1 00:00:08,130 --> 00:00:10,350 Sean Aylmer: Welcome to Fear and Greed: The Week Ahead. I'm Sean 2 00:00:10,380 --> 00:00:14,610 Sean Aylmer: Aylmer, and as always, I'm joined by economist Stephen Koukoulas. You'll 3 00:00:14,610 --> 00:00:17,549 Sean Aylmer: find him at thekouk.com and on Twitter using the handle @ TheKouk. 4 00:00:18,270 --> 00:00:19,169 Sean Aylmer: Good morning Stephen. 5 00:00:20,070 --> 00:00:21,960 Stephen Koukoulas: And a very good morning to you, Sean. 6 00:00:22,230 --> 00:00:24,150 Sean Aylmer: Now, I know you're excited about what's going on in the 7 00:00:24,150 --> 00:00:25,829 Sean Aylmer: economy, but I've got to tell you, I spent my 8 00:00:25,829 --> 00:00:27,300 Sean Aylmer: weekend in Tasmania. 9 00:00:28,170 --> 00:00:32,970 Stephen Koukoulas: Tasmania. The Apple Isle. Holidaying or looking for business opportunities? 10 00:00:33,060 --> 00:00:36,930 Sean Aylmer: No, no. Opossum Bay, the place is where we stayed 11 00:00:36,930 --> 00:00:40,589 Sean Aylmer: and we sort of across the river from Hobart and 12 00:00:40,590 --> 00:00:42,930 Sean Aylmer: my siblings, there's, well, four of the five of us 13 00:00:42,930 --> 00:00:45,180 Sean Aylmer: and our partners all went down for the weekend and it was fantastic fun. 14 00:00:45,180 --> 00:00:49,260 Stephen Koukoulas: Oh, gorgeous. Isn't Tasmania lovely? And it's not difficult to 15 00:00:49,260 --> 00:00:51,659 Stephen Koukoulas: understand why it's been one of the strongest property markets, 16 00:00:51,659 --> 00:00:54,360 Stephen Koukoulas: Hobart, this is. Over the course of the last 15 or 17 00:00:54,360 --> 00:00:57,360 Stephen Koukoulas: 20 years, Hobart prices have been actually one of the 18 00:00:57,360 --> 00:00:58,320 Stephen Koukoulas: star performers. 19 00:00:58,590 --> 00:00:59,340 Sean Aylmer: Is that right? 20 00:00:59,460 --> 00:01:02,880 Stephen Koukoulas: Outperformed Sydney, Melbourne, yep. It's been the star performer. 21 00:01:03,390 --> 00:01:03,391 Sean Aylmer: Fantastic. 22 00:01:03,391 --> 00:01:05,580 Stephen Koukoulas: From a low base. From a low base. It must be noted. 23 00:01:07,200 --> 00:01:09,690 Sean Aylmer: Anyway, before we start this week, last week, I mean 24 00:01:09,690 --> 00:01:13,650 Sean Aylmer: plenty going on overseas and locally. Let's just talk about 25 00:01:13,650 --> 00:01:16,080 Sean Aylmer: the labor force numbers first. A kind of a tick up, 26 00:01:16,080 --> 00:01:18,810 Sean Aylmer: but a question mark I suppose over the numbers. 27 00:01:19,620 --> 00:01:22,139 Stephen Koukoulas: Always a question mark over the numbers in December, January, 28 00:01:22,140 --> 00:01:24,810 Stephen Koukoulas: seasonally adjusting the numbers when people are on holidays or 29 00:01:24,810 --> 00:01:27,480 Stephen Koukoulas: going away. The ABS do note that there's always a 30 00:01:27,480 --> 00:01:30,630 Stephen Koukoulas: bit of a quirk. However, the interesting thing for me 31 00:01:30,630 --> 00:01:33,000 Stephen Koukoulas: about those labor force numbers is that the decline that 32 00:01:33,000 --> 00:01:38,160 Stephen Koukoulas: we saw in employment in January, minus 11,000, followed a minus 20, 33 00:01:38,190 --> 00:01:40,800 Stephen Koukoulas: 