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[music]

This is Bloomberg Daybreak weekend. Our

global look at the top stories in the

coming week from our Daybreak anchors

all around the world. Straight ahead on

the program, we look ahead to some key

inflation data in the US and how they

may affect Fed policy moving forward.

[music] I'm Nathan Hager in Washington.

>> I'm Caroline Hepka in London where we're

examining the [music] extent of Europe's

energy crisis with earnings in focus.

>> I'm Doug Krer looking ahead to next

week's rate decision [music] from the

Reserve Bank of Australia. That's all

straight ahead on Bloomberg Daybreak

Weekend on Bloomberg 1130 New York,

Bloomberg 991 Washington DC, Bloomberg

929 Boston, DAB Digital Radio London,

SiriusXM121,

and around the world on

Bloombergradio.com

and the Bloomberg Business App.

[music] Good day to you. I'm Nathan

Hager. We begin today's program with

some key inflation data in the US. The

consumer price index for July comes out

Wednesday, followed by producer prices

on Thursday, plus a read on how

consumers may be dealing with higher

prices when we get retail sales for the

month of July on Friday. For more on

what we can expect from all this data,

uh we are joined by Bloomberg News

senior strategist Edward Harrison, of

course, the author of the Everything

Risk Newsletter. Great to see you on the

weekend, Ed. Thanks for coming in. So uh

what's the risk that price pressures

pick up in July?

>> That is a good question. I think the

risk that they pick up uh is not what's

currently discounted by the market. The

market is thinking that we had inflation

of 2.6%

uh and that inflation will fall to 2.5%

going forward. This is the core number

that I'm talking about. Now uh the the

broader number is going to be above 3%

but the Federal Reserve generally looks

at the core number because that gives

them a sense of where the overall trend

is is going.

>> So where do we see uh price pressures

continuing right now? And are we still

on the disinflationary track even if we

don't see changes to Fed policy? I would

say that we're not on the

disinflationary track and that is the

problem for the Federal Reserve that

we've stopped disinflating that is

inflation is not going down further.

It's and and potentially it's rising

more and part of the reason is is

because when you look at numbers like

services I think a lot of people look at

something called super core services

both for the number that's used uh for

personal income and and expenditures

that's the PCE number and then this

number that we're going to see this week

later on both of those numbers those

those super core numbers are higher than

the baseline number what it says is that

even if you look at core, you're not

looking at a number that is reflective

of some of the percolating inflationary

symptoms that are in the economy. So,

what's keeping those uh services numbers

higher and is there anything that Fed

policy can do to bring them back down?

Are you saying that there is a risk that

we could start to see the Fed think

about invoking policy to get some of

those prices back to where they want

them? Yeah, we we definitely could. I

think we're seeing definitely financial

services is part of that. Uh health care

is another part of that. Generally

speaking, what we're seeing is if super

core services is well above 3% 3.8%

actually using the the PCE version that

says that at its core numbers that

geopolitical risk has nothing to do with

are high and therefore the the Fed might

have to go against that. We saw last

week, however, on Friday that when the

jobs numbers came out, they were

relatively poor. Uh that is the non-farm

payroll number was down. The

unemployment number was lower, which is

good, but it was just enough to make

people think the Fed will not raise

interest rates at its next meeting, nor

is it completely priced in for the

meeting after that either. As you

mentioned with those uh jobs numbers, it

does seem as though the market is giving

the Fed a little bit of breathing room

uh when it comes to policy. Uh but if we

see a pretty elevated inflation number,

does that change the forecast? I mean,

is there a possibility that we could see

those numbers uh come in a little bit

hotter? Definitely, we could see that.

And one of the things that's behind that

is Kevin Wars is the new Federal Reserve

chairman and he's been saying, "We don't

want you to look at what we're doing and

what you think we're going to do. We

want you to look at the numbers and come

up to with your own thinking about

that." And what that ultimately means is

every single time that we get a data

print, the market will be more volatile

in terms of reacting to that specific

number than it it was in the past

because we're getting less information

from the Federal Reserve about what

they're going to do. the less forward

guidance from the Federal Reserve. So if

that number comes in hot as you say

Nathan then I think that the markets

will react negatively. Now of course we

saw uh some reporting this past week

that uh the chairman is keeping open the

possibility of hiking interest rates if

inflation prints do come in too hot

after the uh relative lack of guidance

that we got at the last Fed meeting. Is

there a chance that we could see the Fed

lean toward a hike just to to get back

some of that market credibility?

