US Fed lifts rates for first time in three years

0:00ABC Listen, podcasts, radio, news, music and more. Good morning. Welcome to AM. It's Thursday the 17th of September. I'm Rachel Mealy coming to you from the lands of the Torbal and Yagora people in Brisbane. The US Federal Reserve has raised interest rates for the first time in over three years in an attempt to bring down high prices. The decision puts the Federal Reserve's new chair at odds with US President Donald Trump. North America correspondent Lauren Day joined me from Washington a short time ago. Lauren, the feds made this move to fight persistent inflation. What's the reaction been so far? Well, that's right. This is all about taming inflation. Inflation's remained above 3% throughout most of the year and that's well above the feds target rate of 2%. And that inflation has been driven in part by the President's tariff regime as well as the energy shock that's resulted from the war with Iran as well as a huge spending

1:03boom from the artificial intelligence boom that we've seen and we've heard so much spoken about this week. It's also driving inflation apparently. Now, the President had promised to lower prices on his watch while he simultaneously has dismissed cost of living concerns. But this is clearly more evidence that prices are really biting and are going to continue to be a big issue ahead of November's midterm elections. And how might we expect President Trump to react to this decision? Well, Donald Trump hasn't responded so far, but we know how he's responded in the past. He's been a very vocal critic of the Federal Reserve before and particularly it's former head Jerome Powell. He regularly mused about firing Jerome Powell for failing to bring down interest rates. He made these savage personal attacks. You remember he called him a knucklehead, a numbscal, a moron. And then he appointed Kevin Wash about four months ago in the hopes that he would lower rates. And now in Kevin Wash's first major decision, he's done exactly the opposite.

2:04Now Donald Trump has subsequently softened his rhetoric around the Federal Reserve slightly, but we still yet to see how he'll take today's news. And Kevin Wash was asked today about his relationship with Donald Trump, have a listen to what he had to say. What would you say to investors who sort of believed this is another task to the Fed's independence? And then kind of when was the last time you spoke with the President? I don't have anything for you on discussions with the President. And I'm not a Wall Street newsletter. Part of the independence of the Federal Reserve is we stay in our lane. As Kevin Wash, the chair of the US Federal Reserve and before him, our North America correspondent Lauren Day in Washington and President Donald Trump has now responded condemning the hike in interest rates in a social media post, saying they should be 1% or lower. John Diamond is the director of the Centre for Tax and Budget Policy at Rice University's Baker Institute. We spoke earlier. John Diamond, thanks for joining AM.

3:06It's a pleasure to be here. Thanks for having me on. The Federal Reserve has raised interest rates for the first time in three years. It's an inflation-busting move. Will it bust inflation? You know, inflation has been very sticky. This is a step in the right direction and it's something the Fed had to do to maintain their credibility. Is this enough to bust inflation? We'll have to wait and see on that. There's a lot of factors that could play into that. It may take the Fed at least one more raise and maybe two to finish the job, but this is definitely a good start. In Australia, we are more attuned to the news of rising interest rates. How will ordinary Americans receive this news? Well, I don't think they're going to like the news, but this really wasn't a question of higher or lower interest rates. If the Fed had not raised the short-term rate, I have a feeling the long end of the curve

4:08would have gone higher regardless. What the Fed had to show, if you want to bring interest rates down in the future, the Fed has to show they're committed to bringing inflation down to their 2 percent target. As long as the market feels like the Fed isn't committed to that 2 percent target, the back end of the curve for the 10-year treasuries and the 30-year treasuries are going to continue to go up. Of course, it's happening in the Australian economy too, but investment in artificial intelligence is creating a boom in some areas of the US economy. You describe it as an AI sugar high. Yes. We really have two different economies in the United States right now. We've got the AI economy, which is running hot. It is a quarter of a point not going to debt the desire to make new investments and to build new data centers and to invest in new AI tools.

5:09That is going to stay hot, and the Fed's not going to be able to slow that part of the economy down with a quarter point hike. The same thing, autos, consumer durables. Unfortunately, those areas are sluggish already, and the Fed's 25 basis point increases only going to slow that sector of the economy down even more. The parts that we're already struggling, I think, are going to struggle even more. The red hot part of the economy is probably going to stay red hot. It's often said that when the US sneezes, the world catches a cold. What's likely to be the implications for the global economy in countries like Australia? I think we're all kind of in the same boat at this point. There's a lot of demand for investment for AI goods. There's also a lot of demand for debt to cover governments that are spending more than

