Once Bitten RBA, Kevin Wishy-Warsh and the ‘SaaSpocalypse’

10.02.2026

In this episode of SB Talks, CEO Vincent O’Neill and CIO Nick Ryder unpack Australia’s stubborn inflation pulse and the RBA’s latest 25bp hike, considering the latest RBA forecasts with a slower return of inflation back to target, weaker growth and rising unemployment. They look at what’s now priced, and how policy divergence has lifted the Aussie dollar toward 70¢. Across the Pacific, they explore Trump’s Fed pick, Kevin Warsh, debating whether his hawkish past fits with new AI‑productivity optimism amid a brief U.S. data disruption from the partial government shutdown.

A bruising week for Software-as-a-Service (SaaS) stocks follows, as AI “co‑worker” tools spark fears of business moat disruption, prompting the team to separate hype from genuine risk. They wrap with Japan’s political shift and why the global rotation away from U.S. tech may still have room to run.

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Transcript

Vincent: Welcome to SB Talks. Today is Tuesday, February 10^th, I am Vincent O’Neill, and I am joined as always by our Chief Investment Officer, Nick Ryder. Welcome Nick.

Nick: Thank you, Vinny.

Vincent: Now, today Nick and I will be discussing Australian inflation, interest rates and the outlook from here. The next fed chair nominee Kevin Warsh, as well as a turbulent week for SaaS stocks as questions emerge over growing AI threat. Welcome to all our listeners.

After a trip to Davos on the last recording, we’ll start in a less exotic location. This time, the Reserve Bank of Australia, where last week they lifted rates by 25 basis points. Ultimately, it wasn’t a surprise given what we’d seen in the inflation data in the immediate weeks preceding that, but still a bit of a hit.

Nick: Yeah, just after we finished the last podcast, we got the December quarter inflation data, which was a bit of a shock. So trim mean inflation came in at 0.9% for the quarter, 3.4% year on year. That was up from 3% previously. So, getting further away from the midpoint of the RBAs target range,

Vincent: And they were forecasting that potentially to peak out at 3.7. So again, drifting up from their hopes to keep it in the low threes for the trim main.

Nick: Yeah, so they’ve revised their forecast for the next two, three years, and it shows inflation really staying above their target range really until 2027. So, it’s going to take a while just. Given the high numbers for those to kind of wash through, and to come down. It’s not until sort of middle of 2028 that they see inflation back at the midpoint of their target range. They’ve got a lot of work to do. Their new forecasts are predicated on the market’s pricing, which was for three rate rises. So basically, they need to slow the economy down and they do actually have now the slowest forecasts they’ve ever made for economic growth.

Vincent: In terms of the growth

Nick: In terms of the growth outlook, Since they started forecasting in 1990, they have growth getting down to 1.6% in 2028. So, they need that slow down. They see unemployment rate going up to about 4.6% over that sort of forecast period. As I said, that’s predicated on three rate rises. Weaker growth, 1.6%, and that will be enough to bring inflation back to the midpoint of their target range.

Vincent: So, the two year journey to get there.

Nick: Yeah.

Vincent: If we rule the, the clock back 12 months, obviously pressure was sort of building on the reserve bank to make the cuts that it made last year. We were leading into an election and with the benefit of hindsight now, and that’s always easy, really, those cuts were not necessarily and naturally, completely inappropriate.

Nick: Yeah, well, inflation did come down, and some of that has now reversed. So, particularly in the last quarter of 2025, inflation started going back up again. And it was quite broad based. There was some discussion that some of these things could be temporary, and that might still be the case. But I think it’s like once bitten, twice shy, they’re now a bit gun shy. They look embarrassed, I guess, about what they did last year. You know, at the start of last year, they were talking about demand exceeding supply, and they were concerned about the ongoing tightness in the labour market, and that hasn’t really gone away.

Vincent: Yeah, and they talked a pretty good game about holding off and making cuts.

Nick: Yeah.

Vincent: But eventually potentially bad depression.

Nick: Yeah, as I said, inflation did come down. I guess had a little bit more confidence it was coming down and now it’s, that’s reversed. And so, there are still some economists saying, ah, some of those things were temporary and it’ll wash through. If you look at the new monthly CPI data, the momentum, was coming down through the last three months of 2025. So perhaps if that does continue to play out. Then maybe inflation will come down faster than the RBA is predicting. But at the moment no.

Vincent: They’re concerned about it. You touched on before the market and what it’s pricing in, in terms of rates from here. Let’s touch on that.