>> Well, potentially. However, the jobs

number that we saw last week took a lot

of the impetus out of that move because

now the market's not even pricing it. If

the market's not pricing it, then the

Fed may not do it as a result of that.

It's hard to say because we're in a new

regime now. But if the Fed does not

raise interest rates in September, then

suddenly you're in a situation where

October, which is right before an

election, is the potentially the first

time that you're going to raise interest

rates. So legitimately, September is

probably a better uh time just from a

purely practical stance given that

Donald Trump is a vocal Fed critic, but

it's it's hard to say how the Fed is

thinking about that.

>> I really appreciate this, Ed. Again,

thanks so much for coming on with us on

the weekend. That is Edward Harrison,

senior strategist for Bloomberg News and

the author of the Everything Risk

Newsletter. Let's take a look now at

some stocks making news in the week

ahead. I'm Nathan Hager joined by

Bloomberg News reporter Judy Lru. And

the earnings story continues well right

away on Monday when we hear from him and

hers after the closing bell. I mean, it

feels like healthcare earnings have been

going pretty good so far this season.

Does that include Tella Health, Judy?

You know, Tellah Health is having a

really interesting sort of season with

this this earning season, but Hims and

Hers I think is certainly a space to

watch for a lot of investors. Um the

company has beat EPS estimates six of

the last 10 quarters. It's, you know,

really seen a lot of growth recently.

However, that growth is kind of slowing

down right now. So reported subscriber

growth was about 35% for 16 straight

quarters. But for the last two quarters

growth has been 9% and about 13%

respectively. So I think what a lot of

investors are really looking at is how

HIMS ticker HIMS

is responding to that slowing growth. So

stock movement is also an interesting

space to watch. Um the um stock is down

about 9% this quarter alone. So

definitely for investors um looking to

see him and hers earnings results and

then how that stock will respond to the

growth they report.

>> You know it's interesting Judy ahead of

this earnings we heard him announce a

new app with a doctor-led AI native care

experience. I think anytime anybody

hears the letters AI their ears start to

perk up.

>> That's right. That's right Nathan. And I

think for him and hers certainly trying

to really push the envelope with respect

to getting their consumers to stick with

them I think is certainly paramount for

the company. One item as of note is that

there was an FTC or is an FTC rather

lawsuit against his and hers. The um

plaintiffs are um FTC, Utah, and Los

Angeles County. And the lawsuit is

alleging that Hims and Hers has misled

customers into locking themselves into

recurring subscriptions and that the

company has shared private information

with Meta and Snap despite saying that

they were protective of customer

privacy. So

>> definitely, you know, I think investors

will want to know what the company has

to say about this. Certainly, the

company has come out to say that the FTC

lawsuit disregards substantial evidence.

So look for analyst questions on that.

Look for stock moves based on what uh

management says about this. I really

think it's a space to watch.

>> Yeah, nobody likes illegal overhang over

any company. [laughter] Um the uh

earnings story continues on Tuesday.

Another tech name reporting in Coreweave

after Tuesday's close, putting a focus

back on AI infrastructure after all the

concerns about hypers scale spending.

That's correct. Earnings from Core

Weave, ticker CR WV, will show whether

enormous EI demand can outweigh the

heavy costs of data centers and debt.

Right? So, um the company is expected to

report its highest revenue since their

IPO in 2025. um it's sort of Wall Street

is expecting 2.5 billion in revenue this

quarter. So, you know, really looking at

um really how Coree is managing that. Um

and I think that Bloomberg intelligence

analysts really hit the nail on the head

that say when they wrote that Coree

second quarter earnings will signal to

investors whether AI demand remains

stronger than their share price implies

and they cited that they feel like the

share price is underperforming. So

they'll be looking at revenue

specifically for their earnings and um

Bloomberg Intelligence really believes

that the revenue for Coravee for the

quarter could exceed guidance.

