1 00:00:05,440 --> 00:00:07,720 Sean Aylmer: Welcome to Fear and Greed The Week Ahead. I'm Sean Aylmer, 2 00:00:07,800 --> 00:00:10,760 Sean Aylmer: and as always I'm joined by economist Stephen Koukoulas. You'll 3 00:00:10,760 --> 00:00:14,520 Sean Aylmer: find here at thekouk.com, t H e kuk dot com 4 00:00:14,760 --> 00:00:17,640 Sean Aylmer: and on next using the handle @TheKouk. Stephen. Good morning. 5 00:00:18,239 --> 00:00:20,800 Stephen Koukoulas: I think it's a good morning, but good morning, Sean. 6 00:00:21,040 --> 00:00:23,040 Sean Aylmer: It is good morning. I mean, what a week. When 7 00:00:23,040 --> 00:00:25,239 Sean Aylmer: you have a week, whether you sort of forget about 8 00:00:25,280 --> 00:00:28,320 Sean Aylmer: the Reserve Bank Board meet, you know something big is 9 00:00:28,360 --> 00:00:32,320 Sean Aylmer: going on. Let's firstly talk tariff's and what it means 10 00:00:32,440 --> 00:00:34,839 Sean Aylmer: for the local economy and the global economy. 11 00:00:35,320 --> 00:00:38,159 Stephen Koukoulas: Look, it's going to be a moving face still. While 12 00:00:38,640 --> 00:00:41,839 Stephen Koukoulas: the big announce of occurred last week, I think it's 13 00:00:41,880 --> 00:00:44,680 Stephen Koukoulas: fair to say that the door is open for negotiations. 14 00:00:44,720 --> 00:00:47,680 Stephen Koukoulas: We've seen some of that discussion going back and forth already. 15 00:00:48,159 --> 00:00:51,319 Stephen Koukoulas: So where the dust finally settles, I'm not sure. No 16 00:00:51,360 --> 00:00:53,600 Stephen Koukoulas: one's sure at this stage. But we do know the 17 00:00:53,600 --> 00:00:57,000 Stephen Koukoulas: effect of tariffs is negative, whether they're small, medium, or large, 18 00:00:57,000 --> 00:00:59,040 Stephen Koukoulas: and that's what we try to quantify. Right now. You've 19 00:00:59,080 --> 00:01:04,080 Stephen Koukoulas: seen that incredible market volatility as the tariffs are announced 20 00:01:04,080 --> 00:01:08,560 Stephen Koukoulas: and subsequently, so I think the overall effect will not 21 00:01:08,640 --> 00:01:10,640 Stephen Koukoulas: be good for the US economy, will not be good 22 00:01:10,640 --> 00:01:14,880 Stephen Koukoulas: for global growth. Tariffs mean that trade flows are diminished 23 00:01:15,520 --> 00:01:20,720 Stephen Koukoulas: and that it has important implications for I guess inflation 24 00:01:21,120 --> 00:01:25,400 Stephen Koukoulas: from a growth perspective. Even though the tariffs themselves put 25 00:01:25,480 --> 00:01:28,280 Stephen Koukoulas: up prices in the US obviously by the amount of 26 00:01:28,280 --> 00:01:31,880 Stephen Koukoulas: the tariffs that they're charging each country, So trying to 27 00:01:31,880 --> 00:01:35,000 Stephen Koukoulas: size all that, it's not good news for the economy. Again, 28 00:01:35,040 --> 00:01:37,560 Stephen Koukoulas: we've seen, you know, the bond markets tending rally, stock 29 00:01:37,640 --> 00:01:40,240 Stephen Koukoulas: markets tending to fall, and that's a reflection of where 30 00:01:40,280 --> 00:01:41,120 Stephen Koukoulas: the tariffs are. 31 00:01:41,680 --> 00:01:45,120 Sean Aylmer: Okay, so is there any good news in this for Australia. 32 00:01:45,120 --> 00:01:48,720 Sean Aylmer: It's that places like Cambodia, Vietnam, China massive tariffs Now 33 00:01:48,840 --> 00:01:50,720 Sean Aylmer: when they're trying to sell into the US, will they 34 00:01:50,800 --> 00:01:53,360 Sean Aylmer: try and find new markets which are the edges will 35 00:01:53,560 --> 00:01:55,520 Sean Aylmer: mean we'll get cheaper manufactured goods. 