1 00:00:08,010 --> 00:00:11,520 Sean Aylmer: Welcome to Fear & Greed: The Week Ahead. I'm Sean Aylmer, and as 2 00:00:11,520 --> 00:00:13,710 Sean Aylmer: always at this time on a Monday morning, I'm joined 3 00:00:13,710 --> 00:00:18,480 Sean Aylmer: by economist, Stephen Koukoulas. You'll find him at thekouk. com, T- H- E- K- O- U- K. 4 00:00:18,660 --> 00:00:22,590 Sean Aylmer: com, and on Twitter using the handle, TheKouk. Stephen, good morning. 5 00:00:23,130 --> 00:00:24,599 Stephen Koukoulas: And a very good morning to you, Sean. 6 00:00:25,050 --> 00:00:27,210 Sean Aylmer: I hope you had a quieter weekend, given the previous 7 00:00:27,210 --> 00:00:30,120 Sean Aylmer: few weekends you'd spent at the racetrack watching your horse 8 00:00:30,120 --> 00:00:30,540 Sean Aylmer: run round. 9 00:00:31,140 --> 00:00:33,930 Stephen Koukoulas: And watching her run and performed creditably. Look, she's not 10 00:00:33,930 --> 00:00:35,670 Stephen Koukoulas: a group one horse, even though she was running in 11 00:00:35,670 --> 00:00:38,010 Stephen Koukoulas: group one races. So at one level it was a 12 00:00:38,010 --> 00:00:40,770 Stephen Koukoulas: little bit disappointing, but on the other she gave it 13 00:00:40,770 --> 00:00:44,279 Stephen Koukoulas: all, she gave 110% and did well. She's having a 14 00:00:44,280 --> 00:00:45,930 Stephen Koukoulas: spell in the paddock. She'll be back in a couple 15 00:00:45,930 --> 00:00:46,320 Stephen Koukoulas: of months. 16 00:00:46,680 --> 00:00:48,809 Sean Aylmer: Now I've got to tell listeners that I was actually 17 00:00:48,810 --> 00:00:51,240 Sean Aylmer: at the races, not with Stephen. Stephen was also there 18 00:00:51,240 --> 00:00:53,340 Sean Aylmer: and I texted him at one point the race before 19 00:00:53,340 --> 00:00:55,650 Sean Aylmer: Stephen's horse is running, there was a horse running around 20 00:00:55,650 --> 00:00:59,610 Sean Aylmer: called Economist. And I text Stephen and said, " Surely you're 21 00:00:59,610 --> 00:01:01,230 Sean Aylmer: going to put your money on that." And you said, " 22 00:01:01,230 --> 00:01:03,570 Sean Aylmer: Of course." Did nothing. We lost out. 23 00:01:04,319 --> 00:01:06,479 Stephen Koukoulas: And it actually, I read the stewards report, it pulled 24 00:01:06,480 --> 00:01:09,870 Stephen Koukoulas: up lame. That is not a joke. That is not a joke. 25 00:01:10,530 --> 00:01:11,071 Stephen Koukoulas: So a very lame economist there. 26 00:01:11,070 --> 00:01:11,850 Sean Aylmer: Lame economist. 27 00:01:11,850 --> 00:01:14,730 Stephen Koukoulas: So maybe she was going through a spell too. 28 00:01:15,600 --> 00:01:18,960 Sean Aylmer: Talking about economics, those labor force numbers last week, not bad. 29 00:01:19,620 --> 00:01:22,800 Stephen Koukoulas: They were not bad at all. We saw the March 30 00:01:22,800 --> 00:01:26,190 Stephen Koukoulas: employment report come out and it had jobs increasing by 31 00:01:26,580 --> 00:01:29,880 Stephen Koukoulas: a pretty chunky 53,000 for the month, which was a 32 00:01:29,880 --> 00:01:32,910 Stephen Koukoulas: little bit better than market was expecting. The unemployment rate 33 00:01:32,910 --> 00:01:36,149 Stephen Koukoulas: remained stable at just a tick above a 50 year 34 00:01:36,150 --> 00:01:39,990 Stephen Koukoulas: low of 3. 5%. The participation rate went up. So 35 00:01:40,170 --> 00:01:42,660 Stephen Koukoulas: when we cut through all of the volatility and the 36 00:01:42,660 --> 00:01:45,720 Stephen Koukoulas: noise of month on month, different readings in the labor 37 00:01:45,720 --> 00:01:48,390 Stephen Koukoulas: market data because they are volatile month to month, it 38 00:01:48,420 --> 00:01:52,080 Stephen Koukoulas: was generally a pretty solid result. So saying that even 39 00:01:52,080 --> 00:01:54,960 Stephen Koukoulas: though the economy's slowing down and it is, the labor 40 00:01:54,960 --> 00:01:56,340 Stephen Koukoulas: market's pretty resilient. 