6:09they're taking in. I think we're all going to see higher interest rates moving forward, regardless of what our central banks do. Until fiscal policy makers are actually learned to budget responsibly. Donald Trump has railed against the idea of a rate hike with the midterm elections looming. What do you think is the political fallout from this decision today? I think normally you think of a rate hike as being a political problem for the party and power. I actually think that this rate hike will insulate the Republicans. I think it gives a little bit of peace in the market. Again, had the Fed not acted today, I expect that things would have been more volatile moving forward than if the market thinks the Fed is actually going to follow through. I think some people will try to tell the story that this is bad for the administration and

7:13the Republicans in Congress. I don't really think that's true in the current state that we're in. John Diamond, it's been great to have you on AM. Thanks for joining us. Absolutely. Thank you. John Diamond is the director of the Centre for Tax and Budget Policy at Rice University's Baker Institute. Over the weeks of Cabinet disagreement and delay, the government is finally ready to release its much anticipated migration policy. Immigration Minister Tony Burke will address the National Press Club today to set out how the government plans to slash net overseas migration. It comes amid sustained political pressure from the coalition and one nation. Here's political reporter Sarah Tamebska. Labor's policies after one nation revealed its own plan to dramatically slash Australia's migration intake. Today, it's Immigration Minister Tony Burke's turn. We do need to get net overseas migration down. Labor's plan to reduce net overseas migration to 225,000 people by 2028, down from around

8:20300,000 currently. The plan includes a go-slow on processing working holiday maker visas and banning international students from bringing their immediate family to Australia. That measure alone would see 120,000 fewer migrants enter the country in just three years. Tony Burke told Parliament yesterday, Labor's policies would ideally be delivered through legislation or else regulation. The more tools that are available, the better we can target the system. Immigration dipped into negative numbers during COVID, a record 570,000 people came to Australia in 2023 once borders reopened. Since then, net overseas migration has consistently exceeded Labor's projections. Migration expert Alan Gamlin says setting a hard target is pointless. If you have a target, it's always going to be missed. Other countries to whom we compare ourselves have abandoned this idea a long time ago.

9:23In Canada, they no longer have net overseas migration targets. They target the size of the temporary population. About two-thirds of net migration is made up of temporary visa holders like working holiday makers or students. The rest permanent visa holders and returning citizens who have free movement in and out of Australia. Here's Alan Gamlin again. That's the pandemic. The main reason for high net overseas migration is low departures. We're talking about cutting arrivals when what we really need to talk about is normalising departures. While opinion polls suggest many Australians do feel migration levels are too high, director of strategy at polling firm Redbridge Cosmaris says most voters are more focused on other things. What is motivating Australians voting behaviories is the state of the economy. One only for a third of one nation vote is the number one issue. Across the country it's around two-off percent. But are people linking the cost of living with high immigration?

10:25No, they're not. There is some element of the Australian community that will bite down hard on that, but overall no, it's not. Labour's plan does have some similarities to one nation's migration policy, which also includes a crackdown on family visas for students and skilled migrants. A former Labour party strategist, Cosmaris says the current political debate risks alienating key migrant voters. They are witnessing a live debate about them and their place in this country. And so my message to the political class, whether it's Labour, Liberal or one nation is, don't ignore them. They will determine a lot of seats. The immigration minister is due to deliver his speech later today. Political reporter Sarah Tamebska, Australia's higher education sector is waiting anxiously to see the details of the government's immigration policy. Luke Sheeze, the chief executive of universities, Australia. This is just a continuation of years of chipping away at Australia's great national asset,

11:29which is international education that serves the country, serves the economy, helps fund our world-class universities and subsidises the education of nearly a million students. What the intention of this policy is pretty clear, they want fewer international students, they want to slash the numbers coming into the country. That will have real consequences both economic and for our relationships across the world. A rising Australian political commentator on a popular social media platform has been traced to the other side of the world. An investigation by ABC News Verify has found AI is being used to give the man an Australian accent. The channel is part of what's being called the Slop Economy, which refers to low quality, mass-produced digital content. Jonathan Hare reports and a warning, this story contains AI-generated audio. Good day, good to see you. Pull up a chair, grab a cold one if you've got it.

12:31Because we need to have a serious yarn about what's been going on down in Canberra this week. The presenter on this YouTube channel sounds very Australian, he's opinionated too. Aussies cannot just sit back, have a win at the pub over a beer, and hope she'll be right. The Oceania unfiltered YouTube channel frequently promotes one nation, and it's critical of Prime Minister Anthony Albinese, but there's an issue. The accent, it's AI. And in the video, the presenter's mouth has been AI manipulated to match what's being said. The host appears to be a Brazilian man named Junior Lutero D'Alcantara. He appears on several YouTube channels, mostly speaking Portuguese and discussing everything from world politics to aliens to conspiracy theories. Here's what he sounds like there. Well, that's it, guys. I just have to say, you know, it happened, it didn't happen. On another channel, in videos talking about the US in Canada, he sounds like this. There's a quote from Mark Carney that, to me, should have already set off alarm bells for a lot of people.