Nick: Yeah. So, we’ve got another rate rise priced by sort of the middle of the year, June, and then about another 50% chance of another one after that in the second half of 2026. The market’s definitely not saying this is a one and done just a little adjustment. They think probably 25 basis points won’t be enough. They need a few more. So, potentially getting back up to where we were before we started cutting a year ago

Vincent: I guess we have the time now and then in the immediate months to come to really see what the trend is in that inflation data. And potentially if it does cool off somewhat, then that pressure for the next rise or beyond will potentially ease.

Nick: Yeah. But Australia’s now at odds with the rest of the world. We are the only sort in developed market, central bank raising rates. It’s obviously put a bit of a rocket under the Australian dollar, uh, and the Aussie dollars back up to 70 cents because of that sort of interest rate differential between us and the rest of the world, particularly the U.S., which is still seen as cutting rates later. This.

Vincent: Well, let’s talk the U.S. So last time we recorded, there was sort of speculation growing that Trump was about to sort of make an announcement in terms of who his nominee would be to succeed. Jay Powell at the Fed in May, and we now know who that is. It’s Kevin Warsh. An experience choice potentially. One that calmed the market somewhat.

Nick: Yeah. I think he was actually leaning for Kevin Hassett. But there was probably a bit of back channel pushback against Hassett who was seen as too pro-Trump, too much of a puppet. So, he’s gone with a sort of safer choice, Kevin Warsh. Although I would say, even though the market liked it, they think he’s a bit of a hawk because when he was previously on the Fed in between 2006 and 2011, he was sort of anti this whole quantitative easing. He was quite hawkish. So, people are saying, oh, he is a hawk, an inflation hawk. But he’s changed his tune, obviously, to help get the role. And it’s now talking about, oh, well, with AI productivity, it won’t necessarily show up in the data. That means we can potentially cut rates now.

So, people are sort of saying, well, is he a hawk or is he a hypocrite? And they’re using the term wishy-washy, you know? So, I think it’s the jury’s out. We just have to see what kind of central banker he is if he gets confirmed, which is still a bit of an if, but assuming that he does and takes the reins in May, will the true Kevin Warsh kind of stand up and will he be an inflation hawk or will he be a sort of pro-Trump, cutting rates when they’re not justified?

I think the market’s taken a bit of comfort that he’s just one person on a 12-member committee. There’s been some press recently saying, some of his ideas around AI driven productivity and lowering inflation, economists don’t buy that. So, how will he interact with the professional economists that work at the Fed, that advise the chair and the board, on economic policies and projections. It’ll be interesting to watch.

Vincent: It’ll just be another thing in the recipe of Washington, and there’s no shortage of ingredients in that recipe. Let’s be certain, while we’re there. U.S. shutdown, so we’re sort of back in that territory again, and it, and it will impact, I guess, the data flow, that organisations such the Fed rely on to try and make their decisions.

Nick: I think we foreshadowed that there was likely to be another shutdown, which there was, it was pretty brief. They did extend funding for most of the government. There’s one area, the ICE or the Department of Homeland Security, which they funded for another two weeks to the 13th of February. So, they have to kind of get that through, but that’s only 60 billion. It’s a drop in the ocean. But there was, I guess, some delay to some of the data, or particularly the labour market and CPI data push back a little bit, but it should only be days or a week or two. Not material, not like the first shutdown that we saw, at the end of last year.

Vincent: So it’s not something that’s occupying a lot of attention in terms of the markets?

Nick: No.

Vincent: Right now, what the markets have been very excited to buy in the last week or two is this whole story around AI and SaaS stocks. This narrative that potentially everyone can go create their own replicas of these SaaS companies using AI themselves, such that their economic moat begins to be eroded very quickly. And it’s seen a number of organizations take a pretty serious hit on their share prices, the likes of Salesforce, Adobe, Atlassian, and even Thomson Re.

Nick: Yeah, so, chatbot company, Anthropic, who has the clawed chatbot or model, released a new tool called coworker, which makes it very easy for people to run autonomous workflows and have those executed automatically. And so, people saying, oh, wow, that just makes it very easy for people to do things like, customer relationship management, legal research, expenses, processing, HR, IT ticketing and analytics. They’re saying a lot of those enterprise software, as you mentioned, ServiceNow, SAP, Workday, Atlassian, Salesforce, all took a beating as people saw that maybe so down 20% plus in their share prices. They’re calling it the SaaS apocalypse, or the service software as a service at SaaS apocalypse, because all these businesses which are deeply embedded in corporates, may lose their economic moat if clawed can basically replicate what they do at a fraction of the cost.

Vincent: What’s your thoughts on that?

