Bloomberg Morning time: Australia 05/15/2024

Welcome to DAYBREAK, Australia.I'm Haidi Stroud-Watts in Sydney We're counting down to Asia's major market opens.And then about rulers in Hong Kong and the top stories this hour.Asian stocks set for a positive open ahead of the US inflation data.A big tech rally driving the S&P 500 within a whisker of record highs.Bond yields fall. Beijing blasts the US move to hiketariffs on about 8 billion of imports after President Biden accuses China ofcheating on trade. And I'm Paul Allen at Parliament Housein Canberra, where the Albanese.

Government has handed down a budget thattries to balance cost of living relief against not stoking inflation.We'll dissect the plan with Finance Minister Katy Gallagher shortly.And in Singapore, I'm Evil Hong, reporting live as the country's fourthleader since independence prepares to take power.We'll look at the unprecedented challenges facing the new Primeminister, Lawrence Wong. All right.Counting down to the market opens here across Asia at the start of the day.You've got US futures coming online fairly steady, but in the context ofwhat was another run up in the prior.

Session.So the S&P 500 just within a few points of reaching a new, fresh record high.Tesla and video are among some of the big gainers there.And also that enthusiasm and the optimism around main stocks continuedfor another session. You had GameStop, for instance.That's the last close to seeing that, but up 60% adding to those gains ofaround 70% the day prior as well. A few different echo points to note,because we had producer price inflation data coming out actually toppingeconomists forecasts here. When you look beneath the surface, therewere a couple of different details that.

Did offer some relief in key categoriesthere, and we can get more details on that in just a moment.And of course, Heidi, hearing from Jay Powell as well, another focus for thesession. Yeah, because I guess ahead of, ofcourse, inflation prints up by number really causing that reversal when itcomes to expectations that maybe the data is softening because inflation, atleast on the producer price front, still looking very sticky.So we're really watching what the consumer price inflation number has tohold. That's a major narrative that we'rewatching now.

Futures looking like we'll see a littlebit of a move upwards when it comes to the start of trading in Sydney, which isabout 50 minutes away from the start of cash trading.Kiwi stocks a little bit on the back foot already this morning.Nikkei futures looking sort of mildly positive.So we will see that follow through. When it comes to the US rally, it seemswatching the tech stocks given that we did see big tech megacap leading thatrecovery in US benchmarks as well ahead of that key inflation number.China futures looking a little bit softer at this point.A number of close markets to contend.

With today, namely Hong Kong and Koreaboth closed on account of the Buddha's birthday holiday.But of course, one of the big challenges, despite the fact that wehaven't really seen much of a market reaction, is, of course, how we digestthese tariffs. Are they significant when it comes tothe substance and is it more sort of political posturing going into November?Take a listen to what we heard from President Biden and the US traderepresentative, Katherine Tai. They want fair competition with China,not conflict. When you make tactics like these, theyare not competing.

It's not competition is cheating.And we've seen damage here in America. We are interested to see how Chinaresponds. We have indicated to China that this isnot an intention to escalate or even to confront.It really is on our side a set of defensive measures when taken togetherwith the investments that we are making here in a green and clean technology.Well, China has blasted the Biden administration's move in a statementvowing to take its own action, but it's yet to reveal any concrete response.Our chief North Asia correspondent Stephen Engle joins us now for more.And Steve, we knew this was coming and.

Is range of different sectors that arein focus, but what really stands out to you?Yeah, I mean, we've known this since Friday with the Bloomberg scoop and thennow it's fleshed out the details in the announcement.So everybody knew this was coming and I'm sure it was well telegraphed as wellby U.S. officials to Beijing with the varioustrips by U.S. officials that something like this waspotentially coming down. Keep in mind, this is the culmination ofabout a two year review of Trump era tariffs on China.And keep in mind as well, none of those.

Tariffs were rolled back, right?So they were added on to any in key areas, as we just heard from KatherineTai and also Joe Biden in key areas that are key to China's ramp up ofmanufacturing capacity and the industrial base at a time of a slowingdomestic economy. So we're talking their new three EVsbatteries, solar as well as chips and other things.Everything from ship to shore cranes are added to, you know, an increase of 25%syringes and needles, 50% surgical gloves, 25%.So there's a lot of different products, targeted products, as Janet Yellen hastalked about,.

Against China and the increase of thesetariffs. Yellen, by the way, she also weighed inon this, saying this will not cause a meaningful rise in US prices.And that's the big concern, obviously, that this could stoke inflation.If you're raising the import costs potentially on a lot of these products.Here's the statement coming from the Ministry of Commerce, Ofcom in Beijing.China will take resolute measures to safeguard its own rights and interests.The US should immediately correct its wrong action and cancel the additionalmeasures against China. Beijing also adding that the tariffswere political manipulation ahead of the.