000 in December. So it's not just a one hit 34 00:01:40,800 --> 00:01:42,870 Stephen Koukoulas: wonder or one month wonder. There's two months in a 35 00:01:42,870 --> 00:01:45,720 Stephen Koukoulas: row and okay, you probably want to just get that 36 00:01:45,720 --> 00:01:49,290 Stephen Koukoulas: confirmed given how strong employment was in the months prior 37 00:01:49,290 --> 00:01:51,720 Stephen Koukoulas: to that. But then I also look at the unemployment 38 00:01:51,720 --> 00:01:55,559 Stephen Koukoulas: rate and it's gone from 3. 4% in October to 3. 7% 39 00:01:56,460 --> 00:01:58,710 Stephen Koukoulas: in January. So again, not the sort of stuff that 40 00:01:58,710 --> 00:02:00,660 Stephen Koukoulas: you're sort of, I'm going to jump out the window 41 00:02:00,660 --> 00:02:02,940 Stephen Koukoulas: and say we're heading for a hard landing recession or 42 00:02:02,940 --> 00:02:06,570 Stephen Koukoulas: anything like that. But it does signal that perhaps with 43 00:02:06,600 --> 00:02:09,090 Stephen Koukoulas: job ads starting to trend a little lower, that job 44 00:02:09,120 --> 00:02:11,850 Stephen Koukoulas: vacancies are moving lower and the economy is slowing. There's 45 00:02:11,850 --> 00:02:14,639 Stephen Koukoulas: no question about that. We could be in a position 46 00:02:14,639 --> 00:02:17,580 Stephen Koukoulas: that over the course of the next three to six 47 00:02:17,580 --> 00:02:20,549 Stephen Koukoulas: to nine months, we'd start getting a four point something 48 00:02:20,550 --> 00:02:23,160 Stephen Koukoulas: percent on the unemployment rate, which would be just a 49 00:02:23,160 --> 00:02:26,490 Stephen Koukoulas: little uncomfortable when we got used to these tremendously low 50 00:02:26,490 --> 00:02:28,590 Stephen Koukoulas: levels of unemployment through the course of last year. 51 00:02:28,950 --> 00:02:31,530 Sean Aylmer: And of course, Reserve Bank has two jobs, not one. 52 00:02:31,830 --> 00:02:33,060 Sean Aylmer: Of course, we all know it's got to keep a 53 00:02:33,060 --> 00:02:36,000 Sean Aylmer: lid on inflation, but it's actually supposed to achieve full 54 00:02:36,000 --> 00:02:36,870 Sean Aylmer: employment as well. 55 00:02:37,590 --> 00:02:39,510 Stephen Koukoulas: Indeed. And if I was Phil Lowe, if I was 56 00:02:39,510 --> 00:02:41,190 Stephen Koukoulas: giving him advice, which I'm not by the way. 57 00:02:41,340 --> 00:02:43,020 Sean Aylmer: Oh no, go ahead. Everyone else is. 58 00:02:44,000 --> 00:02:47,609 Stephen Koukoulas: Oh, the shellacking he has copped in recent times! And he has mentioned it on occasion, 59 00:02:47,610 --> 00:02:51,450 Stephen Koukoulas: is the fact that one legacy of COVID and easing 60 00:02:51,450 --> 00:02:53,429 Stephen Koukoulas: monetary policy and these sort of things, is an incredibly 61 00:02:53,430 --> 00:02:56,310 Stephen Koukoulas: low unemployment rate. I don't think I know of anybody 62 00:02:56,610 --> 00:02:59,040 Stephen Koukoulas: say three or four years, years ago who thought Australia 63 00:02:59,040 --> 00:03:02,310 Stephen Koukoulas: could actually get an unemployment rate near four or below. 