41 00:01:57,480 --> 00:01:59,580 Sean Aylmer: So the Reserve Bank is very interested in the labor 42 00:01:59,580 --> 00:02:02,130 Sean Aylmer: market when it thinks about interest rates. It's also very 43 00:02:02,130 --> 00:02:07,470 Sean Aylmer: interested in the National Australia Bank Sentiment Conditions survey, and 44 00:02:07,470 --> 00:02:08,670 Sean Aylmer: that came out last week too. 45 00:02:09,180 --> 00:02:11,460 Stephen Koukoulas: It did, and again, it was solid. There was not 46 00:02:11,460 --> 00:02:17,519 Stephen Koukoulas: much movement in the various indicators of conditions, sentiment and 47 00:02:17,730 --> 00:02:20,549 Stephen Koukoulas: prices paid and these sorts of other sub- components, employment 48 00:02:20,550 --> 00:02:23,070 Stephen Koukoulas: intentions and these sorts of things. So in a sense 49 00:02:23,070 --> 00:02:24,690 Stephen Koukoulas: it was just confirming what we do know, and that 50 00:02:24,690 --> 00:02:28,560 Stephen Koukoulas: is the business sector is traveling pretty well. There's a 51 00:02:28,560 --> 00:02:32,669 Stephen Koukoulas: degree of caution in the confidence measure. So firms are 52 00:02:32,669 --> 00:02:35,940 Stephen Koukoulas: clearly watching the interest rate hiking cycle, global conditions where 53 00:02:36,540 --> 00:02:39,660 Stephen Koukoulas: clearly the global economy is slowing down as well. But 54 00:02:39,660 --> 00:02:42,480 Stephen Koukoulas: all up, it's a sort of a survey that's consistent with, 55 00:02:42,480 --> 00:02:45,510 Stephen Koukoulas: yeah, the economy's still growing, that fears of recession are 56 00:02:46,110 --> 00:02:49,500 Stephen Koukoulas: just not there in any of the business confidence numbers. 57 00:02:49,500 --> 00:02:52,470 Stephen Koukoulas: And it was again, another solid result, not booming, but 58 00:02:52,470 --> 00:02:55,440 Stephen Koukoulas: certainly nowhere near the sort of hard landing that a 59 00:02:55,440 --> 00:02:57,300 Stephen Koukoulas: few people are speculating about right now. 60 00:02:57,690 --> 00:03:01,290 Sean Aylmer: And the Westpac Melbourne Institute Consumer Sentiment survey shows that 61 00:03:01,440 --> 00:03:02,490 Sean Aylmer: rates really matter. 62 00:03:03,120 --> 00:03:05,639 Stephen Koukoulas: They do, and that it's shot up by almost 10% 63 00:03:05,639 --> 00:03:07,410 Stephen Koukoulas: month on month. And of course that was the month 64 00:03:07,410 --> 00:03:11,519 Stephen Koukoulas: where the RBA held rates steady. And so the sentiment, 65 00:03:11,520 --> 00:03:14,940 Stephen Koukoulas: they break it down between mortgage holders and people who 66 00:03:14,940 --> 00:03:17,010 Stephen Koukoulas: own their house without debt and renters and the like, 67 00:03:17,010 --> 00:03:20,040 Stephen Koukoulas: but the people with the mortgage, their optimism shot up 68 00:03:20,040 --> 00:03:23,400 Stephen Koukoulas: dramatically. So all of a sudden consumers are feeling optimistic 69 00:03:23,400 --> 00:03:26,790 Stephen Koukoulas: that they had, for the first time in 10 RBA 70 00:03:26,790 --> 00:03:29,880 Stephen Koukoulas: meetings, no hiking interest rates. And look, I think we've 71 00:03:29,880 --> 00:03:31,530 Stephen Koukoulas: also got to just put it into context too. The 72 00:03:31,530 --> 00:03:35,280 Stephen Koukoulas: level of sentiment's still more pessimist than optimist, so it's 73 00:03:35,280 --> 00:03:38,010 Stephen Koukoulas: still at a negative reading, but it's off the canvas, 74 