November election.Obviously, this is something that Donald Trump has weighed in on.He says forget the 100% increase on tariffs into the United States.It should be 200%. Of course, Donald Trump has talked a lotabout across the board 60% tariffs on Chinese products.So it's going to get an interesting of obviously over the next six months.Now, the big question right now is what can China do to retaliate?We don't know. And what is their capacity to retaliate,perhaps on their own export controls like on key minerals, which Chinacontrols.

But again, that could undermine XiJinping's efforts to restore confidence in its domestic economy and also attractinvestment from abroad. So we'll see.A lot to be said about saying how nuanced these tariffs were, and thereare some pretty key exclusions and careful exclusions here.Yeah, the US solar industry, for one, has, as argued, and I guess rightfullyand not rightfully so, but it's been justified, I guess, by theUSTR, the US Trade Representative's Office, and Katherine Tai essentiallystarting a process for the exclusion perhaps of about 19 different products,essentially for equipment that goes into.

Making solar components, because thatsolar industry in the United States, it's it's it's up and coming, but it'snot there yet. And that could if we raise the if theUnited States raises the price on the solar equipment, manufacturing equipmentessentially could raise their costs and and and hinder their efforts to buildout their own supply chain in the solar industry, in particular, the U.S.manufacturers, they're arguing about tariffs on solar, ingot and also wafermaking equipment that would raise their costs at all.But keep in mind as well, something that was interesting that I read through thison those EV batteries, the lithium ion.

Batteries.Yes. The Biden administration raised thetariffs on lithium ion batteries for EVs to 50%, but they did not raise thetariffs for lithium ion batteries that go into solar equipment.And that is a key designation as well, not to hinder the burgeoning U.S.solar industry, which is, of course, really dominated by China,overwhelmingly dominated by China. All right, Steve, that was our chiefNorth Asia correspondent there, Stephen Engle on just a few breaking lines tonote here this morning. We do have some leadership changes orresignation, rather, at openai.

This is, of course, the company thatthat brought it into the world. But it gets it's gave it is leaving thecompany. He's actually just put a post down on Xand saying that after almost more than a decade he's made the decision to leaveOPENAI. The company's trajectory has beennothing short of miraculous, he says. But he is, as we said, exiting thecompany. It has been a very interesting period,of course, for Openai, so its gave is actually one that voted to oustSam Altman as CEO, but then managed to survive all of that leadership tumultand and was appointed to the board but.

Skydiver is saying he's very excited ofwhat comes next. And it's a project that is somethingthat's quite meaningful to him personally Heidi.Australia's government has delivered a second consecutive budget surplus, butits spending plan will see a return to deficit in the next fiscal year as thecountry heads towards an election. Treasurer Jim Chalmers says the fiscalblueprint will help ease cost of living pressures without stoking inflation.This budget shows that we are realistic about the pressures that people faceright now, and we are optimistic about the future.This budget reflects our biggest.

Ambitions and our highest aspirations tomake Australians the primary beneficiaries of a world of churn andchange. Bloomberg's Paul Allen is at ParliamentHouse in Canberra this morning. A poet's without stoking inflation partthat's going to be a question mark over it, right?What do you point to when it comes to the disappearance of surpluses?Yeah. Surplus.We barely knew ye. 9.3 billion Aussie dollars.That's about 6.1 billion USD. And that's pretty much locked in becausethere's just a few weeks left in the.

Financial year.But then, yes, we're back into deficit 18.7 billion for 20 2425, and that'sdouble what economists were expecting. So will it go?How did it evaporate so quickly? Well, there's a couple of reasons.Commodity prices are forecast to come down.The iron ore price forecast to be $60 per tonne over the next year, althoughthe budget forecasts for iron ore are typically pretty conservative.But forecasts for coal thermal, metallurgical coal, natural gas as well,they've been dialed back as well. And then there's the spending side ofthe equation $26 billion in tax cuts.

Everyone is going to get a tax cut, $300billion worth of energy bill relief. It doesn't matter how wealthy you are,everyone's getting that as well. And then there are expansion of therental assistance plan, 330 billion and spending on defence.And also we've got the future Made in Australia plan, which we've been talkingabout extensively. It's $27 billion, although that cost isgoing to be spread out over the course of a decade.So hey presto, your surpluses evaporate. And Paul, of course, we're gettingcloser, I guess. So The election is going to be held nextyear.