Nick: I think it’s been a big overreaction. A lot of these companies are not just basic software. They’re deeply embedded in these companies, and they have a lot of proprietary data that gives them a moat. I mean, it’s something that we need to monitor, but I think it was very much the market shooting first, asking questions later, and a lot of the equity managers that we work with in that space are saying, this is great. It’s thrown up a lot of real bargains.

Vincent: We’re able to buy these great stocks now that no longer on a watering PEs

Nick: Yeah. Knock down prices. So look, there will be some companies, maybe the smaller companies that are mainly held in private equity portfolios that are more vulnerable because they’re not as big and not as well entrenched. But, I think it’s probably a bit overdone and we have seen a little bit of a bounce back in recent days,

Vincent: But worth reflecting, I guess. That this might not be the last time we see this sort of reaction as the world of AI sort of unfolds and, companies on markets try to predict where it’s going to disrupt things, that these sort of momentum trades can sort of break out where people, someone writes a thesis or someone has an idea around where it’s going to disrupt and quickly the market reacts to it and then unwinds it more slowly.

Nick: Well, that’s right. I mean, we’re very much in a narrative driven market where anything to do with AI, a narrative shifts in a certain direction as this one did. And I think it’s probably healthy, we are seeing a bit of a market rotation away from some of these AI name, towards sort of materials companies, banks, value stocks. Japan’s done very well in the last year. Europe’s done well. Emerging markets have done well. So, it’s really that rotation away from U.S. Tech to some of these other sectors and countries that are, which I think is healthy.

Also, last week when we did have some of those hyperscalers report, their quarterly earnings and. I mean, it’s amazing. So collectively, Alphabet, Amazon, Meta and Microsoft have committed to spend 620 billion on AI or infrastructure CapEx this year. That’s up to 60% last year. Collectively, it’s almost I think 2% of GDP in the U.S. and that’s sort of equivalent to the railroad boom in the 18 hundreds. It’s a huge investment boom. That’s just four companies, but beyond them even bigger.

Vincent: It’s hard to grasp the scale of that investment and just where the resources come from to actually roll that out. It’s certainly going to cause inflationary pressures in some points in the economy.

Nick: Well, we’re definitely seeing that in chip prices, but also pressures in potentially energy and water supply, and things like that, that we’ve written about in our 2026 Investment Outlook. But those stocks, are no longer doing as well as they had. So interestingly, in 2025, only two stocks out of the mag seven beat the index, and that was Nvidia and Alphabet. The others underperformed. So, we’re seeing, some of that rotation I mentioned, which is probably healthy. The earnings multiples of some of those stocks is better than it has been for a little while.

Vincent: It gives you a little bit more confidence in terms of the grounding of where the market is at right now. One other thing, catching our eye. We’ve spoken a few times on the podcast about Japan’s resurgence and some of the strength of their stock market. We’ve had an election there. First, female prime minister, around bolstering their military cutting taxes. What can you tell us?

Nick: Yeah, so she got elected over the weekend in a landslide. So, the LDP, which is the party she represents being in power for a long time. They have a two thirds majority in the lower house, which will allow her to push forward with some of her bolder reforms, which do revolve around sort of sales tax cuts, fiscal stimulus. It’s a sort of pro-growth agenda. But the market isn’t too concerned that it’s sort of runaway fiscal spending that’ll see government debt, to GDP blowout a lot further. The markets really liked it, for example, the NIKKEI 225 was up almost 4% on that news.

Vincent: Yeah, that she’s got that landslide and that gives her a mandate to push her agenda forward.

Nick: We did write about Japan in our 2026 Outlook, and some of the reforms there that’s happening in corporate governance and the release of bloated balance sheets with a lot of cash. Interestingly, the Japanese stock markets have almost 50% in the last year, and 116% over three years. It’s had a great run.

Vincent: Whether that can be sustained, a little bit of that’s catch up from a sort of a fairly sleepy period for an extended period of time.

Nick: Yeah. Absolutely. And also benefiting from that rotation away from tech into sort of more industrial companies and things like that

Vincent: And people looking for places in Asia that they can find hopefully growth outside of China.

Nick: That’s right. And of course the Japanese Yen has helped a lot of their companies who have sort of export focused as well.

Vincent: And I think it’s helped, a very large portion of Australia have holidays in Japan as well as everybody you meet seems to be either enjoying the summer or winter break there.

Nick: Absolutely. I did hear some statistic, I can’t remember what it was, two or 3 million Australians going to Japan in the last year.

Vincent: Wow.

Nick: Yeah so it’s a lot.

Vincent: That is a lot. Wonderful. An excellent summary of everything as always, Nick. Thank you. And thank you to all our listeners.

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