1 00:00:07,770 --> 00:00:10,440 Jennifer Duke: Welcome to Fear and Greed - The Week Ahead. I'm Jennifer 2 00:00:10,440 --> 00:00:13,500 Jennifer Duke: Duke and I'm joined by economist Stephen Koukoulas. You'll find 3 00:00:13,500 --> 00:00:16,230 Jennifer Duke: him at thekouk. com, that's T- H- E- K- O- U- K. 4 00:00:16,379 --> 00:00:19,890 Jennifer Duke: com, and on X using the handle TheKouk. Stephen, good morning. 5 00:00:20,610 --> 00:00:24,270 Stephen Koukoulas: Good morning. After a fabulous weekend of football grand finals, 6 00:00:24,270 --> 00:00:25,709 Stephen Koukoulas: what a way to kick off a new week. 7 00:00:26,189 --> 00:00:28,709 Jennifer Duke: That is true. But last week was a massive one, 8 00:00:28,710 --> 00:00:30,450 Jennifer Duke: and I first of all want to talk to you 9 00:00:30,450 --> 00:00:33,689 Jennifer Duke: about the inflation figures because things got pretty heated online 10 00:00:33,690 --> 00:00:35,400 Jennifer Duke: for you last week. Can you talk us through what 11 00:00:35,400 --> 00:00:36,390 Jennifer Duke: happened with that data? 12 00:00:36,720 --> 00:00:40,290 Stephen Koukoulas: Yes. The inflation numbers did show a little bit of 13 00:00:40,290 --> 00:00:43,560 Stephen Koukoulas: an upturn in the annual inflation rating. It was 4. 14 00:00:43,860 --> 00:00:46,979 Stephen Koukoulas: 9% in the year to July. The August numbers showed 15 00:00:46,979 --> 00:00:50,280 Stephen Koukoulas: an increase to 5. 2%, which was actually pretty much 16 00:00:50,280 --> 00:00:54,359 Stephen Koukoulas: bang on market expectations because we know oil prices, petrol 17 00:00:54,360 --> 00:00:58,140 Stephen Koukoulas: prices increased by about 9% in the month. So there were no 18 00:00:58,140 --> 00:01:02,010 Stephen Koukoulas: surprises there. All I was alluding to is that first 19 00:01:02,010 --> 00:01:05,639 Stephen Koukoulas: of all, that on any economic or even market trend, 20 00:01:05,639 --> 00:01:07,950 Stephen Koukoulas: it's not a straight line month after month after month, 21 00:01:07,950 --> 00:01:10,199 Stephen Koukoulas: going the same direction. There's always zigs and zags, but 22 00:01:10,199 --> 00:01:12,990 Stephen Koukoulas: the trend is still very much for lower inflation, so 23 00:01:12,990 --> 00:01:15,540 Stephen Koukoulas: don't get too upset about it. Then the other thing, 24 00:01:15,540 --> 00:01:17,970 Stephen Koukoulas: which had a few people hot under the collar, let's 25 00:01:17,970 --> 00:01:22,440 Stephen Koukoulas: say, because inflation picked up you silly clown, is that would an 26 00:01:22,860 --> 00:01:26,490 Stephen Koukoulas: RBA rate hike really force the Saudis to increase their 27 00:01:26,490 --> 00:01:28,770 Stephen Koukoulas: production of oil to push the oil price down? The 28 00:01:28,770 --> 00:01:32,310 Stephen Koukoulas: short answer is no. For anybody as old as me 29 00:01:32,310 --> 00:01:35,220 Stephen Koukoulas: or has studied what happened in the mid- seventies oil 30 00:01:35,220 --> 00:01:38,970 Stephen Koukoulas: price shock is that central banks shouldn't be hiking interest 31 00:01:38,970 --> 00:01:42,149 Stephen Koukoulas: rates in response to something that are not interest rate 32 00:01:42,150 --> 00:01:46,590 Stephen Koukoulas: sensitive. In Australia, we've learned that with cyclones impacting banana 33 00:01:46,590 --> 00:01:51,870 Stephen Koukoulas: prices, floods impacting lettuce prices, and now globally oil prices. 