So is this a is this a budget that hasthat vote very much in mind? Yeah, that's the question I'll beputting to the finance Minister, Katy Gallagher, a little bit later on thishour. And I am anticipating a coy answernaturally, because one of the benefits of incumbency is getting to choose whenthe election is going to be. And in that regard, you want to keepyour opponents guessing. But I boil it down to a fairly simpleequation. If CPI comes down, plus the RBA easeslater this year, that equals an early election potentially.Now, that's the great hope here is that.

This government has delivered cost ofliving relief without stoking inflation. Now that's a point of some debatesbetween both the government, the opposition economists as well byBloomberg. Bloomberg Analytics has also published anote saying, well, this is going to push back rate cuts, all this additionalspending. For its part, the Treasury isforecasting inflation to be at 2.75% by year end.That's back within the RBA's target range and that would open the door topotential rate cuts. However, that's 12 months earlier thanthe RBA forecasts for inflation to be.

Back in the target range.Now both of these groups, the Treasury, the RBA, they're meant to be apolitical.So there's a pretty obvious disconnect here on inflation forecasts.Oh, Alan there in Canberra. We'll have more analysis on Australia'sbudget coming up with Paul and Finance Minister Katy Gallagher.He'll be joining us later this hour. We're speaking with the ShadowTreasurer, Angus Taylor as well later on.Coming up, Evans and partners sharing their investment strategy as Fed ChairJay Powell suggests rates might be kept higher for longer.

The Middle East and Africa.Vibrant resources and high yield investment opportunities abound.Join me on Horizon, Middle East and Africa for the stories, newsmakers andinsights from this exciting region. Call me on Bloomberg. I don't think that it's likely based onthe data that we have, that that the next move that we make would be a ratehike. I think it's more likely that will be ata place where we hold the policy rate where it is.The first quarter in the United States was notable for its lack of furtherprogress or inflation.

We had higher readings in the firstquarter and higher than we expected. We did not expect this to be a smoothroad, but these were higher than I think anybody expected.And so what that has told us is that we'll need to be patient and letrestrictive policy do its work. The Chair, Jerome Powell on the centralbank's fight against inflation. Of course, we'll get a little bit morewhen we get that inflation picture being rounded out by the consumer numberslater on. Let's bring on Texas Lucy Meyer, who's asenior investment adviser at Evans and Partners here with us in Sydney.And of course, this kind of balance.

Between fiscal and monetary is achallenge for the Fed. It's increasingly now front and centerfor the RBA as well. When you take a look at the budgetannouncement, subsidies for all, if you're an electricity user, it seems,how much does that complicate the picture?Well, the Government's been at pains to sort of really assess that they'veworked with Treasury to work out the potential inflationary impacts of thesemeasures, and they assure us that they aren't to be, you know, too considerate.But I think their main objective here was looking at the health of theconsumer, which has been certainly dire.

You know, the cost of living has beenvery stressful for consumers. And we calculate that to be in aggregateat 50 billion for 2023 was that aggregate measure.And that's looking at things, you know, rising interest rates, cost of livingand inflation and also tax bracket creep.So these measures from the from the budget and from the government go someway to address those concerns. As you mentioned, we saw the energysubsidy, $300 to all households who use electricity in combination with thosetax cuts. And we've also seen some rent relief.So they really are at pains to try and.

Provide some relief to those cost ofliving pressures. And we'll see how that goes for you,though. There are some investable themes comingout of the support that we've seen in the budgets and the critical mineralsannouncements, health care. Are you able to action those in terms ofthe companies that you see a clear benefit pass through?Yeah, well, as you mentioned, so health care, there were some net benefits topathologists, suppliers like Helios, Australian clinical labs, they shouldsay some benefit from indexation, which we haven't seen in 25 years.So that is a benefit, probably not an.

Extremely large one.Also, the critical minerals plays through the future in Australia nowprojects where we're seeing incentives and tax cuts for producers in criticalminerals. So today we might see an uplift frommineral resources, Linus rare earths and also Wesfarmers and there significantlithium play there. But all of these are sort of at themargin and we'll need to see how things play through out from where we'resitting. The biggest advantage from these budgetmeasures, as well as other reasons to believe that the consumer would improveat those listed discretionary retailers.

Where we do think that they'll be a liftfrom these budget measures as well as we're just saying, you know, we'resaying rates peaking, inflation should be peaking and all of these things willhelp to increase that per capita consumption that we've seen has beenreally depressed in the last few quarters.Are there any listed discretionary retailers that stand out to you inparticular? Yeah.So when we look at the discretionary retailers, I mean, Flight Center is onethat, you know, despite COVID and the impact that that had on on, you know,lockdowns and restrictions to travel, it.

