Smart ways to invest a grand + Trump's latest tariff slanging match

Hi everyone, happy Friday,

Winter is behind us with spring starting on Monday. Sunny days, cool nights, jacarandas in bloom and football finals (which are much better if you’re in them.) 😊 Spring and autumn are my two favourite seasons.

As you know, I love reading for leisure and have shared a few book reviews over recent months. Some of you have asked for my reading list. Remember, most of my days are spent reading corporate and economic reports, so for leisure I like a bit of escapism.

Here’s what I’ve read so far this year:

Back to money matters, and a bit to talk about ...

In this week’s newsletter:

• July monthly inflation shock.

• In the words of the RBA ...

• Got a spare $1,000? How to invest wisely.

• Money white lies - who tells them the most.

• From skyscrapers to data centres.

• The price impact of Trump’s tariff policies.

July monthly inflation shock

The Reserve Bank Board keeps telling us they need to monitor the economic data before making any decisions on interest rates. They’ve said it again in their latest board minutes (which I’ll get into in the next section of the newsletter), and it’s pretty clear why.

This week’s July CPI figure is a perfect example - the data is all over the place.

Just when we thought inflation was under control, the July CPI came in a lot higher than expected. The headline rate rose sharply to 0.9 per cent for the month and 2.8 per cent annually - compared with the 2-2.3 per cent expected by economists.

Even the RBA’s preferred trimmed mean inflation rate came in well above expectation at 2.7 per cent.

While the result is a shocker, there are a few one-off factors that should (hopefully) unwind over the next couple of months, so the all-important quarterly CPI figure returns to normal:

• Electricity prices were a lot higher than expected due to the timing of federal government rebates in a couple of states.

• Travel and holiday costs also spiked.

• Food inflation was softer than expected. Over the year, food inflation is sitting at 3 per cent, but fruit and vegetables are up 4.8 per cent and non-alcoholic beverages 5.7 per cent.

• Tea and coffee prices are rising at the second-highest rate of any product in the CPI, up 14.5 per cent. Global prices for coffee products remain high, and local producers are now passing this on to customers.

• Housing overall increased by 1.9 per cent for the month, driven by electricity prices, while new dwelling costs were up 0.4 per cent.

Remember, the July figure is the first month of the quarter and is always weighted more heavily toward goods prices, with less data on services inflation. That balance gets corrected over the next two months.

In the words of the RBA …

The RBA has released the minutes of its last board meeting, which agreed on a 0.25 per cent rate cut.

Here are some snippets:

“Members agreed that - based on what they knew at the time of the meeting - preserving full employment while bringing inflation sustainably back to the midpoint of the target range appeared likely to require some further reduction in the cash rate over the coming year.”

“They also agreed that it was important for the pace of decline in the cash rate to be determined by the incoming data on a meeting-by-meeting basis.”

“Various indicators suggested that labour market conditions remained a little tight, and the forecast for inflation was for it to be marginally above the midpoint of the target range in the medium term. In addition, private demand was showing signs of recovering, with risks on both sides of the forecast. And uncertainty about the degree of spare capacity and the neutral interest rate could warrant a measured approach to assess what incoming information reveals about these and other uncertainties.”

On inflation, the minutes noted, “The outlook for inflation was little changed from the May forecast. Underlying inflation was expected to be around 2½ per cent over the forecast period, on the assumption that there was some further gradual easing in the cash rate consistent with the market path.”

Financial markets expect the RBA to keep rates on hold at the September board meeting, and wait until the November meeting to ease them to 3.35 per cent. Rates are expected to settle around 3.1 per cent, or potentially as low as 2.85 per cent by the end of the cutting cycle.

Got a spare grand? Here's how to invest it wisely

A colleague recently shared a story that made me smile. Her daughter, fresh into the workforce, had received a surprise $1,000 bonus for closing a big sale. A proud moment - but what stood out wasn’t the bonus itself, it was what she said next.

Rather than splurging on a new phone or a shopping spree, she told her mum, “I want to invest it - I want to make it grow.”

For some, $1,000 might not seem like much. For others, it’s significant. But this kind long-term mindset, instead of instant gratification, is what sets people up for financial security. Before I delve into some of her investing options, remember the golden rule:

Clear debt before you invest.

I know it’s not the exciting part of managing money, but paying off debt comes first. Debt compounds just like savings do - only in the wrong direction. It’s like a financial snowball that can become enormous if we’re not careful.

So, before investing, clear the slate.

Why pay 16 per cent interest on a credit card while earning only 3 per cent on a term deposit? Paying off debt is one of the best “investments” we can make.

As for my young investor friend - she’s in the green, not the red - so let’s look at some smart ways for her to make that $1,000 ”grow”.

6 easy ways to invest $1,000

1) Exchange-traded funds (ETFs)

ETFs are a low-cost, beginner-friendly way to invest in shares or commodities. Rather than buying individual stocks, you get exposure to a whole portfolio in one go - like the top 200 companies on the ASX, US tech giants, bonds, or gold.

Many ETFs also require as little as $500 to get started, and their management fees tend to be lower than traditional managed funds.

If you want a hands-off, diversified and lower-risk approach to the market, this is a great place to start.

2) Make a voluntary superannuation contribution

This may not sound exciting, but future you will thank you for making this long-term move early on.

A voluntary super contribution could qualify you (depending on your income) for a government co-contribution of up to $500, instantly turning $1,000 into $1,500.

It’s not flashy, but with the tax advantages and long-term compounding, this is one of the easiest ways to boost your super savings.