64 00:03:02,310 --> 00:03:04,350 Stephen Koukoulas: And here we are warning that it'll go up to 65 00:03:04,350 --> 00:03:07,860 Stephen Koukoulas: four or maybe a little above 4%. So that is 66 00:03:07,860 --> 00:03:10,859 Stephen Koukoulas: a nice issue to be dealing with. And I guess 67 00:03:11,130 --> 00:03:13,620 Stephen Koukoulas: from the RBA's perspective, you can have too much of 68 00:03:13,620 --> 00:03:16,109 Stephen Koukoulas: a good thing in a sense, like good red wine, 69 00:03:16,110 --> 00:03:18,030 Stephen Koukoulas: you can have too much and it leads to a hangover. 70 00:03:18,480 --> 00:03:21,180 Stephen Koukoulas: If we get over full employment, the unemployment rate stays 71 00:03:21,180 --> 00:03:24,270 Stephen Koukoulas: incredibly low, and dare I say it, we get wages picking up, 72 00:03:24,270 --> 00:03:28,020 Stephen Koukoulas: feeding into future inflation. That's a problem the RBA and 73 00:03:28,020 --> 00:03:29,760 Stephen Koukoulas: other central banks are trying to guard against. 74 00:03:30,030 --> 00:03:32,970 Sean Aylmer: Now wages we'll will find something out about that this week. 75 00:03:33,960 --> 00:03:35,880 Stephen Koukoulas: We will, we get the wage price index for the 76 00:03:35,880 --> 00:03:39,360 Stephen Koukoulas: December quarter when the labour market was running hot. And 77 00:03:39,360 --> 00:03:43,260 Stephen Koukoulas: if we believe any of those demand indicators, the wonderful 78 00:03:43,260 --> 00:03:48,240 Stephen Koukoulas: NAB survey's got a question about the wages paid, employment costs, 79 00:03:48,690 --> 00:03:51,840 Stephen Koukoulas: and through to the December quarter when these numbers are referenced, 80 00:03:52,020 --> 00:03:54,240 Stephen Koukoulas: it was up, it was strong. So the market is 81 00:03:54,240 --> 00:03:57,300 Stephen Koukoulas: looking for a quarter on quarter increase around about 1%, 82 00:03:58,170 --> 00:04:01,320 Stephen Koukoulas: which will bring the annual figure to around about 3. 5% 83 00:04:02,040 --> 00:04:04,440 Stephen Koukoulas: plus or minus a few decimal points. And the other 84 00:04:04,440 --> 00:04:07,260 Stephen Koukoulas: thing which is feeding into this wage price index is 85 00:04:07,710 --> 00:04:12,060 Stephen Koukoulas: what employers are doing for non wages. So things like bonuses. 86 00:04:12,060 --> 00:04:15,690 Stephen Koukoulas: Are people getting paid retention payments? And the recent data, 87 00:04:15,690 --> 00:04:17,279 Stephen Koukoulas: that was definitely the case. So if you looked at 88 00:04:17,279 --> 00:04:22,560 Stephen Koukoulas: wages including bonuses, it was already running at 3. 8% annual pace, 89 00:04:22,800 --> 00:04:26,040 Stephen Koukoulas: that is almost certain to be above 4%. So even 90 00:04:26,040 --> 00:04:30,029 Stephen Koukoulas: though the bottom line wage may not be increasing rapidly, 91 00:04:30,330 --> 00:04:33,120 Stephen Koukoulas: employers are using other incentives to keep their staff. 92 00:04:33,420 --> 00:04:36,300 Sean Aylmer: Okay, the next thing. RBA minutes we get those tomorrow. 