Actually emerged from that period abetter business. It brought its cost cost of operationsdown as it closed a lot of its fixed physical stores.So it's actually in a really great position to take advantage of the upliftin spending that we're actually seeing from that demographic 60 and above.So we know that this impact on cost of living hasn't been equal across theboard. So, yes, so Flight Center is in a greatposition there as well. We've also seen a decline ininternational affairs at last. So for Flight Center who somebody who'swho packages travel offerings together,.

That means that reduced spend on onairfare should actually see customers able to add on things likecruises and hotels which are of higher margin to their business.So that's one in the discretionary retail space that we like others.Others, there are premier investments, really quality business with theirinternational brands like Smiggle Peter Alexander, another high quality domesticbrand looking for international expansion and thosediscretionary retailers, they have done particularly well in the last couple ofmonths, but still a lot of them are priced on a pay basis below the marketas a whole.

So we see opportunity there,particularly if we continue to see strength in that consumer throughoutthis year. But I noticed that when you've gotflights and I've also got Trip.com and that's of course a play on the Chineseconsumer. But what's interesting in China at themoment is that we're seeing more people are taking trips and we're sort ofrecovering there. But the average spend per trip is stillpre-pandemic levels. You concerned about that?And what are you thinking about Chinese consumers generally?Well, the Chinese consumer has.

Definitely been a concern and been underpressure. And a lot of that is around confidencelevels in the local economy that, you know, across the share market andparticularly the property market. And yes, that's had an impact on trip.We've also seen that faces play out really well this year.So whether there's a lot more to go in that stock, we're sort of happy to holdon to that there rather than add to new positions.But back to the consumer, it's really interesting because we're saying, youknow, the Politburo has come out and said that potentially they might addsupport for the property market, and.

That would be through buying excessinventory in apartments in China, which would if they sort of set a floor in thein the property market, as well as providing stimulus as they have to datein the stock market, that could really be a turn around for the confidence inthe in the Chinese consumer locally, in our view, which would be quiteremarkable. So where do we look from there?If we get that confidence back in the Chinese consumer, then we very well maylook to recipients of that based offshore.So one example that we've been looking at is is Lululemon.So they're a Canadian athleisure brand.

And we've already seen their revenuesfrom China increase 67% year on year. So we're already seeing growth out ofChina. And if we, to your point, get thatrebound in in consumer confidence in China, then they would be wise to playthat from an offshore perspective. Lisa, always great to chat with youhere. Lisa miller, senior investment adviserat Evans and Partners. More to come here on DAYBREAK Australia.This is Bloomberg. It is the end of an era in Singapore.As Prime Minister Lee Hsien Loong prepares to step down after two decades,is handing power to 51 year old Lawrence.

Wong, who is set to face a growing listof economic and geopolitical challenges. Bloomberg's Errol Hong is in Singaporefor more details. And so Singapore, it is true theapproaches say it is truly the end of an era.This has been such a carefully calibrated handover, but that doesn'tsort of dismiss the laundry list of challenges and policy priorities.That's right. And this has been a really welltelegraphed leadership transition. But challenges abound for this newleader who's been praised for his leadership during the COVID 19 pandemic,challenges such as a more diverse.

Electorate that might be demandinghigher degree of transparency, accountability, especially in the wakeof a corruption scandal which saw a top minister charged with graft on top oftheir concerns related to housing affordability, wealth and incomeinequality. The incoming leader has pledged to boostsocial safety net in all this coming ahead of an election that needs to takeplace by November 2025. That some say it could come as soon asthis year. And this is against the backdrop of theruling party's share of the popular vote sliding over the years.So this could be the first key test for.

The incoming leader.And externally, challenges abound as well.Think about the US-China relationship, especially as we see the two majortrading partners for Singapore going toe to toe over tariffs.Remember, his foreign policy credentials haven't quite been tested yet.And as one political observer put it, we haven't quite seen his political policypath, that vision being articulated yet for Singapore.So these are the challenges for the new leader.Yeah. And April, as you said, very welltelegraphed, but but still.

What sort of changes will we see, ifany, after the election next year? Right.So what we're seeing now is, I think that message of policy, continuity andstability, that is the Singapore way. So as to whether we will see changesafter the election. That seems to be something that is yetto be determined. But for the moment, we've seen howLawrence Wong has, for example, opted to keep the cabinet of his predecessorlargely intact. So he will have the old guard, so tospeak, by his side. He also has the outgoing prime ministerin a senior minister role.

So tapping on the political influenceand his network here, that should stand the leadership in good stead in years tocome. MM.All right. April Hoang there in Singapore for us.More ahead. Counting down to the market opens herein Sydney, Seoul and Tokyo at the start of the day here.Quite a bit of positivity coming across the screen.It does follow the US session overnight and we continue to see the S&P 500trending high here. So just within a whisker of reaching afresh record high, you had big tech.