>> Oh, that would be a pretty big

turnaround at a time when as you know

Core Wee is kind of missed more often

than not when it comes to earnings. Is

the bar pretty high then for Coree to uh

outperform this time around?

>> I mean you're right about that Nathan.

The company has missed EPS estimates

four times out of the last five

quarters. So yes, definitely looking at

that, looking at revenue, looking at EPS

and really understanding from management

and again the earnings call and comments

are really going to be big here. Um

where they see the company going.

Analysts on the other hand are quite

bullish. 29 buys, 11 holds, three sells.

So again, we'll be listening to that

earnings call quite closely.

>> Yes, absolutely. We're also going to be

listening, I think, to uh earnings from

Cava. They report on Tuesday as well. Is

is this one affected, do you think, by

the uh the produce scare that we've seen

in fast food as opposed to fast casual?

>> I mean, certainly anybody who touches

lettuce is [laughter] having a rough

summer. I will say that. So, yes, we're

focusing on ticker CAV.

That's right. And so for analysts, the

earnings for Cava Group really need to

show that customer traffic, restaurant

profits, and new store growth is

remaining strong despite these headwinds

we're seeing, right, with the

cycllospara

um parasite and and really understanding

exactly what kind of slowdown the

company is seeing um as a result of all

of the headlines about food safety in

general. Um the stock is up around 13%

this year. Um but down about 11% this

month. And when we put that in

comparison to names like Shake Shack,

which is up about 30% this month,

Domino's, which is up about 17% this

month, really Cava, I think it's it

could represent in many respects close

to the epicenter of this issue with

cycllospora as it pertains to lettuce

and produce as as it gets served in fast

casual settings. Yeah. Oh, so we will be

watching for those hungry for the

earnings. Thank you, Judy.

>> Judy Lru of Bloomberg News with Stocks

[music] to Watch. Judy, thank you for

this. Coming up on Bloomberg Daybreak

weekend, we'll examine the extent of

Europe's latest energy [music] crisis.

I'm Nathan Hager and this is Bloomberg.

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This is Bloomberg Daybreak Weekend, our

global look ahead at the top stories for

investors in the coming week. I'm Nathan

Hager in Washington. Up later in the

program, we'll look to a monetary policy

decision from the Reserve Bank of

Australia. But first, in the coming

days, we hear from some of Europe's

biggest energy companies about their

recent performance. As reserves drop to

new lows and geopolitical unrest drives

up prices, how are the major players

responding? Let's head to London and

bring in Bloomberg Daybreak Europe

anchor Caroline Heepker. Nathan,

European gas storage levels have fallen

to their lowest for this time of year in

almost two decades after the war in the

Middle East drove up prices and stalled

winter stockpiling. The situation has

left governments with a growing dilemma

as colder weather approaches. At the

start of this month, European Union

inventories were only just about 57%

full. Meanwhile, prices are still about

80% above pre-war levels and remain

higher than winter contracts, leaving

little incentive for hoarding the fuel.

And extreme temperatures are also a

factor. A series of blistering heat

waves in the region has weakened some of

the most historically reliable sources

of electricity, forcing more dependence

on imported fossil fuels and variable

renewable energy. France's river cooled

nuclear power plants have suffered a

record amount of heat related outages.

Emily Ashford is head of energy strash

at Standard Chartered Bank and says that

the sector is facing a particularly

pertinent combination of challenges. Now

weather has always mattered to the

energy complex. It influences fuel

demand. Um but increasingly extreme heat

and drought affect refiners ability to

produce fuels efficiently. So we have

simultaneous raising of demand and

constraint in supply. Each individual

effect is relatively small but when you

combine them that amplifies pressure and

we've particularly seen that on middle

distillate cracks uh and boosting of

refinery margins over the summer month.

Uh the ice gas oil Brent crack that uh

reflects European diesel pushed over $75

at the end of July, a near 20-year high.