34 00:01:51,960 --> 00:01:54,000 Stephen Koukoulas: Yes, look, it's feeding into inflation. There's no doubt about 35 00:01:54,000 --> 00:01:56,370 Stephen Koukoulas: that. It is. However, just as quickly as the oil 36 00:01:56,370 --> 00:02:00,059 Stephen Koukoulas: price has gone from $ 70 a barrel to $ 90, $ 95 37 00:02:00,059 --> 00:02:02,280 Stephen Koukoulas: a barrel, it could easily come back down. Wouldn't you 38 00:02:02,280 --> 00:02:04,350 Stephen Koukoulas: look silly as a central banker if you hiked interest 39 00:02:04,350 --> 00:02:04,591 Stephen Koukoulas: rates if that happened? 40 00:02:04,591 --> 00:02:08,190 Jennifer Duke: It's a very good point. Now, we also had a lot 41 00:02:08,190 --> 00:02:10,140 Jennifer Duke: of other data out last week that I think the RBA will be 42 00:02:10,380 --> 00:02:12,510 Jennifer Duke: looking at pretty closely as well. Can you go through 43 00:02:12,510 --> 00:02:13,920 Jennifer Duke: what some of those statistics were? 44 00:02:15,000 --> 00:02:16,980 Stephen Koukoulas: Yes, and they were really important data and they were 45 00:02:16,980 --> 00:02:20,099 Stephen Koukoulas: generally weak. So that fits with the story, just putting 46 00:02:20,099 --> 00:02:23,788 Stephen Koukoulas: the month on month volatility inflation aside, goodness me. But 47 00:02:23,788 --> 00:02:26,820 Stephen Koukoulas: we had weakness coming through in job vacancies, obviously a 48 00:02:26,820 --> 00:02:31,049 Stephen Koukoulas: really important leading indicator for future employment trends. The ABS 49 00:02:31,050 --> 00:02:34,829 Stephen Koukoulas: measure fell actually 9% in the three months to August, 50 00:02:34,830 --> 00:02:37,169 Stephen Koukoulas: so it was a very big decline, and it's down 51 00:02:37,258 --> 00:02:41,219 Stephen Koukoulas: 18% from the peak 15 months ago. So, demand for 52 00:02:41,219 --> 00:02:43,380 Stephen Koukoulas: labor is starting to cool in line with the weakening 53 00:02:43,380 --> 00:02:46,470 Stephen Koukoulas: in the economy. That goes without saying I think, but 54 00:02:46,470 --> 00:02:50,130 Stephen Koukoulas: it's nice to see these trends confirmed in the economic 55 00:02:50,130 --> 00:02:53,160 Stephen Koukoulas: slowdown. The other thing was retail sales, which came in 56 00:02:53,160 --> 00:02:55,649 Stephen Koukoulas: at only plus 0. 2% for the month. People were 57 00:02:55,830 --> 00:02:57,660 Stephen Koukoulas: thinking that it might've been a bit of a higher 58 00:02:57,660 --> 00:03:01,170 Stephen Koukoulas: number. The Matildas football team, there's lots of spending on 59 00:03:01,530 --> 00:03:05,940 Stephen Koukoulas: paraphernalia, scarves, hats and eating out and celebrating their fantastic 60 00:03:05,940 --> 00:03:09,540 Stephen Koukoulas: performance through the World Cup, but alas it was only a 0. 61 00:03:09,540 --> 00:03:12,450 Stephen Koukoulas: 2% increase. If we look at things like food spending, 62 00:03:12,450 --> 00:03:15,988 Stephen Koukoulas: it actually went down in the month. So it's really 63 00:03:16,139 --> 00:03:18,719 Stephen Koukoulas: a sign that consumers are continuing to hunker down, if 64 00:03:18,750 --> 00:03:21,750 Stephen Koukoulas: you like, responding to cost of living pressures, higher interest 65 00:03:21,750 --> 00:03:24,720 Stephen Koukoulas: rates, and even the early signs of a turning point 66 00:03:24,720 --> 00:03:27,030 Stephen Koukoulas: in the labor market by paring back their spending. So 67 00:03:27,389 --> 00:03:31,380 Stephen Koukoulas: inflation blipped up, economic growth continued to weaken, and that's 68 00:03:31,380 --> 00:03:34,409 