Giants that were leading the gains thatthe likes of Tesla and media. But main stocks as well, continuing tosee trade is piling into the likes of GameStop up around 60%.AMC Entertainment, another one as well. Futures so far for the US, a littlechanged here. But again, a couple of things you'retracking in the session today. Australia, it's very much that budgetthat's in focus here. We're seeing more spending comingthrough as the Government prepares for an election next year.They have spent the first two years in office really trying to rein that in totry and contain inflation.

Some of the economists are speaking toare saying that the inflationary impulses from that budget are containedor restrained, but others are perhaps a little bit more concerned by that, notjust, of course, that inflation focus in Australia.It's it's a global thing naturally, but a bit powerful as well.Speaking about that overnight in Amsterdam, actually saying that the Fedis likely to keep rates higher for the longer again against the backdrop ofinflation pressures in the US. So we had PPE overnight, for instance,coming in hotter than expected. We do actually have the US inflationprint CPI rating coming out today.

The expectation for that one is we'reactually going to have seen a moderation over the course of April for the firsttime in six months. So that would offer some relief toinvestors. And again, that's perhaps why you'realready seeing that sort of run up. What else we're tracking?Let's take a look at what's happening in the currency space this morning.Really keeping an eye on a different number of things here today.But broadly, you've got the dollar gauge trending fairly steady here.You are just seeing, again, a bit of dollar strength being reflected againstsome of those G10 counterparts.

Continuing to track, Heidi, thatJapanese yen there, above all, getting close to that 157 level.Take a look at morning calls ahead of the Asia trading day.Bank of America says Japan will probably use its U.S.Treasury holdings in any future yen intervention with implications for debtmarkets. Strategists say reduced demand fortreasuries may push rates up modestly and tighten spreads on the securedovernight financing rate. BFA says Japan may have already spenttens of billions of dollars in official deposits when it stepped in on twooccasions in recent weeks to bolster the.

Yen.Watching commodities as well, Carlyle's Jeff Currie is still bullish on oilahead of the key summer driving season in the US.He told us more when it comes to his outlook for crude.When we think about the underlying demand, you know, it's not spectacularlike it is in copper, but it's rock solid.You know, it's it's well above long term average growth rates.You're going into the gasoline driving season, jet fuel.And by the way, remember, global warming means your cooling season is going tocreate more demand in the past.

We didn't build inventory.So that three to bull story is still very much intact.Take a look at what we're watching when it comes to trading in oil.At the moment, crude really still kind of seeing some declines in US inflationdata. Of course, still that question mark whenit comes to the stubbornly high elevated levels of producer price inflation thatwe saw, we are seeing a bit of decline there when it comes to trading in theovernight session. But that recovery about 6/10 of 1%, thatwhen it comes to New York crude, we're now back above 79, $78 a barrel there.But certainly producer prices rising.

More than projected.The key components that feed into the preferred inflation gauge, though, alittle bit more muted. But we did hear from Jay Powell that theFed must wait for further evidence that inflation continues to cause a reallydoubling down on this narrative of staying higher for longer at the Fedwill also be looking, of course, to the consumer price data due out on Wednesdayfor further clues on what that policy trajectory could look like.But we have seen crude really trading within that narrow band this week aheadof that data release. And we also had the Bloomberg reportingthat Opec+ producers want their output.

Capacity upgraded in a review, watchingiron ore here as well, of course, as the tariffs sort of battle on to and frobetween China and the US heats up there as well.We are seeing iron ore over the past couple of sessions really extendingthose declines. Singapore pricing of about a quarter of1% was a major Chinese developer. Default of course earlier this weekreally further signs of a debt crisis within the that the very steel intensiveproperty sector is far from being fully played out.More ahead here on DAYBREAK Australia. This is Bloomberg.

We're in the thick of Japanese earningsseason, but a couple of names really standing out this.And one of those, of course, is Nomura. We've got the company unveiling plans toalmost double its profit by the end of the decade.But let's cross over to Tokyo, where our Asia Investing editor, Russell Ward isstanding by with our next guest. Good morning.I'm joined by Christopher Wilcox, head of the wholesale division at NomuraHoldings, for an exclusive interview. Christopher, welcome back to Bloomberg.Thanks for having me. I'd like to start by talking about theInvestor Day that that Nomura held.

Yesterday.What was the feedback you got from shareholders?So yesterday, obviously, we went through both some of our short term plans, whichwe normally do Investor Day, but this year we really wanted to also giveanalysts and investors a feel for the longer term plans for the business ofwhich we have some very ambitious plans. I think the feedback was was positive.As always, there are questions around certain parts of it.Everybody would like us to go faster in terms of increasing the hours that wehave. But our focus is to build a very solidfoundation for the firm and then build.

