1 00:00:05,200 --> 00:00:07,440 Speaker 1: Welcome to Fear and Greed the week ahead. I'm Adam 2 00:00:07,520 --> 00:00:09,960 Speaker 1: lang and with Sean Aylmer and Stephen could Cool us 3 00:00:10,039 --> 00:00:13,080 Speaker 1: both taking a well earned break. I'm delighted to be 4 00:00:13,160 --> 00:00:17,840 Speaker 1: joined by Cherrell Murphy, chief economist at ey Cherrelle Good morning. 5 00:00:18,120 --> 00:00:19,919 Speaker 2: Good morning for lovely to be here with you. 6 00:00:20,680 --> 00:00:23,120 Speaker 1: We've had a slew of data in the last week. 7 00:00:23,200 --> 00:00:25,720 Speaker 1: Let's have a chat about it. The biggest number for 8 00:00:25,840 --> 00:00:29,800 Speaker 1: me was the GDP figures released on Wednesday. What did 9 00:00:29,840 --> 00:00:31,280 Speaker 1: you see in those numbers? 10 00:00:32,200 --> 00:00:35,519 Speaker 2: Yeah, there were pretty miserable numbers, weren't they. Unfortunately, with 11 00:00:35,960 --> 00:00:38,560 Speaker 2: GDP up to zero point two percent in the quarter 12 00:00:38,600 --> 00:00:41,800 Speaker 2: and one percent over the year, not much good news 13 00:00:41,800 --> 00:00:44,600 Speaker 2: in there at all. In fact, all of that growth 14 00:00:44,640 --> 00:00:48,960 Speaker 2: came from the public sector essentially, that was added point 15 00:00:48,960 --> 00:00:51,479 Speaker 2: four percentage for its contribution, and then the rest of 16 00:00:51,520 --> 00:00:53,920 Speaker 2: the economy cup took away from that. There was a 17 00:00:53,920 --> 00:00:57,800 Speaker 2: bright spark in service exports, which largely reflects the international 18 00:00:58,160 --> 00:01:02,880 Speaker 2: students spending. But look overall, I think what it's showing 19 00:01:02,960 --> 00:01:05,360 Speaker 2: us is that the public sector is really taking on 20 00:01:05,440 --> 00:01:08,399 Speaker 2: a bigger and bigger role in keeping the economy afloat. 21 00:01:09,040 --> 00:01:13,360 Speaker 2: The share of public consumption and public investment rose to 22 00:01:13,640 --> 00:01:16,720 Speaker 2: over twenty seven percent of GDP, which is actually the 23 00:01:16,840 --> 00:01:20,560 Speaker 2: highest old records is these statistics were first gathered back 24 00:01:20,600 --> 00:01:24,520 Speaker 2: in the nineteen sixties. Now that's not necessarily, of course, 25 00:01:24,560 --> 00:01:27,200 Speaker 2: all bad news. There's a lot of support for households 26 00:01:27,240 --> 00:01:30,399 Speaker 2: in there, which is really necessary at the moment. But 27 00:01:30,600 --> 00:01:33,559 Speaker 2: what is not so good about that is the fact 28 00:01:33,800 --> 00:01:37,240 Speaker 2: that the private business investment was pretty flat. Of course, 29 00:01:37,240 --> 00:01:41,760 Speaker 2: consumption coming down, really sort of weak productivity growth in 30 00:01:41,800 --> 00:01:45,840 Speaker 2: there as well. Productivity is barely moving at all at 31 00:01:45,840 --> 00:01:48,600 Speaker 2: the moment, So whatever's going in the economy, it's not 32 00:01:48,640 --> 00:01:51,280 Speaker 2: sort of setting us up for long term growth. I 33 00:01:51,320 --> 00:01:54,520 Speaker 2: think there's a lot of just kind of patching problems 34 00:01:54,560 --> 00:01:57,920 Speaker 2: in the short term and helping hassholds through this difficult period. 