And there is still further upside

possible there if conditions worsen. And

Europe is a particularly interesting

case for this because most European

refineries were designed decades ago for

significantly cooler climates. And the

limiting factor isn't the distillate

column itself, but it's the cooling

systems. As we see ambient temperatures

increasing, air coolers become less

effective. Uh cooling water sources like

you mentioned such as the rivers, they

warm, so they remove less heat and

there's an increasing risk of refiners

breaching water discharge temperature

limits. And we have operational safety

limits which can reduce runs uh taking

processing units offline. That was Emily

Ashford from Standard Chartered there

speaking to Bloomberg's Lizzie Burden

and Anna Edwards. So this is the

backdrop for earnings from utilities Eon

and RWE and the wind turbine

manufacturer Vestas that we'll get in

the next few days. Joining me now for

more is Bloomberg's Brussels bureau

chief Suzanne Lynch and our energy

reporter Aean Farhat. Suzanne, the

energy crisis is affecting much of the

European continent. What has the

response been like in Brussels?

Well, I think uh since the outset of uh

the war in Iran, European officials have

been keen to stress that this is not the

same as the crisis that engulfed the

European Union back in 2022 um following

the full-scale invasion by Russia of

Ukraine. Then we saw that big energy

spike. Things have not gone h as high as

what we had then. One reason the EU

officials are keen to stress is that

Europe has diversified its supply. Now

it's not directly dependent on the

Middle East uh for energy imports for

example uh it is more dependent on

places like the US Norway although of

course it is indirectly impacted by

what's happening uh in the straight of

Hormuz and around that region.

Yeah, as you say, um, perhaps not

comparable to 2022 when Russia first

invaded Ukraine. That was towards the

end of the CO 19 pandemic, wasn't it?

But then layer that with the war in Iran

and and there are some some issues,

aren't there, for for the EU to deal

with? I mean, how do you think this

plays into diplomacy between the EU and

the US given this pressure?

Well, as part of the EU US trade deal

that was signed around a year ago

between Ursula Vanderion, the head of

the European Commission, and Donald

Trump at his golf course in Scotland, um

a big part of that was a commitment by

Europe to buy around 750 billion worth

of US energy. Now, we do know that the

Europeans have been buying a lot of LNG

uh from the US. Um now, whether it's

going to hit those figures, how you

measure that, that's a whole other

question. Um but that is certainly the

case and and even in some quarters

there's been talk about is the European

Union building up dependency? It's just

got a rid of one dependency for Russia

and here it is kind of opening up

potentially new dependency with the US

at a time when of course relations

between the US and Europe are at a low.

It has to be seen but look I'm not

downplaying the issue here for the

European Union. The reality is that you

know the EU's storage facilities when it

comes to LNG um to gas um are very very

low. It's it's around 57% full. That's

been the lowest in records going back to

around 2009. Um and we have seen these

LNG imports have been dropping since

April. Um because of the disruption in

supply. Now again the European Union is

saying you know not time to panic yet.

Um it believes that um fresh imports

will offset um those lower levels of

storage but undoubtedly it is an issue

now as we get into the winter months.

Yeah, it's already started to turn. Even

though it's August, you can feel that

the daylight hours are becoming shorter

in the UK at least. Really interesting,

Suzanne. Thank you so much. Yeah, for

those thoughts then about Europe, how

Europe can try to ameliate the energy

situation after well a series of of

crises really an overlaying crisis.

Thank you, Aean. Let me turn to you then

in terms of this well what I'll call a

multi-layered problem a recurring

problem of energy for Europe. What do

you think there is about this particular

moment that is so very difficult for the

European energy markets?

>> I mean I think this as we always say

this a lot of it is about weather. I

mean we've had now this extreme heat

this summer. Definitely some of it's

predictable. you know, it's always hot

in the summer, but it has been quite

prolonged. And just now, all these

companies and all these different, you

know, markets will be thinking about

getting ready for winter. And when you

have that kind of that winter looming

with what's happened this summer with

lots of energy supplies being used up

because of cooling demand, but also lots

of issues with cooling nuclear reactors,

meaning we have to use more coal and gas

supply, you know, it puts everyone in a

bit of a difficult position going into

the coming months as we prepare for

those colder months ahead.