00:03:38,010 --> 00:03:40,440 Stephen Koukoulas: and another couple of months where it starts to pick 75 00:03:40,440 --> 00:03:42,780 Stephen Koukoulas: up, you'd be thinking that maybe the consumer side of 76 00:03:42,780 --> 00:03:46,020 Stephen Koukoulas: the economy will after a bit of a soft patch 77 00:03:46,020 --> 00:03:47,370 Stephen Koukoulas: in the first half of this year, it might do 78 00:03:47,370 --> 00:03:48,540 Stephen Koukoulas: a little better in the second half. 79 00:03:49,050 --> 00:03:52,890 Sean Aylmer: It's also worth mentioning last week we had Jim Chalmers 80 00:03:52,890 --> 00:03:55,740 Sean Aylmer: in Washington. We had the Reserve Bank governor over there, 81 00:03:55,740 --> 00:03:59,670 Sean Aylmer: but we also had US inflation figures, which sort of 82 00:03:59,670 --> 00:04:02,610 Sean Aylmer: the headline number was pretty good though the underlying one 83 00:04:02,610 --> 00:04:04,320 Sean Aylmer: perhaps not quite so promising. 84 00:04:05,010 --> 00:04:09,150 Stephen Koukoulas: Yes, well, the headline figures showed that annual inflation in 85 00:04:09,150 --> 00:04:11,760 Stephen Koukoulas: the US only rose by 0. 1% in the month, and 86 00:04:12,090 --> 00:04:15,450 Stephen Koukoulas: the annual figure dropped down to 5. 0% from the 87 00:04:15,450 --> 00:04:18,750 Stephen Koukoulas: peak above 9% about 7 or 8 months ago. So 88 00:04:18,750 --> 00:04:21,180 Stephen Koukoulas: inflation's on the way down, there's no question about that. 89 00:04:21,180 --> 00:04:25,140 Stephen Koukoulas: And obviously with different trends happening in oil prices now, 90 00:04:25,140 --> 00:04:26,700 Stephen Koukoulas: they've picked up a bit of course with the OPEC 91 00:04:26,700 --> 00:04:29,880 Stephen Koukoulas: decision a few weeks ago. But basically one of the 92 00:04:29,880 --> 00:04:32,669 Stephen Koukoulas: reasons why inflation was falling, because petrol prices in the 93 00:04:32,670 --> 00:04:35,370 Stephen Koukoulas: US were down, but as you quite rightly pointed out, 94 00:04:35,370 --> 00:04:39,270 Stephen Koukoulas: you strip out food and energy, the volatile items in 95 00:04:39,270 --> 00:04:42,690 Stephen Koukoulas: the Consumer Price Index basket in the US and we 96 00:04:42,690 --> 00:04:46,440 Stephen Koukoulas: had the month on month reading at 0. 4%, the annual 97 00:04:46,440 --> 00:04:50,609 Stephen Koukoulas: figure around about 5.5% still. So again, it's off the 98 00:04:50,610 --> 00:04:52,920 Stephen Koukoulas: highs but not falling as much as some of the 99 00:04:52,920 --> 00:04:55,560 Stephen Koukoulas: dubs would really love to see. So the jury's out 100 00:04:55,560 --> 00:04:58,020 Stephen Koukoulas: about whether there's going to be another rate hike next 101 00:04:58,020 --> 00:05:00,750 Stephen Koukoulas: month from the Federal Open Markets Committee in the US. 102 00:05:01,230 --> 00:05:03,180 Stephen Koukoulas: It's sort of like a line ball call. But even 103 00:05:03,180 --> 00:05:05,339 Stephen Koukoulas: having said that, we know we're very, very close to 104 00:05:05,339 --> 00:05:07,200 Stephen Koukoulas: the end of the rate hiking cycle in the US. 105 00:05:08,370 --> 00:05:10,560 Sean Aylmer: So putting all that together, and this is called The 106 00:05:10,560 --> 00:05:12,300 Sean Aylmer: Week Ahead though there's not a lot out this week 107 00:05:12,300 --> 00:05:14,670 Sean Aylmer: apart from the Reserve Bank minutes, where are we up 108 00:05:14,670 --> 00:05:16,830 Sean Aylmer: to? What do you think the Reserve Bank in the 109 00:05:16,830 --> 00:05:19,740 Sean Aylmer: next few weeks we'll be thinking about given the labor 110 00:05:19,740 --> 00:05:23,670 Sean Aylmer: force stats, the consumer sentiment, the business conditions, what's happening 111 00:05:23,670 --> 00:05:25,260 Sean Aylmer: overseas, what are they thinking about? 