35 00:01:58,840 --> 00:02:01,520 Speaker 1: Cherille, as you look at AAD from that data, what 36 00:02:01,680 --> 00:02:03,240 Speaker 1: do you think is ahead of us? 37 00:02:04,240 --> 00:02:07,080 Speaker 2: Look, I think you know, the hassehold sector will see 38 00:02:07,120 --> 00:02:10,120 Speaker 2: a little bit more momentum into the second half of 39 00:02:10,160 --> 00:02:13,720 Speaker 2: the year because of the tax cuts and those sort 40 00:02:13,720 --> 00:02:17,800 Speaker 2: of payments to the hasehold sector pick up another notch 41 00:02:17,919 --> 00:02:22,600 Speaker 2: because of things like the electricity support, cheap transport in Queensland, 42 00:02:22,760 --> 00:02:25,840 Speaker 2: there's a number of programs in there, and at the 43 00:02:25,880 --> 00:02:30,200 Speaker 2: same time real wages arising. That's because our wages are 44 00:02:30,200 --> 00:02:33,880 Speaker 2: now growing faster than inflation. So those two things together 45 00:02:34,000 --> 00:02:37,799 Speaker 2: should mean that the hausehold sector is doing a little better, 46 00:02:38,840 --> 00:02:43,320 Speaker 2: but it's likely to be a fairly modest change going forward. 47 00:02:43,560 --> 00:02:46,880 Speaker 2: We'll see GDP pick up just that little bit, but 48 00:02:46,960 --> 00:02:48,680 Speaker 2: I just don't think that we're in for a particularly 49 00:02:48,760 --> 00:02:52,320 Speaker 2: strong period at the moment, particularly with inflation high and 50 00:02:52,360 --> 00:02:55,600 Speaker 2: the reserve banks keeping the brakes on the economy with 51 00:02:55,720 --> 00:02:59,960 Speaker 2: a relatively high interest rate. So it'll be an improved 52 00:03:00,200 --> 00:03:01,760 Speaker 2: but I don't think it'll be much of one. 53 00:03:02,360 --> 00:03:05,600 Speaker 1: Okay, And on a per capita basis, we saw that 54 00:03:05,639 --> 00:03:10,880 Speaker 1: there's been six consecutive quarters of decline, which is something 55 00:03:10,919 --> 00:03:13,480 Speaker 1: of a record, and that goes to how we're feeling 56 00:03:13,480 --> 00:03:16,720 Speaker 1: about it. What did you see in the per capita numbers? 57 00:03:17,480 --> 00:03:20,880 Speaker 2: Yeah, just incredible. We've never seen that before again since 58 00:03:20,960 --> 00:03:26,000 Speaker 2: these data were first collected, and it's just essentially showing 59 00:03:26,080 --> 00:03:29,160 Speaker 2: us that hauseholds are really tightening their belts. They really 60 00:03:29,200 --> 00:03:33,200 Speaker 2: are on a volume basis, spending less than they were 61 00:03:33,760 --> 00:03:38,360 Speaker 2: a year ago. So hassold's actually buying less on average. 62 00:03:38,640 --> 00:03:43,840 Speaker 2: Across the sector. That applies to discretionary goods and services, 63 00:03:43,880 --> 00:03:46,920 Speaker 2: but it also even applies to food. So we've actually 64 00:03:47,000 --> 00:03:49,520 Speaker 2: seen hassehold spend less on food than they did a 65 00:03:49,600 --> 00:03:51,640 Speaker 2: year ago. That's pretty extraordinary. 66 00:03:51,960 --> 00:03:52,800 Speaker 1: That's remarkable. 67 00:03:52,920 --> 00:03:55,480 Speaker 2: It is so I think we need to kind of 68 00:03:56,240 --> 00:03:59,120 Speaker 2: consider that that even although the Reserve Bank's job is 69 00:03:59,160 --> 00:04:02,640 Speaker 2: not done, economy is slowing. And essentially what that's showing 70 00:04:02,720 --> 00:04:06,400 Speaker 2: is is that demand has come down, yes, but supplier 71 00:04:07,600 --> 00:04:09,840 Speaker 2: is still lower, which is why we have inflation. And 72 00:04:09,920 --> 00:04:13,560 Speaker 2: so the capacity of the economy to produce more is 73 00:04:13,640 --> 00:04:16,320 