5 reasons why Australia's inflation rate will not follow the US uptick
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5 reasons why Australia’s inflation rate will not follow the US uptick

The latest US inflation figures came in hotter than expected

By Bronwyn Allen
Tue, Apr 16, 2024 2:09pmGrey Clock 2 min

Inflation in Australia is unlikely to follow last week’s surprising uptick in the United States, according to AMP deputy chief economist Diana Mousina. US inflation increased 0.4 percent in March, pushing the yearly inflation rate to 3.5 percent, up from 3.2 percent in February. This is well above the US Federal Reserves 2 percent target, and prompted analysts to push back their predictions on the timing of a US interest rate cut. The official US cash rate range is currently 5.25 to 5.5 percent.

Australian and US inflation are now at similar levels. Our annual inflation rate is currently 3.4 percent, as per the monthly report for February. The rate was the same in January. Ms Mousina said Australian inflation peaked in December 2022, which was about six months after the US economy. While analysts have been watching US trends ever since for insights as to what may happen here, Ms Mousina said it was unlikely that Australia would also record an uptick in inflation for March.

we think Australian inflation will see a further slowing from here, unlike the recent pattern in the US, Ms Mousina said. There are five key reasons for this, starting with how domestic conditions in the US and Australia have been impacted differently by monetary policy. Firstly, most US home loans are on long-term fixed interest rates. Most Australian mortgages are on variable rates, so mortgage repayments have lifted considerably and eaten into household budgets for living expenses.

US outstanding mortgage rates have risen by 0.5 percentage points, compared to 3.2 percentage points in Australia. This is despite Australia increasing interest rates by 1 percent less than the US. As a result, households are in worse shape in Australia than the US.

Ms Mousina said retail trading, real household disposable income and consumer confidence were down in Australia but rising in the US. A softer consumer weighs on spending and inflation,” she said.

Ms Mousina also said high US wages growth was keeping services inflation elevated. Australian wages growth has also increased, to its highest level since 2009, but is likely to taper off from here. “… the unemployment rate is expected to lift as labour demand has slowed,” she said. Softer wages growth in 2024 will see a softening in services inflation.

Prices in regular US price surveys have recently recorded an uptick, while prices in Australia have been trending down. Additionally, Australian pipeline inflation pressure, which gives a four-month lead on inflation trends, continues to head lower. Pipeline pressure is measured using energy and agricultural commodities prices, shipping rates, price surveys, advertised salaries on Seek and the China Producer Price Index. “… when we look at our Australian pipeline indicator, there is still a further slowing in inflation likely to occur, whereas progress in the US inflation indicator has stalled,” Ms Mousina said.

The last reason why Australia is unlikely to record an uptick in inflation is technical differences in the measurement of inflation between the two countries. The US CPI data has a high weighting to housing at 33 percent, including both rents and ‘owners equivalent rentwhich reflects property values. In Australia, only rents are included in the CPI index, with a weighting of just 5.8 percent. Both rents and owners equivalent rent have had high inflation in the US,” she said. “If Australia had a higher weighting to rents, then services inflation would remain higher for longer, as very elevated Australian population growth is keeping rental inflation high.



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The Rise of Million-Dollar Companies With Just One Employee

Artificial intelligence is making it easier than ever to build a business without building a team. As AI takes over coding, customer support, marketing, administration, and other day-to-day tasks, a growing number of solo founders are scaling startups to millions in revenue with few—or even no—employees. While the trend is lowering barriers to entrepreneurship, it is also reshaping hiring, raising questions about the future of work and how businesses will grow in the AI era.

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Ben Broca launched a company last December that offers AI tools to entrepreneurs. He’s already added 10,000 paying customers and is on track to bring in $10 million in revenue this year.

One thing he hasn’t added: any other employees.

The 40-year-old is part of a class of entrepreneurs who are launching, and then often running, new companies on their own. Artificial intelligence tools answer Broca’s emails, help write and debug code, field requests from customers, sign up new subscribers and grant refunds when issues arise.

Broca relishes his ability to make whatever decisions he wants on his own, often from his sun-drenched Sausalito, Calif., living room. “I think compromises make lukewarm results,” he said.

Once upon a time, running a business of a certain size required a team. AI is turning that assumption upside down, and more aspiring entrepreneurs are going it alone.

Ben Broca sitting in his home office.
Tech has seen an explosion of solo founders in the past year. Broca said he likes being able to work at his own speed, unencumbered by a team. Jonah Reenders for WSJ

An analysis by the payments company Stripe shows there are thousands of solo operators on the company’s platform that are generating over $1 million in revenue, with their ranks doubling between 2023 and 2025. The number of solo operators crossing the $10 million threshold nearly tripled in that same span.