36 00:01:56,080 --> 00:01:58,760 Stephen Koukoulas: It could, yes, just as a couple of the early 37 00:01:58,840 --> 00:02:01,080 Stephen Koukoulas: stories from the beef produce uses and even the aluminium 38 00:02:01,080 --> 00:02:03,480 Stephen Koukoulas: and still produced that was the story from a week 39 00:02:03,560 --> 00:02:06,120 Stephen Koukoulas: or two back. They're looking for alternative markets. If the 40 00:02:06,160 --> 00:02:08,840 Stephen Koukoulas: tariffs that the US is imposing means that there is 41 00:02:08,880 --> 00:02:12,720 Stephen Koukoulas: a significant pullback in the export volumes. Yes, just as 42 00:02:12,720 --> 00:02:16,360 Stephen Koukoulas: we saw in the wine industry, the balley industry, the 43 00:02:16,400 --> 00:02:20,160 Stephen Koukoulas: lobster part when China imposed tariffs or trade restrictions on 44 00:02:20,240 --> 00:02:22,760 Stephen Koukoulas: US a couple of years ago, a lot of those 45 00:02:22,760 --> 00:02:26,440 Stephen Koukoulas: firms were reasonably adept and reasonably quick at finding pretty 46 00:02:26,440 --> 00:02:29,480 Stephen Koukoulas: good substitute markets. I'd expect the same to be happening 47 00:02:29,600 --> 00:02:34,280 Stephen Koukoulas: right now, and the trade links might be diminishing with US, 48 00:02:34,480 --> 00:02:37,200 Stephen Koukoulas: which by definition is what mister Trump wants, and they'll 49 00:02:37,240 --> 00:02:39,440 Stephen Koukoulas: be opening up elsewhere. So who's going to be sort 50 00:02:39,440 --> 00:02:42,280 Stephen Koukoulas: of swift and agile if you like to get their 51 00:02:42,320 --> 00:02:44,120 Stephen Koukoulas: product into these alternative markets. 52 00:02:44,200 --> 00:02:45,880 Sean Aylmer: There's a bit of a rush last week after the 53 00:02:45,880 --> 00:02:49,639 Sean Aylmer: announcement to say that maybe this is good if you 54 00:02:49,760 --> 00:02:51,960 Sean Aylmer: want interest rate cuts in Australia. 55 00:02:52,080 --> 00:02:53,520 Stephen Koukoulas: What's your take on that, Well, that's the way the 56 00:02:53,520 --> 00:02:55,960 Stephen Koukoulas: market reacted. Certainly, the first twenty four hours or so 57 00:02:56,080 --> 00:02:59,400 Stephen Koukoulas: after the announcement, we saw the bond market rallying hard. 58 00:02:59,440 --> 00:03:02,799 Stephen Koukoulas: We saw effectively there's near to one hundred percentage you 59 00:03:02,800 --> 00:03:05,600 Stephen Koukoulas: could get a rate cut priced into the twentieth May, 60 00:03:05,639 --> 00:03:08,720 Stephen Koukoulas: which of course is the next RBA meeting, and a 61 00:03:08,760 --> 00:03:10,960 Stephen Koukoulas: couple more rate cuts after that before the end of 62 00:03:10,960 --> 00:03:14,639 Stephen Koukoulas: the year. So another seventy five odd points of rate 63 00:03:14,680 --> 00:03:17,160 Stephen Koukoulas: cuts now being priced into the future's curve in Australia 64 00:03:17,200 --> 00:03:20,200 Stephen Koukoulas: when it was only sort of like well two roughly 65 00:03:20,360 --> 00:03:22,440 Stephen Koukoulas: and only about a sixty percent chance of a rate 66 00:03:22,480 --> 00:03:25,400 Stephen Koukoulas: cut before the tariff announcement. The effects. So, yes, the 67 00:03:25,480 --> 00:03:27,240 Stephen Koukoulas: weak of growth is something that's going to be very 68 00:03:27,280 --> 00:03:30,239 Stephen Koukoulas: important to us, and I think from an Australian perspective, 69 00:03:30,800 --> 00:03:33,480 Stephen Koukoulas: it's not necessarily the direct effects on us that are important. 