Speaker 2: just not there. And you know, things like the weak 74 00:04:16,600 --> 00:04:20,159 Speaker 2: productivity numbers really point to that, and that's why we've 75 00:04:20,160 --> 00:04:21,839 Speaker 2: got that gap between the two. 76 00:04:23,320 --> 00:04:26,120 Speaker 1: Cherill. Last week, Reserve Bank Governor Michelle Bullock gave a 77 00:04:26,200 --> 00:04:29,480 Speaker 1: speech on Thursday. You were there, anything you can tell 78 00:04:29,560 --> 00:04:30,440 Speaker 1: us about what she said? 79 00:04:31,400 --> 00:04:34,840 Speaker 2: Yes, the Reserve Bank governor is, I guess, trying to 80 00:04:34,920 --> 00:04:38,719 Speaker 2: explain why they are doing what they're doing. She's talking 81 00:04:38,720 --> 00:04:43,520 Speaker 2: about the fact, particularly that low income hussles and vulnerable 82 00:04:43,560 --> 00:04:47,440 Speaker 2: hausholds are the ones that suffer most when inflation is high. 83 00:04:48,040 --> 00:04:50,720 Speaker 2: So while you know, we might all want to sort 84 00:04:50,720 --> 00:04:53,680 Speaker 2: of hate on the Reserve Bank at the moment, it's 85 00:04:53,680 --> 00:04:56,320 Speaker 2: difficult for them to do anything but what they are doing, 86 00:04:56,360 --> 00:05:00,280 Speaker 2: which is to try and get inflation under control. At 87 00:05:00,360 --> 00:05:03,200 Speaker 2: pains to point this at that it's the most vulnerable 88 00:05:03,240 --> 00:05:07,040 Speaker 2: in the community that we really feel inflation, and they 89 00:05:07,080 --> 00:05:09,720 Speaker 2: are the ones that would also suffer the most if 90 00:05:10,080 --> 00:05:13,599 Speaker 2: inflation ran away, moved higher and interest rates had to 91 00:05:13,640 --> 00:05:17,200 Speaker 2: be lifted again, it would mean that the Reserve Bank 92 00:05:17,279 --> 00:05:19,599 Speaker 2: was trying to clamp down on the economy and lower 93 00:05:19,680 --> 00:05:22,440 Speaker 2: demand even more than it already is, which would mean 94 00:05:22,520 --> 00:05:24,760 Speaker 2: job losses, and it tends to be the most vulnerable 95 00:05:24,760 --> 00:05:28,440 Speaker 2: who would lose their jobs first. She's also making the 96 00:05:28,480 --> 00:05:31,960 Speaker 2: point that low and mid income hasholes are the ones 97 00:05:32,000 --> 00:05:34,600 Speaker 2: that spend a lot on on the basics, the non 98 00:05:34,600 --> 00:05:38,400 Speaker 2: discretionary goods and services, the loaves of bread and rent, 99 00:05:38,920 --> 00:05:40,600 Speaker 2: and these are all the things that are going up 100 00:05:40,640 --> 00:05:43,400 Speaker 2: a lot in price, and by making sure that they 101 00:05:43,400 --> 00:05:45,800 Speaker 2: don't go up further in some way, she's trying to say, 102 00:05:45,839 --> 00:05:50,760 Speaker 2: we're trying to protect those hassholds. So there's been a 103 00:05:50,800 --> 00:05:53,880 Speaker 2: lot of I guess, anxiety about interest rates at the moment, 104 00:05:53,920 --> 00:05:56,159 Speaker 2: obviously a lot in the political debate at the moment. 105 00:05:56,600 --> 00:05:58,719 Speaker 2: What Michelle Bullock is trying to do here is just 106 00:05:58,800 --> 00:06:01,960 Speaker 2: really make the point that what is going on with 107 00:06:02,120 --> 00:06:06,120 Speaker 2: interest rates is necessary and particularly for vulnerable housholds. 108 00:06:06,800 --> 00:06:09,480 Speaker 1: A couple of other figures came out last week. Charrelle 109 00:06:09,839 --> 00:06:11,880 Speaker 1: on Monday, we had the a and said job ads, 110 00:06:11,920 --> 00:06:12,760 Speaker 1: what did you see there? 