93 00:04:36,600 --> 00:04:39,060 Sean Aylmer: They will kind of be interesting because last time that 94 00:04:39,060 --> 00:04:42,029 Sean Aylmer: the Reserve Bank lifted rates, people were quite surprised just 95 00:04:42,029 --> 00:04:43,680 Sean Aylmer: at how hawkish they were. 96 00:04:44,310 --> 00:04:47,250 Stephen Koukoulas: Yeah, the rate hike a couple of weeks ago was hawkish, 97 00:04:47,250 --> 00:04:49,560 Stephen Koukoulas: and then of course the commentary since has been incredibly hawkish, 98 00:04:49,560 --> 00:04:52,050 Stephen Koukoulas: and so the minutes will actually put a bit more flesh. 99 00:04:52,050 --> 00:04:55,050 Stephen Koukoulas: Now we've already had the statement on monetary policy come 100 00:04:55,050 --> 00:04:57,750 Stephen Koukoulas: out after that. So if we read through that carefully, 101 00:04:57,750 --> 00:04:59,700 Stephen Koukoulas: I dare say the minutes will really only reflect the 102 00:04:59,700 --> 00:05:03,000 Stephen Koukoulas: statement on monetary policy, but nonetheless, there'll be a little 103 00:05:03,000 --> 00:05:06,510 Stephen Koukoulas: bit more detail. What were they debating? Perhaps because it 104 00:05:07,589 --> 00:05:11,909 Stephen Koukoulas: was a move from cautious hawkishness to outright hawkishness at 105 00:05:11,910 --> 00:05:15,210 Stephen Koukoulas: that meeting when obviously they delivered the rate hike and signaled 106 00:05:15,210 --> 00:05:15,810 Stephen Koukoulas: more to come. 107 00:05:16,350 --> 00:05:18,779 Sean Aylmer: And what about December CapEx? They're out this week. Always 108 00:05:18,779 --> 00:05:20,430 Sean Aylmer: interesting to know what business is thinking. 109 00:05:20,880 --> 00:05:23,849 Stephen Koukoulas: Yeah, the that's going to be one area of the 110 00:05:23,850 --> 00:05:27,089 Stephen Koukoulas: economy in my view that stops us lurching towards recession 111 00:05:27,089 --> 00:05:28,800 Stephen Koukoulas: if we're even going to go anywhere near a recession. 112 00:05:28,800 --> 00:05:31,230 Stephen Koukoulas: But the business sector has actually got a pretty upbeat 113 00:05:31,230 --> 00:05:35,310 Stephen Koukoulas: outlook for investment on machinery and equipment, for buildings and 114 00:05:35,310 --> 00:05:39,060 Stephen Koukoulas: structures, basically CapEx. And part of that's a bit of 115 00:05:39,089 --> 00:05:42,000 Stephen Koukoulas: catch up from the COVID years when they shelved a 116 00:05:42,000 --> 00:05:45,930 Stephen Koukoulas: lot of projects, they couldn't actually undertake a lot of 117 00:05:45,930 --> 00:05:49,080 Stephen Koukoulas: the projects or they had supply chain problems for machinery 118 00:05:49,080 --> 00:05:51,540 Stephen Koukoulas: and equipment and these sorts of things. So it's likely 119 00:05:51,540 --> 00:05:54,210 Stephen Koukoulas: to be a decent sort of increase quarter on quarter, 120 00:05:54,210 --> 00:05:58,020 Stephen Koukoulas: about 2%, which feeds nicely into the GDP number and 121 00:05:58,050 --> 00:06:02,070 Stephen Koukoulas: interestingly and importantly, will be their expected CapEx over the 122 00:06:02,070 --> 00:06:05,040 Stephen Koukoulas: course of the next year. That's actually looking pretty upbeat 123 00:06:05,040 --> 00:06:06,810 Stephen Koukoulas: and I think on the latest figures, we are looking 124 00:06:06,810 --> 00:06:10,050 Stephen Koukoulas: for about a 10% annual increase, which puts a decent 125 00:06:10,050 --> 00:06:13,260 Stephen Koukoulas: floor under bottom line, GDP. Anything stronger that than that 126 00:06:13,260 --> 00:06:16,290 Stephen Koukoulas: will be nice to see. And CapEx is the vital 127 00:06:16,290 --> 00:06:17,400 Stephen Koukoulas: part of productivity. 