>> Yeah. Suzanne was just mentioning though

it's not really a crisis that you can

compare to the invasion of Ukraine when

that sent such a shock across Europe in

terms of the scale of this problem. Give

us an idea of how you're thinking about

it.

>> Yeah, I mean you're right. I think very

quickly we start trying to draw those

parallels and we're not in the same

position as we were back then. That

being said, we are starting to see some

I'd say warning signs. For example, when

we look at some of the energy futures,

energy prices, they are going up to

levels that we haven't seen since winter

2022. I think there were a story about

Italy actually this week, which is very

gas dependent, which just saw one of

their prices go up to the highest since

December 2022, which is quite shocking.

But we would say when it comes to again

to winter, which is really where these

effects are felt, it only takes, you

know, a very cold snap, a difficult

month to very quickly be in I'm not

going to say the same position, but in a

very similar position as we were back

then. So although you're right, we're

not there yet. um everyone is very aware

that that could change very quickly

depending on the months ahead.

>> So how are energy providers dealing with

that situation and as you say are they

therefore passing those price pressures

on to consumers?

>> Yeah, I mean when it comes to wholesale

markets as I said the prices have been

elevated because of the the Iran war.

They are elevated because of the extreme

heat this summer and also because of gas

storage issues. Those prices do get

passed on to consumers through their

bills um in different mechanisms in

different countries. Um it has to be

said that Europe has learned obviously

since the last time we've built a lot

more resilience whether that be

expanding renewable energy. Um that be

just kind of getting smarter about how

we run our grid at different times.

That's something that everyone is

thinking about but you know again with

renewable energy there are lots of

things that can affect that but there's

less wind for a period of time. So it

still creates vulnerabilities and

there's no kind of golden bullet but

it's just about trying to mitigate every

eventuality that could lead to those

difficult times.

>> Okay. In the next few days, we've got

earnings from some major companies,

utilities businesses in Europe, uh from

Eon, RWE, also Vestas. What are we

expecting in terms of Eon and RWE

earnings? And will some of these themes

be evident in their reports?

>> Yeah, I mean, I think these these

companies operate across different parts

of the the energy landscape. I mean,

Eon, they do lots in the grid space and

grids have been really important this

summer as far as resilience goes, making

sure the energy can be kind of brought

from different parts of the country. So,

it's very much going to be kind of an

investment picture there about, you

know, the the whole story we've been

having about upgrading grids, being able

to carry that wind energy from the north

to the south, um, in Germany, uh, etc.

Um, I think RWE similar. They're

obviously a bit more um, a bit more

impacted in the kind of renewable

spaces. They're also building their own

projects in different jurisdictions. You

know, bidding for projects in the UK and

elsewhere. So for them, it'll also be

about that investment picture. We have

had a difficult few years for offshore

wind is something that we keep talking

about and those cost pressures are still

there. But at the same time, you know,

when energy prices go up elsewhere

because of geopolitical things, wind

does start becoming more interesting as

well. So there's kind of an investment

case there to to think about and see how

these companies react to that.

>> What about Vestas? again with the

exposure to the US. So that's been in

focus in the past.

>> Yeah, I mean the US has been a difficult

market um for offshore win recently um

because of the actions of Trump there.

Um that being said, Vestus has already

kind of done a lot of what they have to

do there as far as kind of pulling back.

Um they'll be focusing on other projects

and again it's again that investment

picture about where they start putting

their capital next. Um they know they've

also been looking at the different kinds

of um kind of M&A and stuff like that.

But I think it's important also to note

that although when we talk about the US

and kind of renewables more generally

sometimes we talk about being kind of a

difficult environment, there are still

opportunities there and all these

companies when I talk to them about the

US market, they're still very

interested. They're still looking at

projects there. So there are still

opportunities there for these these

firms.

