Special: Finance

JOSH LANGMAN: Hey I'm Josh and I'm just crunching the numbers… because this BTN special is all about financial literacy. I lost count, I'll just start again. Coming up we learn about the value of gold and find out why budgeting is so important.

INTEREST RATES

JOSH: But first, we're talking Interest Rates. Earlier this year the Reserve Bank of Australia reduced interest rates for the first time since 2020. Jack found out what's so interesting about interest rates.

MUNCHKIN: Look it's the RBA.

RBA: Fellow Australians, let me set the record straight. Yes interest rates have been lowered.

MUNCHKIN: Oh my goodness, Oooooooooo.

JACK EVANS, REPORTER: It's the announcement that people had been waiting for in the land of OZ-tralia.

MICHELE BULLOCK, GOVERNOR OF THE RBA: Good afternoon, thank you all for coming… as you know, the board decided to cut the interest cash rate by 25 bases points to 4.1 percent.

JIM CHALMERS, TREASURER OF AUSTRALIA: This is the rate relief that Australians need and deserve.

PERSON: It's a huge change for us, it's going to make a big difference.

PERSON: It's pretty good for first time home buyers.

MUNCHKIN: Come out, Come out

MUNCHKIN: Interest Rates have been lowered.

RBA: Let us be gl…

MUNCHKIN: Wait, what's an interest rate?

RBA: Oh, Well ah… that's a good question. One that many find confusifying. Let's say you wanted to buy a house.

MUNCHKIN: Like a Munchkin house?

RBA: Yes, a Munchkin house. What other house would you buy? You are a Munchkin.

Houses, Even Munchkin houses can be very expensive, and you'll probably need to borrow money from a bank. In exchange for letting you borrow its money the bank charges interest, an extra charge on top of your repayments. How much interest they charge is up to the bank to decide.

RBA: Ah, but usually, it's based on a national interest rate that is set by the Reserve Bank of Australia. Oh, speaking of which I must be getting back there, so if there are no further quest…

MUNCHKIN: Wait, what is the Reserve Bank?

RBA: Oh, well… ahhh, it's…

The Reserve Bank is Australia's Central Bank. It's responsible for keeping the country's financial system stable and part of that is fighting inflation. That's when…

WIZARD OF OZ: A hot air balloon fills with err, hot air.

Well yes, but in this case, inflation is when prices go up. Which is exactly what's been happening for the past few years. One way to fight off inflation is to make it more expensive for people to borrow money. That means they're less likely to do a lot of spending which reduces demand for goods and pushes prices down. Except there's an obvious downside.

MUNCHKIN: We pay more for our Munchkin Mortgages.

RBA: Yeah, that's right.

In Australia interest rates have been steadily rising for the past few years, which has put extra pressure on homeowners.

PERSON: Cost of living has gone up and interest rates are high.

Now, Michelle Bullock says that they've managed to get inflation under control.

MICHELE BULLOCK: It's clear that higher interest rates have been working as anticipated, restricting economic activity and putting downward pressure on inflation.

Which means…

MUNCHKIN: Interest rates are going down.

RBA: Yes, that's what I said at the start. Remember I flew down in on the bubble. Yeah, it looked really good.

But it's not all sunshine and rainbows. Lower interest rates can push up the price of houses, which are already very high. And there's always the risk that that pesky inflation could creep up. So, as you can see it's a delicate balancing act for the RBA. And while many welcomed the news, the interest rate cut wasn't as big as people were hoping for and the Reserve Bank says it's not likely there will be anymore in the near future.

PERSON: It's not saving that much you know.

PERSON: It's great but I wish it had been a lot more

RBA: Ok, are we all good? Can I leave?

MUNCHKIN: Wait.

RBA: Nope, too late. The bubbles up, Sorry. See you later. Bye. Send me any email.

Did You Know

Did you know the RBA was the first central bank in the world to issue plastic bank notes.

GOLD PRICE

JOSH: Now to gold! Several gold mines in Queensland may soon reopen as global gold prices continue to rise. Tatenda digs into why this shiny metal has held such high value throughout history and why humans have been fascinated by it for thousands of years.

DORA AND THE LOST CITY OF GOLD: We're on to something big Dora, an ancient city made of gold.

FINDING OHANA: My kids are inside a mountain looking for some Spanish gold?

UNCHARTED: It's the biggest treasure that's never been found, five billion easy.

TATENDA CHIBIKA, REPORTER: Gold isn't just something people are obsessed with in movies. Right now, it's so valuable, just a kilo costs around $160,000 dollars.

While there are rarer metals out there, experts say gold has properties that make it unique.

PROFESSOR RICK VALENTA, UQ SUSTAINABLE MINERALS INSTITUTE: Gold, it doesn't tarnish. It doesn't oxidise if you have a piece of gold now, you can leave it out in the backyard, in the rain and the cold weather and the hot weather and bury it in the dirt and dig it up again and it will still be shiny.

Gold has been a part of many civilisations throughout history.

The Sumerians moulded it into jewellery, like these earrings gifted from King Shulgi.

Egyptian Pharaoh's like Tutankhamun were buried with it believing it was the "Flesh of the Gods". And the Mali Empire's Mansa Musa is considered one of the wealthiest people in history because of how much gold he had.