From there to our more ambitious targetsin 2030. I would say that, you know, some of thethemes around the business, obviously, some of the themes that we have in Japanaround our wealth management business and more Trust bank were front andcenter or some of the the theme around building a platformbusiness. And then also within the wholesalebusiness and across the firm, part of the ambition is to is to change ourbusiness mix, move ourselves towards more less capital intensive businesses,both inside the wholesale business and across the group as a whole and and havea lot of discipline around capital.

Allocation within the firm.So I think, you know, people the feedback was people were feeling that wewere saying all of the right things. I think the feedback was positive,but obviously always people want us to go quicker and faster to the goals.So probably the biggest goal that was announced yesterday was the goal toalmost double our pre-tax profit by the end of the decade.And part of that goal involves making the wholesale division self-funding andalso to allocate resources to other growth areas.Can you explain what that means in practice for the wholesale division?Sure.

I think, you know, there seems to havebeen a lot of attention to this particular topic, but what we're reallysaying is that we're going to think very carefully about thethe way in which we use capital across the different businesses in the firm.So so obviously, the wholesale business is a big revenue generator for the firm.What we're really saying is that as a proportion of the capital was deployedacross all the businesses in the firm over the next 5 to 7 years, it'sunlikely that the wholesale business will take a higher percentage.But what we're really trying to explain with the self-funding piece is thatdoesn't mean that the wholesale business.

Is going to shrink.It doesn't mean that we're going to stop investing in those businesses.We are we're going to keep investing in those businesses.And the mechanism for doing that is is through retained earnings.So the self-funding is really simply saying something that's evidently alwaystrue, but we're sort of formalizing it a little bit more that the wholesalebusiness is growth in terms of its financial resources is going to befinanced through retained earnings from the profits that the business generates,and that that creates an incentive structure for the wholesale business toto to grow its profitability and to.

Focus on the higher margin, lessresource intensive businesses, which is part part of the goal here.It aligns interests across across the group.And it also but it also reassures both investors and employees that we're goingto continue to invest in those businesses.So another goal that you mentioned in your presentation was to cut the cost toincome ratio to 80% over the medium term or towards the end of the decade frommore than 90% now. How do you plan to do that withoutsacrificing revenue growth? So we've already done a lot of costreduction.

So I think at last year's Investor Daywe committed to making 50 million worth of cost cuts directly inside thewholesale business. We've exceeded that target by the end ofthis year. We think we'll actually have deliveredabout $250 million there as there are more efficiencies to come.We globalised our business over the last 15 months or so which has allowed us toeliminate a lot of duplication and also I think give a much cleaner and betterface to our clients, many of whom are also global.So, so I think there's still a lot to do.Obviously there are some.

Cost efficiencies that can be donequickly and those are the ones that we've done so far.And then there are some that require a little bit more structural change orrequire technology investment. And those those are things that we'regoing to continue to work on going forward.And then there are bigger issues like location strategy and things like that.But I think our cost in commercial has been too high and in part that's beenour structure, which we've been changing.In part it's also the. Income side of the equation, and we feltvery ambitious plans to increase the.

Bottom line of the wholesale businessover the next few years, which we've already started to demonstrate we cando. So yeah, we want to see that cost incomeratio getting towards 80%. Christopher, thanks for joining theprogram again. Last time you were on the show,actually, you were speaking about your outlook for the Japanese yen.And at that point, you were saying it could gain toward 140 by the end of theyear. We are, of course, trending back towardcloser to 160 at this point in time. But what's your outlook for thecurrency?.

Yes, forecasting is a dangerous thing todo, especially on TV. But and I think what we know is thatfact rates often do overshoot. And clearly we've seen some interventionto stabilize, stabilize the yen. I still think that I don't have a majorchange to my view that in the medium term there's no reason why the yenshould, should, should not strengthen from here.And the reasons for that are that we see good momentum in the Japan economy.We see good inflows in terms of investment into Japan markets.And we do think that the that the interest rate differential with the USis going to narrow.

Part of the reason I think we tested the160 level is obviously because a lot of the rate cuts expectations in the UShave been priced out which by the way we did also was one, it was one of ourforecasts earlier in the year. So it's come in line with our originalforecasts. But we do think ultimately the Fed isgoing to start to cut rates later in the year.We do think that that the BOJ will do some limited tightening possibly inOctober. So we see the interest ratedifferentials narrowing. We see the fundamentals being relativelystrong and we see that the international.

