Virtually Live: 15 October 2026

Question one from Marcelo in New South Wales.

Uh, "Hi, Shannon.

Can you advise with regards to the listed government bonds market, um, particularly GSBK 54 and similar ones at a current yield of 5.3%? It-- Is it a good buy or do you expect further downside due to expected rate rises, uh, rate raises ahead?" I mean, look, e-expectations are, are ultimately what dictates whether we're gonna make money or not at these levels.

Um, and expectations continue to, to change and, um, and, you know, all kind of fixed income managers out there are hurting because, uh, inflation has remained stickier than expected a-and yields have headed higher, much and certainly lately, much higher than expected.

Um, obviously I'd much prefer to be a buyer today than I was a month ago or, or a year ago or so on, but, um, I will kind of profess to being slightly surprised by, um, the stickiness of inflation.

I mean, obviously the, the war in Iran is complicating that and that has extended, you know, well, well beyond I think most people's expectations.

It's certainly there's an appetite from the US government to get out of it, but whether they can get out of it or not, um, uh, remains to be seen, at least on terms that will be politically acceptable.

Um, obviously we've got the midterms coming up next month.

Um, kind of too late, I think, for a, for any change in the war, um, to impact, I think, the, uh, the fortunes of the, of the GOP for the midterms, and it's looking like there's gonna be, um, at least a loss in the, um, House of Representatives, uh, with power going back to the Democrats.

Um, and so, you know, I don't, I don't think there's gonna be any near term, um, surprise with, um, with the Iran war and obviously the implications for, for oil prices and inflation in general.

Um, it's obviously not just that, of course.

I mean, one thing I've been...

I mean, we're having kind of this, uh, flip side impact of, of obviously all this, uh, AI spending.

It's, it's obviously in short term very much inflationary because there is a lot of capital going there and the, this data center build-out is, is, is huge and obviously continuing to grow.

Um, and that's putting pressure on, on bond yields for sure.

But at, at the same time, we haven't really seen the improvement in productivity that I have been expecting.

Um, [lip smack] I know it's obviously not the sort of thing that will impact all businesses alike.

Um, certainly services businesses, um, I would have thought for the most part would have been seeing impacts already.

Um, I look and, and I should say, I think in the US there, there are signs that, that we are seeing some improvements there, but in Australia still it's lagging.

Our business for, which I'm obviously right at the coalface of, we're seeing huge productivity improvements.

Um, other businesses that I speak to kind of seeing the same.

So I, I think probably some of the feedback I'm getting from, from business leaders is kind of a lack of imagination at the, in these early days of AI that is preventing, you know, massive changes to, to how businesses operate.

Um, again, you know, using our business as a little bit of a, a bellwether, um, well, I think I kind of expected as, as it improved, um, and as we, we used it more within the business that maybe that would have an impact on, on, um, our headcount and, and certainly-- Not necessarily losing headcount, but, um, but not expanding.

But the reality is we're doing a lot more and YAI is driving a lot of that, that work and we need more people to obviously run that.

So, um, that deflationary impact of, you know, lower employment, I think that's something I'm changing my mind on, but the productivity certainly I'm still expecting that to see through.