>> Okay. Um in terms of the EU, Suzanne

talked a lot about the different

meetings that are taking place about how

at a policy level the EU tries to deal

with this. I mean what is your take on

that as you focus a lot on businesses

investment and companies what's their

perspective on how Europe is managing as

I say a kind of recurring issue around

energy

>> yeah I mean I think it's interesting

because this has happened now a few

times recently this is a recurring issue

and it does seem like from a policy

perspective things do seem quite slow

it's all about you know building more as

I said renewable energy you know gaining

this kind of resilience but that doesn't

feed through to consumers so quickly

consumers are kind of or businesses as

are seeing that difficulty in the coming

kind of 3 months you know the coming 6

months whilst the plans to kind of reach

these big net zero goals and not be

dependent on gas are more like 3 to 5

year time horizon so that's something

that I think is difficult because you

know it will pay off at some point but

the payoff isn't soon enough and people

are are feeling the pain that I guess

you can say they have learned from what

did happen in 2022 and there are kind of

shorter term solutions but at the end of

the day it's more about building that

kind of system resilience which takes

longer which only feeds through after a

and hoping that populations kind of, you

know, battle through that difficult

period for the time being.

>> Yeah. Dealing with voter dissatisfaction

about something that affects them, you

know, at the sharp end so much. Aean,

thank you so much for being with me. My

thanks to Bloomberg's Aean Farad and

also to Suzanne Lynch. And we will bring

you full coverage of the earnings from

Vestas, Eon, and RWE in the coming week

across Bloomberg platforms. I'm Caroline

Hepka here in London. You can catch us

every weekday morning for Bloomberg

Daybreak EU beginning at 6:00 a.m. in

London. That's 1:00 a.m. on Wall Street.

Nathan,

>> thanks Caroline. And coming up on

Bloomberg Daybreak weekend, we look to a

rate decision from the Reserve [music]

Bank of Australia. I'm Nathan Hager and

this is Bloomberg.

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This is Bloomberg Daybreak Week and our

global look ahead at the top stories for

investors in the coming week. I'm Nathan

Hager in Washington. This week we get a

rate decision from the RBA, the Reserve

Bank of Australia. For a preview, let's

get to Doug Krner, host of the Bloomberg

Daybreak Asia podcast. Thanks, Nathan.

The Reserve Bank of Australia raised its

policy rate at each of the bank's first

three meetings of the year. Now, in

June, policymakers held steady. To help

us understand the current dynamics of

the Australian economy and what the RBA

may do next, I'm joined by Bloomberg

economist James McIntyre, who covers

Australia and New Zealand. James joins

from our studios in Sydney. Thank you so

much for being here. Can we begin by

setting the stage with the story on

inflation? I believe the latest reading

was a bit cooler than expected. Help me

understand what's going on. So what we

had was we got the uh June data and that

also gave us the quarterly data and and

Australia is still in this bit of a

situation where we've got a new monthly

CPI and that's uh slowly gradually

taking over from the quarterly which the

RBA looked at and whether it's the

monthly or the quarterly number at the

end of the day uh that uh the latest

figures that we got were a little bit

softer than the market but more

importantly a little bit softer than

what the RBA was expecting. They raised

rates at their May meeting and put out a

a set of updated projections which is

the basis for why they wanted to raise

rates and and inflation has come in not

as as hot. And so the three rate hikes

that the RBA delivered over the course

of this year to try and help slay that

inflation dragon. Well, it turns out

that the dragon at least in the data so

far isn't as big as uh as the central

bank had initially thought.

>> When you look at the work that you do in

trying to understand the various data

points, do you think this is a durable

trend? and will it last?

>> It's always an evolving picture and one

of the pieces of the puzzle that's

evolving uh increasingly that might help

things uh endure and last on on the

inflation front is the the housing

market downturn and the consumer and

domestic demand side of the economy.

It's uh what we've seen uh since those

rate hikes and we've had uh not just

those rate hikes, but we've had the

shock from the uh the conflict with Iran

and then some policy changes around the

taxation of property in the recent

federal budget. And the three of those

factors have combined to deliver pretty

sharp uh downturn in in the housing

market where people uh buyers have

really pulled back and uh and are

sitting on their hands. So if there has

been this contraction in consumer

spending, what do you think it's going

to take to reverse that? Is it is the

recipe here necessarily lower interest

rates or does something else have to

change? Do you think

>> we do have a situation where the labor

market is uh not generating enough jobs

that we did have strong jobs in the in

the most recent month, but if we take a

bit of a longer arc over the year, we do

have a softening of labor market

capacity. It might not, especially for

the property market and and where the

fears are for consumers right now. It

might not be that rate cuts are

necessary. It could be that we could see

a little bit of a stabilization within

that. If there was a signal from the RBA

that they're likely to be on hold from

here, that would be a big relief to

households and could be something that

could help catch what is currently a bit

of a downturn and help stave that off.