Investors are still significantlyunderweight of the Japan market. So we would expect to see over the nextyear or so inflows into Japan market. So I would still say that our mediumterm view would be that the yen goes towards the 145, possibly 140 level.After that, I think it's much more open to question because we don't know whatthe direction of policy will be going forward in 2025.In the meantime, we probably are going to test once 60 markets tend to testthese these levels. But I think we've seen somedetermination from the authorities here to to defend the yen.So but my view is still unchanged.

I still think that over time, the yen isgoing to appreciate from here. Speaking of Bank of Japan, policyshifts, how is the Japan fixed income business been performing since the BOJchange policy at the end of March? Well, look, there's there'sJapan. Fixed income is a much more interestingmarket when when you actually have interest rates or fixed income.So it's it's been very interesting time. I think that the level of interest inJapan markets in general is higher and that includesincludes the fixed income markets. I think our expectation is thatinflation's going to stay elevated.

We're going to see somesome higher some higher numbers in the Shinto.So we certainly think that JGB yields can can possibly get to exceed 1% atsome point, which will be the first time for a long time.So we think Japan fixed income markets are much more dynamic and interestingmarket than it has perhaps been for eight years.And with that, we've seen that yen rates traders have been in high demand.There's a trend of hedge funds hiring those traders as portfolio managers frombanks. What's Nomura doing to attract andretain that sort of staff, or was that.

Even a priority for you guys?No, it's a priority for us to have world class traders and salespeople in our inour businesses. Undoubtedly, these markets are going tobe more interesting, and undoubtedly hedge funds will be looking for talentin the market. I would say it's a double edged swordfor us. Our traders are very good, so they'llwill be attractive to those people. But on the other hand, there are veryfew places that have a yen franchise as strong and powerful as ours.So if you are one of those employees, Nomura is probably the best place to be.So I think we'll be fine retaining that.

Talent.I don't want to be complacent about it because very talented people areobviously very desirable. And it's my job to create a workingenvironment that talented people want to be part of and want to stay in.So getting back to Investor Day, you mentioned yesterday that you want have agoal of becoming one of the top 15 wealth managers in Asia.That's a very competitive space. How do you plan to go about achievingthat? It is a very competitive space, but thegrowth that we've shown, you know, almost $6 billion of net new money overthe last year.

We've doubled our profitability over thelast year and we're seeing very, very strong momentum.I think there's real appetite for a Japanese wealth management company or atleast an Asian wealth management company.People would like an alternative to something American or something Swiss.And I think that the capabilities, the global capabilities that we can bring tobear in the service levels that we can bring to bear are very competitive.So, yeah, we're aiming in the in the short run, we've got a $35 billiontarget. It's a relatively new business.We're going to go on to 60 billion from.

There.We've we've hired incredibly talented people.And I think I think the clients are really believing in the.Offering in the brand that we bring to them.So it's an ambitious target, but I actually have very little doubt that wewill succeed. Christopher Wilcox, thanks very much foryour time today. Heidi, back to you.From banks around the world there. More on Australia's budget now.Goldman Sachs and RBC both saying that it's likely to result in the RBA keepingrates on hold for longer.

Let's return to Canberra.Paul Allen is with our next guest, Paul. Thanks very much, Heidi.Yes, I'm here at Parliament House in Canberra with the Finance Minister, KatyGallagher, to talk about the budget which has just been handed down.And Minister, thank you so much as always for joining us.I want to start with the obvious question, which is regards inflation.There was obviously billions of dollars in spending in this budget.Economists are warning of the inflation risk.How do you tell them that they're not right?Well, first, what economists have a.

Range of views, and it's always probablyhard to find a group that agree with each other.But I think you need to look at the budget as a whole.So we're delivering the first back to back surpluses in 16 years.We're showing spending restraint, whether it be through savings orreprioritizing across budget. We've we've, you know, put back all therevenue upgrades. The vast majority of those back tobudget repair, lower debt, lower interest payments on that debt.So that tells the sort of budget responsibility kind of looking to findrestraint.

But we've also had to work out ways toprovide some cost of living relief without adding to inflation and have aview and an eye on the future. So this budget tries to do a lot ofthings, but I certainly support the view that there is restraint in the budget.There's a lot of calls on the federal budget and we had to say no to a lot ofthings. I want to return to the deficit questionin a moment, but just on inflation, if you're correct, even if there is a ashort term drop in inflation, longer term, those pressures remain in place,don't they? What's the plan to address that?Well, I think both the Reserve Bank and.

The Treasury see inflation moderatingover the next 18 months continuing to moderate.I mean, when we came to government, inflation had a six in front of it.It's now got a three in front of it. We'd like a two in front of it.And that's what the Treasury forecasts show.And the decisions we've taken on, whether it be medicines or rentassistance and the energy bill rebates, focus on putting downward pressure oninflation over the next 12 months, which we think is a good outcome.But it also provides cost of living relief to households in terms of thedeficits.