112 00:05:25,529 --> 00:05:29,159 Stephen Koukoulas: Yeah, well we also had Deputy Governor Michele Bullock giving 113 00:05:29,220 --> 00:05:32,640 Stephen Koukoulas: comments on a panel discussion last week and she was 114 00:05:32,640 --> 00:05:36,330 Stephen Koukoulas: asked quite directly, " Why did you pause in the month 115 00:05:36,330 --> 00:05:38,160 Stephen Koukoulas: of April?" at the April board meeting? She said, " Look, 116 00:05:38,160 --> 00:05:40,380 Stephen Koukoulas: it wasn't really because of the banking problems." Remember that 117 00:05:41,010 --> 00:05:42,659 Stephen Koukoulas: a couple of the US banks were under a lot 118 00:05:42,660 --> 00:05:45,719 Stephen Koukoulas: of pressure and actually went bust a month or so 119 00:05:45,720 --> 00:05:47,789 Stephen Koukoulas: ago. She said, " Look, that wasn't really the key issue. 120 00:05:48,089 --> 00:05:51,330 Stephen Koukoulas: For us, was twofold. We have one eye on the 121 00:05:51,330 --> 00:05:54,150 Stephen Koukoulas: labor market. So we've obviously had confirmation that that's remaining 122 00:05:54,150 --> 00:05:57,510 Stephen Koukoulas: pretty firm. And we have another eye on the fact 123 00:05:57,510 --> 00:06:00,450 Stephen Koukoulas: that we've already done a lot, that we've hiked 350 124 00:06:00,480 --> 00:06:04,080 Stephen Koukoulas: basis points over the last 12 months." So throwing that 125 00:06:04,080 --> 00:06:06,630 Stephen Koukoulas: all into the great big melting pot, I think they've 126 00:06:06,630 --> 00:06:09,479 Stephen Koukoulas: got a bias to hike interest rates, but they'll need 127 00:06:09,480 --> 00:06:13,680 Stephen Koukoulas: a trigger to actually move higher. And on the current 128 00:06:13,680 --> 00:06:16,350 Stephen Koukoulas: data as it sits right now, they'd probably be pausing 129 00:06:16,350 --> 00:06:19,950 Stephen Koukoulas: again at the May meeting. But having said that, next 130 00:06:19,950 --> 00:06:22,920 Stephen Koukoulas: week on the 26th of April, on the Wednesday we 131 00:06:22,920 --> 00:06:27,330 Stephen Koukoulas: have the March quarter inflation numbers. Now I think it 132 00:06:27,330 --> 00:06:29,820 Stephen Koukoulas: almost goes without saying if they're high, then the rate 133 00:06:29,820 --> 00:06:31,920 Stephen Koukoulas: hike is well and truly back on the agenda for 134 00:06:31,920 --> 00:06:35,729 Stephen Koukoulas: May. If they're sort of as expected, the RBA will 135 00:06:35,730 --> 00:06:38,640 Stephen Koukoulas: sound all hawkish, but probably do nothing, and hopefully they 136 00:06:38,640 --> 00:06:40,440 Stephen Koukoulas: come in nice and low and the RBA will still 137 00:06:40,440 --> 00:06:42,690 Stephen Koukoulas: do nothing. We're still a million miles from a rate 138 00:06:42,690 --> 00:06:46,080 Stephen Koukoulas: cut, but we just want to see that inflation number 139 00:06:46,080 --> 00:06:49,800 Stephen Koukoulas: to be sure whether we've got that trajectory lower in 140 00:06:49,800 --> 00:06:50,940 Stephen Koukoulas: the inflation momentum. 141 00:06:51,390 --> 00:06:52,710 Sean Aylmer: Stephen, have a great week. 142 00:06:53,100 --> 00:06:53,789 Stephen Koukoulas: Thank you, Sean. 143 00:06:54,300 --> 00:06:56,910 Sean Aylmer: That was economist, Stephen Koukoulas, better known as The Kouk. 144 00:06:56,940 --> 00:06:59,279 Sean Aylmer: You can find him at thekouk. com and follow him 145 00:06:59,279 --> 00:07:01,950 Sean Aylmer: on Twitter using the handle TheKouk. I'm Sean Aylmer, and 146 00:07:01,950 --> 00:07:03,539 Sean Aylmer: this is Fear & Greed: The Week Ahead.