But um it's it's unlikely that the RBA

is going to be doing that with inflation

where it is. Inflation has been weaker

than expected, but it's still above

their target. And so they're likely to

sound a little bit hawkish, we think, uh

at this August meeting, but softening

their tone uh perhaps over the meetings

to come into the in towards the end of

the year.

>> Not a day goes by when there is not

major news as it relates to artificial

intelligence. And I was reading a piece

that you sent. This is concerning the

RBA's chief economist, Sarah Hunter, who

was warning the data center boom may be

adding to pressures in the construction

industry by essentially taking workers

away from other projects. Talk to me a

little bit about that and the level of

skilled labor that is available to

tackle these kind of construction

projects. So, Australia has a very big

infrastructure boom in one of the the

second largest state and in also in the

largest state, New South Wales. But in

Victoria, there is a major uh

infrastructure boom as they roll out uh

a lot of civil construction for

infrastructure in that state. And that's

something that um has been a challenge

for the residential construction sector

in order to get enough skilled trades

people uh in to build the homes that are

needed for the migration story and the

population picture or the strong

population growth that Australia tends

to have thanks to migration. So we need

the housing, we need the construction

workers for that. We've got a very big

infrastructure construction boom around

transport infrastructure. We're just

putting the finishing touches on a

second airport for Sydney and a lot of

infrastructure around that. So the

construction sector is operating at

capacity and then when we think about

that picture then there is this very

large positive demand shock into the

economy from AI and the construction of

the data centers and so this is

something that is it's catching the

reserve bank's eye quite obviously and

quite importantly because you know

hyperscalers if we look at what's been

happening with the price of be it

processing chips and then memory chips

the price of the iPhone is going to go

up because the hyperscalers are bidding

up for all of these scarce resources

from the chip makers.

>> So, broadly speaking, would you say that

the buildout that we are seeing in

Australia of these AI data centers, is

that a positive for overall GDP?

>> It is in the construction sense, but we

do see a lot of this GDP, the data

center boom, if you want to uh uh call

it that. There's two elements. There's

the machines that you put into the data

center and there's the building of the

data center. The building, that's a boom

for the economy. the machines that go

in. Well, that boom uh just goes

straight out the import side of the GDP

calculations. That's a boom that's made

in South Korea, that's made in Taiwan.

And if we look at our balance of

payments and our trade figures on a

monthly basis, you can definitely see

that that's where that side of the boom

is showing up. But on the construction

side, yes, it's definitely something

that is um delivering an extra boost to

GDP. And that's a positive in the

overall picture for the economy given

that uh that housing downturn, the three

rate hikes, that's seeing some of the

softness uh coming through on the

consumer side of things.

>> You mentioned the the softness of the

housing market a moment ago and I'm

wondering whether or not there is a

positive side to that story. Something

that we need to tease out a little bit

more, especially where the issue of

affordability comes into play. For a

long time, there has been significant

challenges and a lot of uh hand ringing

and concern by policy makers about how

to address the affordability challenge

within the housing sector. House prices

are easing back a touch. Interest rates

are high. High interest rates don't help

affordability, but we do have a

situation of house prices coming off

slightly, inflation continuing to rise,

wages continuing to rise uh as well. So

real house prices are in decline. Real

wages are gradually creeping higher.