I mean, we had a couple of surplusesthere, but of course, commodity prices are coming down.These deficits start to look a bit structural at the whims of, you know,what else is going on in the global economy.Do you have the stomach for the really hard reform that might need to be donehere? Well, there's we've put our shoulder tothe wheel on that since we came to government looking to find savings.We found $77 billion worth of savings or reprioritisation in the last budget.That's a lot more than our predecessors did.And you're right, there's a lot more to.

Do.We need to look at reforms in NDIS. We're working on reforms in aged care.Defence are doing a lot of the heavy lifting in this budget in terms oflooking at within their budget to find out how they make room for newpriorities. And they're the big calls, the interestpayments on our debt, we lowering debt. So those interest payments are lower.They're the big structural pressures on the budget.They increase, they don't decrease. But we need to reform in all of thoseareas. You're certainly Australia's debt to GDPratio will be the envy of many developed.

Countries.But in terms of the savings, let's look at the other side of the coin.The spending if delivered, the cost of living relief, as you say.Tax breaks for all Australians as well. Was there not a sense that maybe thosereally high income earners don't need this because they could they've beenmore of a saving mate? Well, I think if you're talking aboutenergy bill relief, I mean, our cost of living package, there are elements thatare targeted as we've done in the past, like rent assistance and medicines,looking at how we can provide that over five years to concession card holders.But the most efficient and easiest way.

To deliver a short term cost of livingrelief on energy bills, on electricity bills is, you know, the minute you moveoutside of the concessions regime is to allow it to be broad basedin terms of some of the tax incentives, particularly around the future made inAustralia. This was obviously a centerpiece of thebudget. Critical minerals, hydrogen, those taxbreaks don't start until 2028. Can you explain the reason for thedelay? Why not now?So the future Mining Australia, you're right, is a big part of the budget.An element of that is renewable energy.

Super power and that has kind of the theproduction tax credit system that we want to put in place.The reason I don't start till 2027 is because it's around production.So people need to make the investment actually start producing green hydrogenrefining and processing the critical minerals before they can get a taxbenefit from that. So there is a couple of years there onthat. But in the meantime, we are also lookingat a range of grants, equity loans. We've got our national reconstructionfund working. So there is intervention and supportfrom the government in the short term as.

Well.Now, is this the last budget before we see an election or is there going to beone more? Well, the Prime Minister's outlined thatthere'll be a budget in March. We have to have an election by May.But ultimately that decisions for the Prime Minister above my.Right. Okay.I was anticipating that kind of response.There is the risk for you, isn't there, heading into that election, returning todeficit. I know the Labour government's beentrying to position itself as responsible.

Economic managers.Have you left your flank open to an attack with this deficit that you areforecasting for 20 2425? I think we've been open with people andhonest about the pressures on the budget since we came to government like we haveworked hard to deliver those surpluses. They don't happen by accident.I know people there's a bit of commentary around that.They just happen. They don't I mean, there's no shortageof calls for spending on the budget. We've had to say no to a lot of things.We want those surpluses that help with inflation in the short term.But I'm not going to pretend that there.

Aren't increasing pressures in this agedcare, health, the defense and interest on government debt, the five keystructural pressures on the budget that we need to continue to work on inreform. All right.Finance Minister Katy Gallagher, thank you so much for joining us.All right. We will leave it there.As the government the budget back in surplus, but only for a few weeks, 202425 will see the return of deficits. Back to you.Big news is Paul Allen there in Canberra.Coming up in the next hour, Australian.

Shadow treasurer Angus Taylor joins uslive from Canberra for the Opposition's view on the Federal Budget.Also, Singapore's economic future in focus today, the city state's fourthPrime Minister to be sworn in. We do have some breaking news when itcomes to leadership changes at Petrobras.We are hearing that President Lula there has informed the president of Petrobrasa Paul protest that he's out of the company.This, of course, comes after extended period of really disputes and tension atPetrobras between that state controlled oil giant and the and the broadergovernment.

We've seen really about a month ago thesort of settling down of some of these simmering tensions as an internalgovernment battle over the company's chief executive.We had the dispute really over the top job inside Lula's administration,causing Petrobras shares at one point to swing pretty wildly.There were reports and rumors that he would soon be fired, and that hasactually eventuated after what has been really a few weeks of calm for the CEOof Petrobras. We are now hearing that Magda Schembriwill be the new president of Petrobras. She was formerly the general director ofthe National Petroleum Agency during the.

Rousseff government.So we will bring you more details. Of course, a former CEO now had beenunder fire who wanted him to bring down fuel prices and create a job creatinginvestments. The market opens in Sydney and Tokyo arenext. This is Bloomberg.

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