128 00:06:18,360 --> 00:06:19,890 Sean Aylmer: One final thing before I let you go, I just 129 00:06:19,890 --> 00:06:21,990 Sean Aylmer: want to mention the US economy as well because a 130 00:06:21,990 --> 00:06:24,330 Sean Aylmer: couple of big figures out last week, this was the 131 00:06:24,330 --> 00:06:27,510 Sean Aylmer: CPI numbers, which probably came in as expected, but also 132 00:06:27,510 --> 00:06:29,430 Sean Aylmer: some pretty strong retail sales data. 133 00:06:30,330 --> 00:06:33,510 Stephen Koukoulas: Two big numbers, yes, two important numbers. And then I guess the 134 00:06:33,510 --> 00:06:36,510 Stephen Koukoulas: market was, even though the CPI, the inflation numbers was 135 00:06:36,510 --> 00:06:39,300 Stephen Koukoulas: pretty much bang on expectation, both headline and core numbers, 136 00:06:39,570 --> 00:06:41,580 Stephen Koukoulas: I think there was a secret wish that it would be a little 137 00:06:41,580 --> 00:06:44,099 Stephen Koukoulas: bit lower. So when it came in on expectations, we 138 00:06:44,100 --> 00:06:45,539 Stephen Koukoulas: saw the yields jumping and I think we had a 139 00:06:45,540 --> 00:06:48,810 Stephen Koukoulas: few Fed officials reiterating their hawkishness, we need to do 140 00:06:48,810 --> 00:06:50,700 Stephen Koukoulas: more to get inflation lower. So that was sort of 141 00:06:51,060 --> 00:06:54,000 Stephen Koukoulas: caused a bit of choppiness in the market. And yes, 142 00:06:54,000 --> 00:06:56,310 Stephen Koukoulas: the January retail sales numbers in the US were plus 143 00:06:56,310 --> 00:06:59,430 Stephen Koukoulas: 3%. They're always going to bounce back a little bit 144 00:06:59,430 --> 00:07:03,060 Stephen Koukoulas: because November and December were both small negatives, but that 145 00:07:03,060 --> 00:07:06,419 Stephen Koukoulas: 3% month on month blew away expectations. And a little 146 00:07:06,420 --> 00:07:08,669 Stephen Koukoulas: bit like Australia, I think it's 7% month on month 147 00:07:08,670 --> 00:07:11,280 Stephen Koukoulas: was cafes and restaurants and eating out and these sorts 148 00:07:11,280 --> 00:07:14,010 Stephen Koukoulas: of things. So it's perhaps signaling that maybe there's a 149 00:07:14,010 --> 00:07:17,040 Stephen Koukoulas: bit more resilience in the old US economy than some 150 00:07:17,040 --> 00:07:19,200 Stephen Koukoulas: of these other business surveys are indicating. 151 00:07:19,680 --> 00:07:20,880 Sean Aylmer: Stephen, have a good week. 152 00:07:21,720 --> 00:07:22,590 Stephen Koukoulas: Thank you, Sean. You too. 153 00:07:23,100 --> 00:07:25,380 Sean Aylmer: That was economist Stephen Koukoulas, better known as The Kouk. 154 00:07:25,710 --> 00:07:27,930 Sean Aylmer: You can find him at thekouk. com and follow him 155 00:07:27,930 --> 00:07:31,320 Sean Aylmer: on Twitter using the handle @ TheKouk. I'm Sean Aylmer and 156 00:07:31,320 --> 00:07:32,940 Sean Aylmer: this is Fear and Greed: The Week Ahead.