70 00:03:33,520 --> 00:03:35,600 Stephen Koukoulas: And as other people have commented on this in recent 71 00:03:35,680 --> 00:03:39,840 Stephen Koukoulas: days too, it's on global trade and our major export market, 72 00:03:39,880 --> 00:03:42,480 Stephen Koukoulas: which is China. So to the extent that China's got 73 00:03:43,000 --> 00:03:45,600 Stephen Koukoulas: what what we call them above average tariffs to confront 74 00:03:45,600 --> 00:03:49,040 Stephen Koukoulas: when it's trading with the US, China's activity will weaken. 75 00:03:49,640 --> 00:03:52,200 Stephen Koukoulas: China is our major export market, so I dare say 76 00:03:52,240 --> 00:03:54,600 Stephen Koukoulas: we're going to see some price volatility in the things 77 00:03:54,640 --> 00:03:56,360 Stephen Koukoulas: we send to China and also the volumes. 78 00:03:56,560 --> 00:03:58,840 Sean Aylmer: It's hard to go from such a seismic change to 79 00:03:58,880 --> 00:04:01,600 Sean Aylmer: things like business human confident, but we do have those 80 00:04:01,640 --> 00:04:02,880 Sean Aylmer: figures out this week, Stephen. 81 00:04:03,560 --> 00:04:06,360 Stephen Koukoulas: That's about It's. Yes, we've got business and consumer centerment. 82 00:04:06,320 --> 00:04:08,800 Stephen Koukoulas: They're still important indicators, and last week we did actually 83 00:04:08,800 --> 00:04:11,000 Stephen Koukoulas: get a bit of news too, sort of confirming job 84 00:04:11,080 --> 00:04:13,840 Stephen Koukoulas: vacancies were trending down and these sorts of things. So 85 00:04:14,080 --> 00:04:16,680 Stephen Koukoulas: the economy still rolls on, and even though the tariffins 86 00:04:16,720 --> 00:04:19,760 Stephen Koukoulas: will dominate the thinking of policy makers. And there I say, 87 00:04:19,880 --> 00:04:22,560 Stephen Koukoulas: the election campaigning going on, I think we're going to 88 00:04:22,560 --> 00:04:25,240 Stephen Koukoulas: be seeing the Reserve Bank paying a little bit of 89 00:04:25,240 --> 00:04:28,719 Stephen Koukoulas: attention to both consumer and business confidence. They're both really 90 00:04:28,760 --> 00:04:32,960 Stephen Koukoulas: important and quite contemporary indicators of how the economy is performing. 91 00:04:33,040 --> 00:04:35,800 Stephen Koukoulas: So consumer sentiment has been a little better than it 92 00:04:35,839 --> 00:04:38,760 Stephen Koukoulas: was a year ago, but certainly not strong. Business confidence 93 00:04:38,800 --> 00:04:40,760 Stephen Koukoulas: has been trending down for the last six months, but 94 00:04:40,839 --> 00:04:43,159 Stephen Koukoulas: certainly as a week. So we've got this sort of 95 00:04:43,200 --> 00:04:47,960 Stephen Koukoulas: in between gray area for both indicators. Any significant deviation 96 00:04:48,080 --> 00:04:50,440 Stephen Koukoulas: from those current readers will be important for the RBA. 97 00:04:50,600 --> 00:04:53,039 Sean Aylmer: Stephen and Joy the week Thank you was the economist 98 00:04:53,040 --> 00:04:54,920 Sean Aylmer: Stephen Kokul has better known as the Kok. You can 99 00:04:54,960 --> 00:04:56,920 Sean Aylmer: find him at the kook dot com and follow him 100 00:04:56,960 --> 00:04:59,680 Sean Aylmer: on x using the handle the Kok. I'm Seanelmer and 101 00:04:59,680 --> 00:05:01,320 Sean Aylmer: this is Fear and Greed. The weaker hit