Stephen Koukoulas: the run rate for the economy for last week. 69 00:03:35,190 --> 00:03:37,560 Jennifer Duke: We've also obviously got that Reserve Bank meeting coming up 70 00:03:37,560 --> 00:03:39,780 Jennifer Duke: this week. What's your expectation of what they might do? 71 00:03:40,710 --> 00:03:44,070 Stephen Koukoulas: Yes, RBA, no change, I think that's pretty much locked 72 00:03:44,070 --> 00:03:47,580 Stephen Koukoulas: in. The evolution of events since their last meeting, which 73 00:03:47,580 --> 00:03:49,740 Stephen Koukoulas: they held rates steady. In fact, the last three meetings 74 00:03:49,740 --> 00:03:51,899 Stephen Koukoulas: that they've held rates steady has been, just as we 75 00:03:51,900 --> 00:03:54,599 Stephen Koukoulas: said, the economy's slowing, so it had to slow down 76 00:03:54,600 --> 00:03:57,990 Stephen Koukoulas: in one sense. So the RBA would be content to 77 00:03:57,990 --> 00:04:01,200 Stephen Koukoulas: see the growth momentum of the economy panning out pretty 78 00:04:01,200 --> 00:04:03,839 Stephen Koukoulas: much as expected. Look, they'd be looking at the commodity 79 00:04:03,840 --> 00:04:06,960 Stephen Koukoulas: price, the oil price, blip in inflation, and they'll be 80 00:04:06,960 --> 00:04:09,000 Stephen Koukoulas: canvassing what that means. I think that'll be a very 81 00:04:09,000 --> 00:04:12,359 Stephen Koukoulas: important paragraph in their statement that comes out after their 82 00:04:12,360 --> 00:04:15,630 Stephen Koukoulas: meeting. So to see just how they're interpreting the oil 83 00:04:15,630 --> 00:04:20,400 Stephen Koukoulas: price move of the last few months. But, no change. 84 00:04:20,610 --> 00:04:22,169 Stephen Koukoulas: They'll probably have the bias if there is a move 85 00:04:22,170 --> 00:04:23,729 Stephen Koukoulas: in the next few months, it'll be up, not down, 86 00:04:23,730 --> 00:04:29,310 Stephen Koukoulas: that sort of title cliche. But there's really no change 87 00:04:29,459 --> 00:04:33,330 Stephen Koukoulas: expected. The economy's weakening, and yes, there's already, as they 88 00:04:33,330 --> 00:04:36,390 Stephen Koukoulas: keep saying, the yet to be felt effects of the 89 00:04:36,480 --> 00:04:37,860 Stephen Koukoulas: rate hikes that they've already delivered. 90 00:04:38,610 --> 00:04:41,460 Jennifer Duke: And what other data reports are we expecting to see 91 00:04:41,460 --> 00:04:41,969 Jennifer Duke: over the week? 92 00:04:42,900 --> 00:04:45,089 Stephen Koukoulas: Yeah, good news. Again, we're going to get a little 93 00:04:45,089 --> 00:04:48,270 Stephen Koukoulas: bit more information on how this economy's going. House prices, 94 00:04:48,270 --> 00:04:51,330 Stephen Koukoulas: the CoreLogic numbers come out. They will almost inevitably show 95 00:04:51,330 --> 00:04:55,980 Stephen Koukoulas: an increase of about 1%, another 1% monthly increase in 96 00:04:55,980 --> 00:04:58,289 Stephen Koukoulas: house prices in the month of September. We know from 97 00:04:58,290 --> 00:05:02,759 Stephen Koukoulas: their partial data that Sydney, Adelaide and Perth are increasing 98 00:05:02,759 --> 00:05:05,010 Stephen Koukoulas: by more than that, about 1. 