australia compares internationally—all while maintaining an engaging, relatable tone.

Key Discussion Points & Insights

1. Latest Inflation Figures and Their Meaning (00:47–02:27)

• Headline & Underlying Inflation:
  • Headline inflation rose through December, with the annual rate reaching 3.8%.
  • Underlying inflation (“clips out the things that are going up the most very quickly and those that are coming down”) lifted to 3.35%, higher than the Reserve Bank of Australia (RBA) expected.

  “Numbers, numbers, just so many numbers. But ultimately there’s two really important ones.” – Shane Wright (00:52)

• Market Reaction:
  • Immediate speculation that the RBA will raise rates in response at its upcoming meeting.
• Anticipated Action:
  • RBA Governor Michelle Bullock expected to announce a cash rate increase from 3.6% to 3.85% (next Tuesday, approx. 3:30pm).

2. What's Driving Inflation? (02:27–05:02)

• Key Drivers:
  • Airfare Costs: International flights surged by over 24% in December alone—a record monthly rise; domestic flights up 10%—attributed to peak holiday travel season.
  • Electricity: End of state subsidies in Queensland and WA led to a 21% annual jump in electricity inflation, with Brisbane (5%) and Perth (4.4%) seeing the highest capital city rates.
  • Food Exports: “Prices for beef and lamb have climbed by more than 10% over the last 12 months... we are effectively shipping as many cows as we can, or bits of cows, to Donald Trump to feed hungry Americans.”
    • US drought and tariffs are pushing up prices, with local producers responding to American demand.
  • Housing: Construction costs are high due to simultaneous large-scale building and global tariffs.
• Local Factors: State and international policies, including those by Donald Trump, are impacting Australian inflation in complex ways.

3. Explaining Inflation’s Impact on Daily Life (05:02–06:53)

• Inflation Measurement:
  • The ‘shopping basket’ analogy: everything from petrol (largest cost) and housing to groceries and services.
  • Reserve Bank targets 2–3% inflation for stability.
• Why Not Target Zero or Negative Inflation?
  • Deflation discourages spending and can stall the economy (historical reference: the Great Depression).
  • Excessive inflation hurts those on low or fixed incomes most.
• Quote:

  “Prices going up and up really hurt, particularly people on low incomes or fixed incomes because they can’t buy as much… So Reserve bank says, sweet spot if for this country is between 2% and 3%, we are not near that right at the moment.” – Shane Wright (06:19)

4. Interest Rates & The Reserve Bank’s Thinking (07:16–09:58)

• Connection to Inflation:
  • The RBA uses the cash rate to manage the “cost of money” and keep inflation in check.
  • Interest rates have varied dramatically over time (historically as high as 18% in 1989–90).
  • Mortgage holders are immediately affected, but savers and retirees can benefit from higher rates.
• Current Sentiment:

  “The Australian dollar… hit a three year high of US 70 cents just before the announcement… Financial markets... had the cash rate, a 60% chance of the cash rate going up. They now put it at about 70%.” – Shane Wright (08:36)

• Broader impacts: Currency fluctuations, business decisions, and broader economic implications for both borrowers and savers.

5. Labour Market and Prospects for 2026 (09:58–11:42)

• Jobs Data:
  • Unemployment dropped to 4.1%, but job creation is slowing (growth just 1.2% over the last year versus double previously).
  • The RBA must balance inflation pressure against a slowing economy.
  • Expectation: Possibly two rate increases in 2026, followed by a steady period.
• Quote:

  “They have to worry about a lot of other things… you may not see rate movement for some time.” – Shane Wright (11:36)

6. Australia in the Global Context (11:42–13:12)

• Comparisons:
  • US: Similar cash rates (3.5–3.75% band), but the US economy’s strength is uncertain.
  • UK: Economy struggling, inflation falling due to poor growth.
  • NZ, Canada, Europe, Japan: Each facing unique pressures; trade/tariff war with the US complicates forecasts everywhere.
  • New Zealand just exited a two-year recession but still faces inflation issues.
• Quote:

  “Europe… but again, what’s going on in the tariff war with the US makes anything clean really difficult to pick up.” – Shane Wright (13:06)

7. State of the Australian Economy: Glass Half Full or Empty? (13:12–14:35)

• Overall Outlook:
  • Growth is steady if modest, buoyed by population growth and private sector investment, especially in technology/data centers.
  • Consumers remain resilient (“they could only [raise prices 24% on airfare] if Australians had the money and wherewithal to go on an overseas trip”).
  • Analogy: The economy is “like a country road…the lines are marked so you’re not going to run off into the wild. But it’s not the best. But it’s not the worst by any stretch.”
• Final Quote:

  “You should always be positive, Tammy. Should always be. Why would you want to be negative?” – Shane Wright (13:23)

Notable Quotes & Memorable Moments

• On inflation statistics:
  “Numbers, numbers, just so many numbers. But ultimately there’s two really important ones.” – Shane Wright (00:52)
• On the RBA's challenge:
  “They have to worry about a lot of other things… you may not see rate movement for some time.” – Shane Wright (11:41)
• On staying positive:
  “You should always be positive, Tammy. Should always be. Why would you want to be negative?” – Shane Wright (13:23)
• Economic analogy:
  “It’s tracking along. I wouldn’t say it’s a four lane freeway, more like a country road with okay, the lines are marked so you’re not going to run off into the wild.” – Shane Wright (14:26)

Key Timestamps for Important Segments

• 00:47–02:27: Recent inflation numbers and their implications for the RBA.
• 02:27–05:02: Breakdown of what’s driving inflation (airfares, electricity, exports, housing).
• 05:14–06:53: Explanation of what inflation means in practical terms.
• 07:16–09:58: How inflation connects to interest rates and the expected RBA response.
• 09:58–11:42: Labour market trends, rate rise expectations.
• 11:42–13:12: International comparisons.
• 13:12–14:35: Summing up the state and resilience of the Australian economy.

Conclusion

This episode delivers a comprehensive, accessible overview of Australia’s current inflation spike, what’s fueling it, and its likely impact on interest rates. Shane Wright demystifies complex economic topics with clear analogies and a conversational style, providing listeners with both the big picture and the day-to-day significance of these developments. The takeaway: while things aren’t perfect, Australia’s economic road remains steady, and staying informed—and optimistic—is the best course forward.