13:32We also found this 2021 video that doesn't show signs of AI manipulation, and we believe is his real voice. Hi Facebook, sort of bother you with my problem. I don't speak perfect English, sorry for my accent. We asked experts in AI detection from the university at Buffalo in New York to take a look at the Oceania Unfiltered Channel. They determined it was a lip-sync deepfake. It's unclear if the man we trace to Brazil is running the Oceania Unfiltered Account, or whether his image is being used without his consent. ABC News verified attempted to contact him numerous times, but received no reply. Oceania Unfiltered is part of the booming online slop economy, where individuals generate revenue through engagement on social media, using cheap AI content. Essentially, the formula is more attention, more engagement, more money. That's Timothy Graham from Queensland University of Technology's Digital Media Research Center. The effect and the impact of this stuff is more or less identical to what the intended,

14:37if not actual outcomes of foreign influence operations would be. What you end up with is divisive content that is injected into organic communities in Australia. Oceania Unfiltered posts a video most days. The YouTube channel has around 45,000 subscribers, and some videos have more than 100,000 views. This isn't just happening on YouTube. ABC News verifies identified groups and pages on Facebook, where a network of creators share tips and tricks on how to generate revenue, critique other AI slop channels, and even discuss finding the right niche to generate engagement. When we're tracking YouTube, these people are making enough money to hire a voice actor for them. David Hobson is a researcher with Canada's Center for Media Technology and Democracy, which identified a large network of Facebook pages creating AI News Slop out of Vietnam. If you're based in Vietnam or Sri Lanka, any of these countries, if you're getting paid in American, Canadian, Aussie dollars, that translates a lot into your local currency.

15:41Like, at least as far as we can see, it's just a way of getting a quick buck. A spokesman for One Nation says Oceania Unfiltered is not associated with the party. After we sent questions to YouTube, all the channels' videos were given a made-with-AI disclosure. YouTube told us it requires creators to disclose when they upload photorealistic or meaningfully altered and synthetic content. Facebook says accounts and pages must comply with its community standards and content monetization policies. The deal that could see a cattle feedlot, north-west of Tuumba, transformed into a huge

16:51anthropic AI data center has been welcomed by the Mayor Andrew Smith, whose Western Downs Regional Council is still assessing the project. There's talk of, you know, around a thousand jobs. That creates a lot of opportunity. If approved, the data center will be built by a Singapore developer, Zera DC. Its application proposes building facility on 725 hectares, near three gas plants, a solar farm, and transmission infrastructure. Cotton farmer, Lisa Balmain, is a spokesperson for save our darling downs. She's worried recycled water from nearby Colesim gas mining could end up being redirected from farmers to the data center. Does that mean there's going to be less available for farmers for growing food? Water use could be just over a fifth of an Olympic swimming pool a day during construction, then a one-off flush and fill the equivalent of 11 pools, and ongoing use could equate to around 48 households a day. The Mayor Andrew Smith doesn't think the water use will be excessive.

17:54The new air cool technology takes a lot less water than some of the old data center technologies. Maximum power use could be 2.16 gigawatts or equivalent to 1.5 million average Australian households, drawing on gas electricity or renewable energy at different stages of the project. Councillor Smith describes his region as the energy capital of Queensland. Colesim gas is really important to our region. Just down the road, the Cogren Creek Cullfide power station is really important. Lisa Balmain from Save Our Darling Downs wants to see the proposed data center entirely powered by renewables. Any increase in co-sing gas production is going to cause even more water boards to fail in the long term and less ground water in land Queensland. The federal government aims to pass data center legislation early next year after National Cabinet recently agreed to develop consistent rules with flexibility for

18:55jurisdictions including Queensland to use coal and gas. Queensland's premier David Chris Affleys says the historic anthropic deal is a major win for jobs and energy. It must add energy generation to the grid and drive down power prices for Queenslanders. It must protect local water supplies. It comes amid tech companies own concerns about AI's future risks to society and the need for international regulations. And as debate continues in Australia over whether AI should face copyright restrictions. The ABC understands an anthropic's Claude AI chatbot would be powered by the data center rather than carrying out data ingestion known as training the AI model. Any guest reporting and that's AM for today. Thanks for your company. I'm Rachel Mealy. Hi it's Sam Hawley here host of the ABC News Daily podcast. Pauline Hanson has spent the week offending people and she's been widely condemned for it. But is hitting back at her personally

19:57the best way to respond. Today columnist for the age and Sydney Morning Herald, Sean Kelly, on a shift in the way the major parties are approaching Pauline and one nation. Look for the ABC News Daily podcast on ABC Listen.