The precious metal has also been used as a form of currency for ages. For a while, many countries around the world used something called the gold standard where the value of money was directly linked to real gold held in the vaults of banks.

While the policy was used here in Australia because of our ties with Britain our history with the metal was shaped in the mid-1800s. Although people had discovered gold before then, authorities didn't trust the convict population, so they kept it a secret.

But their attitudes changed when the California gold rush began. It brought a lot of money to America but lured much needed workers away from Australia. So, governments in New South Wales and Victoria, offered rewards to anyone who found a gold deposit big enough to be mined.

In 1851, Edward Hargraves and a group of prospectors discovered a bunch of gold flakes in a town near Orange in New South Wales.

Edward showed the gold to officials and was eventually given 10,000 pounds for the discovery which he didn't share with the others. Word of the discovery quickly spread and within months, hundreds of diggers flocked to the area. It sparked the beginning of Australia's Gold Rush which brought hundreds of thousands of migrants to the country and helped make the nation rich.

Today, Australia is the third-highest gold producer in the world behind China and Russia. As for the value of gold nowadays.

PROFESSOR RICK VALENTA: The price of gold is very high right now. There's no doubt about that. The last time the gold price was this high was in 1980.

Experts say when things aren't going well in the global economy gold prices tend to go up.

PROFESSOR RICK VALENTA: People can't print more gold coins. You have to go find more gold. So, people look at that and they say, it's something that has a tangible value of a value that you can sort of rely on.

So, are we entering modern gold rush era? Well Professor Valenta says while things are going well now people shouldn't get too carried away.

PROFESSOR RICK VALENTA: One of the most dangerous things always to say is 'ohh this time is different'. This time probably isn't different. It's probably the same as other gold price spikes in the in the past, and it's probably gonna come back.

Quiz

Which ancient civilization was among the first to extensively mine and use gold? Roman, Egyptian or Greek?

It's Egyptian! Evidence suggests that mining activity happened there more than 5000 years ago.

TEENAGE BOSS

JOSH: Earlier this year, Wren caught up with one of the stars of this season of Teenage Boss. A TV show that teaches kids about financial literacy by putting them in charge of their family finances.

WREN GILLETT, REPORTER: Hello Ben. It's lovely to meet you through a screen.

BEN: Hi Wren. How are you?

WREN: I'm good and I hear you're a money expert now.

BEN: Oh, experts pushing it. But I've learnt a thing or two.

EMMA WATKINS, PRESENTER TEENAGE BOSS: As teenage boss, you will be in charge of $3,423.

BEN: Oh my gosh. $3423, that's a lot to work with.

Teenage Boss is a show that was created to teach kids about financial literacy. In each episode, a teenager like Ben is given total control of their family's finances for an entire month.

BEN: Have you ever seen this much cash before? No, neither have I.

WREN: What was the first thing you did when you saw it?

BEN: Big like bulging dollar sign eyes.

BEN: There's totally a scheming part of me that's stroking my cat and thinking yes, yes, it's all mine, the powers all mine. But it's definitely a lot of money to be responsible for.

Yeah, it's not as easy as it sounds, with that $3423 Ben had to think about all the things his family might need to pay for and on top of that he wanted to put some of it aside for something special.

EMILY, BEN'S MUM: He's just upped the saving goal to $1200 to spend on little bits of interlocking plastic, my god.

BEN: I mean, you can never have too much Lego.

As much as Ben loves his little bits of interlocking plastic, he was secretly saving for a holiday.

BEN: I'm actually saving to take Anwun and I on a trip to Adelaide to see Aunty Cassie and Uncle Will and baby Tom.

EMILY: What.

But in order to do that, Ben needed to budget.

BEN: In the show I sat down with Emma Wiggle, which was amazing and we kind of went through like, okay, what's the family's expenses at the moment?

BEN: Entertainment and eating out. We will not be eating out.

MUM: Nothing?

BEN: Flat no.

WREN: Were you surprised by how much things cost?

BEN: Totally, totally. Yeah. Yeah. Like all the little things stacking up and tiny purchases here and there adding and suddenly I've got this whole box full of receipts that I have to troll through and figure out how much we have left.

Ben says being Teenage Boss taught him a whole heap of things, including how the cost of living crisis is affecting prices of all sorts of things.

BEN: I remember when a block of chocolate was 3 bucks and now it's 7. But it's, I guess, it's always happened to an extent because I remember my mum telling me stories of when she was young and you could buy a whole bag of lollies for $0.10 and I was like, mum, what? That's ridiculous. And now I'm living that and I'm experiencing that within my lifetime which is really interesting.

At the end of the month Ben's managed to stay just under budget and save a total of $1222.35 which means…

BEN: There's something I need to tell you Anwun, which I've been keeping a secret all month, I'm taking you on a trip to Adelaide to see Aunty Cassie and Uncle Will with this money.

WREN: Why do you think it's important for young people to learn how to budget?

BEN: Oh it's such a crucial skill in so many ways. I mean, we're stepping into a kind of a new cost of living crisis at the moment. And so, I think it's more important than ever that young people have a grasp on how money works and how far money can go and that they're thinking about it at an early age, which is why I felt so lucky to have this experience in my teenage years.

Closer

JOSH: Well, that's all we have for this BTN Special. You can check out more specials on our website. Thanks for watching and I'll see you next time!