3) High-interest savings account or offset account

Not every dollar needs to be put into the sharemarket. Sometimes, the smartest thing to do is park your cash in a safe, high-interest savings account - especially if you’re building an emergency fund or saving for a short-term goal, like a home deposit.

With current rates offering returns of around 4-5 per cent, you’re earning pretty decent returns.

If you have a mortgage, an offset account helps reduce interest repayments. Plus, this money is easily accessible if you need it unexpectedly.

4) Private credit funds

Private credit has been gaining traction as an alternative investment class. It involves lending money to businesses or individuals outside the traditional banking system, with potential returns of 7–10 per cent.

Some funds now let you start with $1,000, but please do your homework.

This option carries higher risk, depending on the borrowers and how diversified the fund is. Make sure you understand the risk you're accepting in return for potentially higher yields.

5) Invest in yourself

Spending money on improving your skills is one of the best investments you can make - financially and personally. Getting paid - and potentially well - to do what you enjoy is extremely rewarding.

A short course in public speaking, AI tools, leadership, or upskilling could lead to a new role, career change, promotion, or even launching a business.

In today’s changing job market, making yourself more employable gives you an edge. Any outlay now will likely pay for itself in the long run.

6) Micro-investing apps

Micro-investing apps let you start small, with features like auto-investing, round-ups, and fractional shares. They simplify investing and turn ‘small change’ into something more - often starting with just a few dollars.

They’re beginner-friendly, but watch out for monthly subscription fees, which can eat into small returns. In some cases, traditional brokerage fees may actually work out cheaper.

If you’d like to give micro-investing a go, here are a few popular Aussie options:

• Raiz: Rounds up your purchases and invests the difference into ETFs.

• Spaceship: Offers portfolios focused on global growth and tech.

• Sharesies/CommSec Pocket: Buy fractional shares or ETFs with low minimums.

$1,000 can start off your financial journey

A spare $1,000 is not an amount to be sneezed at. Whether you invest it in a savings account, the money markets, your super, or yourself, the key is to be mindful and intentional with it.

Investing isn’t just for the wealthy. It’s for anyone who wants to make their money work a little harder for them to reach their goals.

And with a $1,000 bonus, my friend’s daughter is in a great position to do so.

They say money talks ... but it turns out, talk is often cheap!

Money has been a taboo subject for a long time, and while a lot of Australians are getting better at talking about their finances, they’re not always honest.

Compare the Market research shows almost half of Australians (47 per cent) have fibbed about their finances in the past year. It’s young people who are under pressure to live the perfect “Instagram lifestyle” who have lied the most.

A staggering 75 per cent of Gen Z-ers admitted to lying, hiding or exaggerating details about their personal finances, including what they earn, what they save, and what they spend.

In a world where everyone seems to have it all under control, it’s no wonder people feel pressure to keep up with the Joneses (or the Kardashians, for that matter). Every lie feeds the toxic trend.

I really do feel sorry for young people today. There has always been pressure on people to attain material wealth and status symbols, but these days, kids are bombarded with constant reminders on their phones.

When we see our friends on holidays, wearing designer clothes and sipping cocktails at fancy parties, it’s natural we want those things too.

Even people who are doing well can feel ashamed about their financial situation when they compare themselves to influencers on social media.

So, for anyone who needs it, here’s a reminder: it’s all smoke and Instagram filters. And you can be the change you want to see by being a little more honest when you talk about finance with friends and family.

Honesty is the best policy – especially when your decisions impact the household.

The reality is that most people aren’t doing so well. Further research from Compare the Market revealed that one in four Australians admit their savings have been going backwards in the past 12 months (20.3 per cent). Concerningly, nearly one in 10 said they had no savings and were in debt (9.3 per cent).

If you know someone who is struggling with money, approach them with kindness and understanding. Help is out there, like the Salvos’ MoneyCare services, and it’s much better to be proactive than to let debt and other issues snowball.

With the end of 2025 around the corner, it’s no surprise that almost half of Australians want to improve their financial position before year’s end (44.7 per cent).

But this isn’t a situation where “fake it till you make it” applies. Focus on making small, realistic changes to build your wealth over time. The real change happens offline!

From skyscrapers to servers

The scale of the AI revolution is staggering - and all signs point to it not slowing down anytime soon. NVIDIA’s market capitalisation now stands at around 3.6 per cent of global GDP, a single valuation larger than the entire stock markets of the UK, France, Germany, and Australia.

Today, its value exceeds the GDP of every country except the US, China, and Germany — underscoring how AI has propelled one company into the economic league of global economic superpowers.

According to the latest Bondi Partners newsletter, in the US, data centres - the physical backbone of AI computing - are rapidly overtaking office buildings as the dominant form of commercial real estate.

In June, US data centre construction surged to a record-breaking US$40 billion - a 400 per cent increase since 2022 - nearly matching total office construction spending (US$44 billion). The shift is historic: the future of real estate - and perhaps economic power - appears to lie not with workers, but with warehouses of computers powering algorithms and AI models.

No wonder the US Fed is nervous about cutting rates …

The ongoing slanging match from President Trump haranguing the boss of the US Federal Reserve to cut interest rates is embarrassing. If you want to know the reluctance behind the Fed’s hesitation, have a look at the chart below on the impact of tariff rises:

There is an understandable fear that tariff increases will fuel inflation and interest rate increases may be needed to bring costs back down.

Over the past year, the average effective US tariff rate has soared 18.6 per cent, the highest level since 1933. The economic trade think tank, Hinrich Foundation, predicts that prices for some goods could initially rise by as much as 41 per cent, before easing over time as cheaper alternatives are found.

Even in the long run, though, prices will still be up considerably.