111 00:06:13,279 --> 00:06:16,599 Speaker 2: Yeah, so job ads were actually done again in the month, 112 00:06:17,279 --> 00:06:21,039 Speaker 2: and that is, I guess an indication again of the 113 00:06:21,080 --> 00:06:24,320 Speaker 2: fact that the labor market, well it still remains quite tight, 114 00:06:24,440 --> 00:06:27,159 Speaker 2: is softening a bit. So they were done two point 115 00:06:27,279 --> 00:06:29,960 Speaker 2: one percent in August, and over the year then they're 116 00:06:29,960 --> 00:06:32,920 Speaker 2: done twenty two zero point nine percent, so quite a lot. 117 00:06:33,880 --> 00:06:36,680 Speaker 2: So things are definitely changing in the labor market. It's 118 00:06:36,760 --> 00:06:39,960 Speaker 2: not as strong as it was. But again the reserve 119 00:06:40,000 --> 00:06:42,960 Speaker 2: bankers that pains to point at that they still see 120 00:06:42,960 --> 00:06:45,480 Speaker 2: the labor market as tight. Even under these conditions. 121 00:06:45,720 --> 00:06:48,200 Speaker 1: Those unemployments are still at record low levels. 122 00:06:48,440 --> 00:06:52,200 Speaker 2: Yeah, very close too, and potentially therefore also putting up 123 00:06:52,200 --> 00:06:56,080 Speaker 2: with pressure on wages and that is again fitting into inflation. 124 00:06:56,320 --> 00:06:59,680 Speaker 2: So even although we're seeing the lave markets soften, it's 125 00:06:59,760 --> 00:07:03,520 Speaker 2: it's coming from a base which was incredibly tight. It's 126 00:07:03,640 --> 00:07:05,200 Speaker 2: still a bit of inflation pressure there. 127 00:07:06,120 --> 00:07:08,359 Speaker 1: Sure, Well the trade numbers, was there a glimmer of 128 00:07:08,400 --> 00:07:09,040 Speaker 1: hope in them? 129 00:07:09,440 --> 00:07:11,920 Speaker 2: Yeah? They were pretty good. Actually, the trade numbers, the 130 00:07:12,000 --> 00:07:16,120 Speaker 2: balance on trade actually widened from five point four billion 131 00:07:16,120 --> 00:07:19,640 Speaker 2: dollars last month to six billion dollars this month. Good 132 00:07:19,760 --> 00:07:23,280 Speaker 2: numbers on the agricultural exports and that made up for 133 00:07:23,320 --> 00:07:26,240 Speaker 2: some of the weakness that we've seen in the resource exports. 134 00:07:26,920 --> 00:07:29,160 Speaker 2: And we also saw imports for dan so that does 135 00:07:29,200 --> 00:07:31,320 Speaker 2: tend to help that balance as well. So pretty good 136 00:07:31,320 --> 00:07:31,880 Speaker 2: result there. 137 00:07:32,480 --> 00:07:34,280 Speaker 1: Sure that wraps up last week. Let's look at the 138 00:07:34,320 --> 00:07:38,880 Speaker 1: week ahead on Wednesday, we've got the overseas arrivals and departures. Now, 139 00:07:38,920 --> 00:07:41,840 Speaker 1: this is really interesting on international travel. What are you 140 00:07:41,880 --> 00:07:42,880 Speaker 1: expecting to see there? 141 00:07:43,800 --> 00:07:46,480 Speaker 2: Absolutely, it does give us a bit of an indication 142 00:07:46,680 --> 00:07:50,520 Speaker 2: what's going on with also migration, because we can get 143 00:07:50,560 --> 00:07:54,240 Speaker 2: some idea of the movements there. And of course those 144 00:07:54,320 --> 00:07:58,600 Speaker 2: numbers have been incredibly strong recently and might have looked 145 00:07:58,640 --> 00:08:00,960 Speaker 2: like they were dipping towards in the first few months 146 00:08:01,000 --> 00:08:03,680 Speaker 2: of this