In the past, people without business contacts or particular savvy might not have known how to get their ideas off the ground, said Ernie Tedeschi, Stripe’s chief economist. “Now, AI can be a built-in business partner,” he said.

AI’s ability to handle various administrative tasks makes it potentially useful for launching solo businesses in many fields. But the technology’s ability to also handle key tasks in tech, like coding, make that field a particular hot spot.

Analyzing Census Bureau data, Bank of America Institute economist Taylor Bowley found that among all industries, new business applications in the information sector have seen the biggest percentage increase—nearly 45%—over the past year. At the same time, the rate of information-sector applicants saying they plan to hire workers has experienced the sharpest decline of any measured industry.

This Census dataset doesn’t track solo-operated businesses. But the numbers broadly show—in tech and beyond—that applications are flat among businesses likely to hire workers, but generally rising elsewhere. Economists say that’s a strong sign that solo operators are on the upswing.

“The bar for getting started has never been lower,” said Julian Weisser, who runs a San Francisco-based accelerator for solo founders working in tech. The accelerator—which offers founders seed money and mentorship in exchange for an equity stake—attracted 4,500 applicants for 10 slots made available in its most recent cycle, nearly five times the number it drew when it launched last May.

Going it alone with AI can still be surprisingly expensive. Broca said he was losing money on many customers’ accounts while paying to access Anthropic’s Claude to run his clients’ requests—that AI company, as well as others, charges based on usage. He has since switched to free open-source AI models from China.

Broca said he has raised $30 million from investors and, at the same time, has saved millions in salary since he hasn’t needed a team of software engineers.

Another risk: If it’s easy for one entrepreneur to launch an AI-assisted business, copying them can be easy, too. This creates anxiety for founders like Troy Johnston, who runs an AI-assisted business alone in Orlando, Fla.

“Everybody has the sword and we all have the ability to unsheathe Excalibur now,” said Johnston, 40, who used AI to code an app that helps people get the most out of credit card benefits. The company makes around $3,000 a month in profit, with no employees, and is continuing to grow.

Headshot of Troy Johnston.
Troy Johnston said AI’s power and ease of use is an incredible boon for entrepreneurs like him—and also a double-edged sword. Luann Koerper

What one-person businesses will mean for the labor market remains to be seen. Polling has shown Americans are worried that AI will replace jobs, and top economists are wrestling with that possibility, too. But AI is also creating lots of new jobs, and the go-it-alone entrepreneurs show how the technology can both open doors and limit employment opportunities.

“If everyone’s hiring less, but you get four times more firms, what does that do to head count?” said Rembrand Koning, an associate professor at Harvard Business School who studies entrepreneurship. He co-authored a recent study that found that among 50,000 startups the researchers examined, those focused on AI tended to operate with 25% fewer employees.

Koning also believes a soft hiring environment that’s left some people mired in long job searches has encouraged more to try their hand at launching businesses.

Some founders cite different motives. “It’s a perfect storm of post-pandemic burnout and a re-evaluation of one’s priorities, and also booming AI and a sense of what’s possible,” said Samir Ahmad, 39, who lives in Breinigsville, Pa.

Two years ago, Ahmad decided to leave the corporate job he had worked at Verizon for almost two decades to start a solo coaching and consulting business. He had been seeing social-media posts touting the ease and virtues of AI, which he used to chart a business plan and help with marketing. “It was like my chief of staff, a second in command,” he said.

The business ultimately petered out within months, though, and Ahmad is now back to a full-time corporate role with a utility company.

For Claire Vo, 41, AI helped her turn a passing impulse into a business. She was working full-time as a tech executive when she tapped AI in late 2023 to help code an app that would help her manage documentation and design for new products, with customers ranging from financial services to healthcare firms.

“I was copying and pasting from ChatGPT,” said Vo, who lives in San Francisco.

Claire Vo smiling into the camera while recording a podcast.
Claire Vo used AI to code an app that’s on track to make seven figures in profit this year. Claire Vo

She put the app online for $1 a month, and within weeks people downloaded it thousands of times. Nearly three years later, Vo’s company—which she ran solo for nine months before hiring an engineer—now has 100,000 users and is on track to make seven figures in profit this year. AI handles the company’s marketing, sales and customer support.

While AI is a shortcut, Vo said her network and credibility in the industry were key. “I think people over-index on how easy AI is and under-index on how much I did to get to this point,” she said.

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