There there is a positive there that

once we do get some some uh potential

you know clear signs that the inflation

challenge is over and that dragon

slightly smaller dragon is actually

slain and the Reserve Bank can think

about normalizing monetary policy and

bringing it back from where it is back

towards a more neutral setting that we

will see that uh that it will become

quite clear that this maybe has set up

some of the you know perhaps early next

year or in 2028 has set up some of the

most beneficial or positive housing

affordability conditions that

Australians might have seen in the last

10, 15 or maybe even 20 years. You

mentioned the immigration issue a moment

ago and I'm trying to get a sense of

what's happening in that dynamic right

now and whether or not uh the government

believes that it's important to kind of

control the flow of migrants coming into

the country or whether there is the

realization that in order for the

economy to expand further that an influx

of migrants is really necessary. Well,

Doug, look, this is this is a a key

tension point within the economy and

also within within domestic politics. Uh

the migration story has been part of

what's kept Australia's economy growing

over the last couple of years. Per

capita GDP growth is weak and we've had

cost of living pressures. Uh that's been

a a kind of a cover for what's gone on

within the economy in terms of living

standards not really moving anywhere.

GDP per capita being in recession and

and flatlining for some point in time.

And that's a different scenario to what

voters and the community expects and has

been used to over our history. And and

it's sort of natural that that uh that

people gravitate towards, you know, uh

people that are offering or or at least

calling out what they're feeling and and

so Australia has does have that

challenge politically. there is the

emergence of a a group similar to what

we've seen with the the MAGA and then uh

UK reform within the one nation party

within Australia having a quite a big

anti-immigration uh type stance and

that's that has been their polling has

really risen quite quite a bit and

putting a lot of pressure on on the

government and the main opposition party

around uh what to do about limiting uh

migration in the sense that you know

that's that being something that has

captured should people's imaginations as

a possible uh solution. Now really when

we think about Australia and Australia's

you know economy uh continues to have

such abundant opportunities ahead of it

and we do need uh labor to come in and

help us unlock some of those potential

and possibilities. But what we haven't

seen and over the last uh couple of

years is we haven't seen uh the the the

benefit of improvements in living

standards coming along with the growth

uh in the economy. And so, you know,

that's that's where this party has uh

come up and the support for around this

uh anti-migration story uh has has

really come through. Um there are some

signs though that if we do get uh you

know an improvement in living standards

and a pick uh from improved productivity

growth as the government's um roll out

of or or or the funding for uh big

social programs by the government is is

cailed somewhat freeing up some room for

the private sector be it potentially

through the productivity enhancing

benefits coming through from the AI data

center boom and then uh and then the the

economy, economic opportunities that

might evolve after that. These are

things that will come over time in the

pipeline but for the moment uh it is

delivering this uh significant pressure

on migration and so we have uh seen that

the government put in a lot of policies

to try and wind that back. there haven't

been uh seeing much signs of success at

the headline level, but we're seeing

some signs coming through in some of the

more high frequency data, especially

around student visas and the like that

some of the the pressure might be coming

off uh soon.

>> So, as we wrap up, I just want to get

back to the RBA meeting just to

underscore the fact that the latest

reading on inflation was on the soft

side. we hear or I hear at any rate uh

the fact that the labor market is stable

at best. There are some problems that

are maybe being addressed. Do we have

any guidance right now at least from

what the markets are saying, the money

markets in particular on what the RBA

may do at uh the next meeting?

>> Market expectations for the RBA have

been dialed back a bit uh over the LA

especially following that inflation

data. There's still an indication that

markets are expecting perhaps a little

bit more tightening, but a full hike not

being fully priced in uh right now, but

the situation is one where there's a

full rate hike is is is not priced in uh

right now by markets. So, there's still,

I guess, a you know, dipping the toe in

the water or lukewarm support for

further tightening with markets not

expecting that the RBA is going to be

easing back anytime soon.

>> We really covered a lot of ground and I

appreciate it so much. Bloomberg

economist James McIntyre helping us

understand what's happening on the

ground in Australia. James covers the

economies of Australia and New Zealand

for Bloomberg Intelligence joining from

our studios in Sydney. I'm Doug Krer.

You can catch us weekdays for the

Daybreak Asia podcast. It's available

wherever you get your podcast. Nathan,

thanks Doug. And that does it for this

edition of Bloomberg Daybreak Weekend.

Join us again Monday morning at 5:00

a.m. Wall Street Time for the latest on

markets overseas and the news you need

to start your day. I'm Nathan Hager.

Stay with us. Top stories and global

business headlines are coming up right

now.

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