year, but you know that actually has picked 147 00:08:03,760 --> 00:08:07,720 Speaker 2: up again. So still a lot of international arrival's, permanent 148 00:08:07,800 --> 00:08:11,120 Speaker 2: long term arrivals in particular have been higher, suggesting that 149 00:08:11,160 --> 00:08:14,680 Speaker 2: those migration numbers will actually still remain quite high. 150 00:08:15,040 --> 00:08:17,520 Speaker 1: We've also got some sentiment measures coming up next week, 151 00:08:17,560 --> 00:08:21,240 Speaker 1: the Westpac Melbourne Institute Survey of Consumer Sentiment and the 152 00:08:21,320 --> 00:08:24,680 Speaker 1: National Australian Bank Monthly Business Survey that are coming out. 153 00:08:24,680 --> 00:08:26,640 Speaker 1: They're always interesting what do you look for when you 154 00:08:26,680 --> 00:08:29,200 Speaker 1: go through those numbers, So we're I guess. 155 00:08:29,080 --> 00:08:33,280 Speaker 2: We're looking for the broad trends in where hopefully investment 156 00:08:33,360 --> 00:08:35,880 Speaker 2: and consumption are going. But I have to say that 157 00:08:35,920 --> 00:08:39,640 Speaker 2: some of these consumer confidence numbers lately have been very weak, 158 00:08:39,840 --> 00:08:43,320 Speaker 2: you know, even weaker than the consumer numbers would suggest 159 00:08:43,360 --> 00:08:46,440 Speaker 2: that the consumption numbers would suggest. However, we did see 160 00:08:46,480 --> 00:08:49,040 Speaker 2: a bit of a pickup in these in and August 161 00:08:49,400 --> 00:08:52,679 Speaker 2: that number, actually, the Westpac number actually was two point 162 00:08:52,679 --> 00:08:56,280 Speaker 2: eight percent, which is probably reflecting, of course, the tax cuts, 163 00:08:56,320 --> 00:08:58,720 Speaker 2: some of the cost of living measures that are coming through, 164 00:08:59,160 --> 00:09:02,080 Speaker 2: perhaps even the that has also feeling a little better, 165 00:09:02,120 --> 00:09:04,800 Speaker 2: as we discussed before, with their real way just going up. 166 00:09:05,559 --> 00:09:09,800 Speaker 2: The business confidence numbers have been a little stronger. There's 167 00:09:10,160 --> 00:09:13,960 Speaker 2: a gap has been opening up between business and consumer confidence, 168 00:09:14,000 --> 00:09:18,160 Speaker 2: and businesses have clearly been feeling better. But having said that, 169 00:09:18,840 --> 00:09:20,800 Speaker 2: they're kind of been edging down a little bit of 170 00:09:20,880 --> 00:09:23,960 Speaker 2: late back to closer to their long term average. So 171 00:09:24,360 --> 00:09:27,120 Speaker 2: definitely be watching this closely to see if there is 172 00:09:27,160 --> 00:09:31,760 Speaker 2: some confidence about the future and the investment prospects in 173 00:09:31,520 --> 00:09:32,680 Speaker 2: the corporate sector. 174 00:09:33,520 --> 00:09:36,640 Speaker 1: Yeah. So those GDP numbers we've had, they were tough, 175 00:09:37,120 --> 00:09:39,240 Speaker 1: but what we've got is some really fascinating darner in 176 00:09:39,240 --> 00:09:42,040 Speaker 1: the week Ahead, cherrelle, thank you very much for joining us, 177 00:09:42,120 --> 00:09:43,679 Speaker 1: and have a great week pleasure. 178 00:09:43,760 --> 00:09:44,160 Speaker 2: Thank you. 179 00:09:44,720 --> 00:09:48,079 Speaker 1: That was Cherrell Murphy, chief economist at EY. I'm Adam 180 00:09:48,160 --> 00:09:50,680 Speaker 1: Lang and this is bearing great the week ahead. Have 181 00:09:50,760 --> 00:09:51,320 Speaker 1: a great week.