25% percent. So that's 99 00:05:05,010 --> 00:05:08,040 Stephen Koukoulas: a really hefty increase in house prices. Melbourne is lagging 100 00:05:08,040 --> 00:05:10,080 Stephen Koukoulas: a bit. Hobart and Canberra a little bit weaker too. But 101 00:05:10,350 --> 00:05:13,860 Stephen Koukoulas: bottom line, nationwide prices up about 1%. That's good old 102 00:05:13,860 --> 00:05:16,980 Stephen Koukoulas: supply and demand coming into play. We've got building approvals 103 00:05:16,980 --> 00:05:19,830 Stephen Koukoulas: numbers, and speaking of which, we need more supply. That's 104 00:05:19,830 --> 00:05:22,199 Stephen Koukoulas: something that we've spoken about, Jen, in the last few 105 00:05:22,199 --> 00:05:26,550 Stephen Koukoulas: weeks, that if we tackle this house price affordability, house 106 00:05:26,550 --> 00:05:30,990 Stephen Koukoulas: rental affordability, we need more buildings. So we're hoping that 107 00:05:30,990 --> 00:05:33,839 Stephen Koukoulas: we get a pickup in building approvals because we need 108 00:05:33,839 --> 00:05:36,988 Stephen Koukoulas: more dwellings. The supply's got to increase. I think the market's looking for 109 00:05:37,139 --> 00:05:39,569 Stephen Koukoulas: a small increase, but any increase is a good one 110 00:05:39,570 --> 00:05:42,630 Stephen Koukoulas: at this stage. We've also got job ads, again, probably 111 00:05:42,630 --> 00:05:45,779 Stephen Koukoulas: consistent with the job vacancy series. There's slightly different coverage 112 00:05:45,779 --> 00:05:50,040 Stephen Koukoulas: in those two series, probably trending lower again. Really importantly, 113 00:05:50,490 --> 00:05:54,479 Stephen Koukoulas: on Friday, we have the RBA releasing their financial stability 114 00:05:54,480 --> 00:05:58,469 Stephen Koukoulas: report, which is an assessment of the financial health of 115 00:05:58,469 --> 00:06:01,349 Stephen Koukoulas: the household sector. Obviously, that's probably going to be flagging 116 00:06:01,710 --> 00:06:05,339 Stephen Koukoulas: some negative aspects as this cost of living pressures increase. 117 00:06:05,460 --> 00:06:08,188 Stephen Koukoulas: Is there any material increase in provisioning for bad and 118 00:06:08,190 --> 00:06:11,190 Stephen Koukoulas: doubtful debts of people falling behind in their ePayments? But 119 00:06:11,190 --> 00:06:13,529 Stephen Koukoulas: it also looks at the small and big business sector 120 00:06:13,529 --> 00:06:16,500 Stephen Koukoulas: too, because of course they're suffering from the economic slowdown. 121 00:06:16,830 --> 00:06:21,360 Stephen Koukoulas: Indeed, many businesses have borrowing debt, overdrafts, and they're paying 122 00:06:21,360 --> 00:06:23,490 Stephen Koukoulas: a higher interest rate as well. So that'll be more 123 00:06:23,490 --> 00:06:27,120 Stephen Koukoulas: of one to mull over, over a few days rather 124 00:06:27,120 --> 00:06:29,549 Stephen Koukoulas: than an instant effect on the economy. But a lot 125 00:06:29,550 --> 00:06:31,440 Stephen Koukoulas: of news coming out this week after a lot of 126 00:06:31,440 --> 00:06:32,190 Stephen Koukoulas: news last week. 127 00:06:32,910 --> 00:06:35,279 Jennifer Duke: Yeah, it's a big one after a long weekend. Stephen, 128 00:06:35,279 --> 00:06:36,150 Jennifer Duke: have a great week. 129 00:06:36,600 --> 00:06:37,710 Stephen Koukoulas: Thanks, Jen. All the best to you too. 130 00:06:37,710 --> 00:06:41,670 Jennifer Duke: That was economist Stephen Koukoulas, better known as The Kouk. 131 00:06:41,790 --> 00:06:44,130 Jennifer Duke: You can find him at thekouk. com and follow him 132 00:06:44,130 --> 00:06:47,428 Jennifer Duke: on X using the handle TheKouk. I'm Jennifer Duke, economics 133 00:06:47,428 --> 00:06:49,950 Jennifer Duke: correspondent at Capital Brief, and this is Fear and Greed - 134 00:06:49,950 --> 00:06:50,580 Jennifer Duke: The Week Ahead.