1 00:00:05,340 --> 00:00:07,800 Sean Aylmer: Welcome to Fear & Greed - The Week Ahead. I'm Sean Aylmer, 2 00:00:07,830 --> 00:00:10,650 Sean Aylmer: and as always I'm joined by economist, Stephen Koukoulas. You'll 3 00:00:10,650 --> 00:00:13,318 Sean Aylmer: find him at thekouk. com, T- H- E- K- O- U- 4 00:00:13,320 --> 00:00:16,829 Sean Aylmer: K, thekouk. com, and on X using the handle, TheKouk. 5 00:00:16,829 --> 00:00:17,759 Sean Aylmer: Stephen, good morning. 6 00:00:18,239 --> 00:00:19,350 Stephen Koukoulas: Very good morning to you, Sean. 7 00:00:19,680 --> 00:00:21,600 Sean Aylmer: Now I've known you for many years. I've never called 8 00:00:21,600 --> 00:00:23,700 Sean Aylmer: you The Kouk. You're always just Stephen to me. 9 00:00:24,120 --> 00:00:27,210 Stephen Koukoulas: Yeah, well The Kouk came about, obviously it's short for Koukoulas and it 10 00:00:27,270 --> 00:00:29,550 Stephen Koukoulas: was my daughter that sort of gave me that christening 11 00:00:29,550 --> 00:00:32,880 Stephen Koukoulas: some time ago. So when I set up my email 12 00:00:32,880 --> 00:00:36,300 Stephen Koukoulas: address when I was living in London, it was stephen@thekouk and it sort of 13 00:00:36,330 --> 00:00:41,159 Stephen Koukoulas: stuck and I thought, " Well that's a cheeky and funny and takes 14 00:00:41,159 --> 00:00:43,500 Stephen Koukoulas: the tone down a bit from being too serious about 15 00:00:43,500 --> 00:00:45,570 Stephen Koukoulas: the economy even though it's a very serious topic." 16 00:00:45,990 --> 00:00:49,409 Sean Aylmer: It is. It is. Although last week's labor force numbers 17 00:00:49,409 --> 00:00:52,289 Sean Aylmer: were just a little bit cheeky, I would hazard a guess. 18 00:00:52,320 --> 00:00:55,260 Stephen Koukoulas: Yeah, look, they were sort of in that groove. They 19 00:00:55,350 --> 00:00:57,900 Stephen Koukoulas: didn't cause financial markets to move when they came out. 20 00:00:57,900 --> 00:01:00,120 Stephen Koukoulas: To me, that's always a bit of an indicator of 21 00:01:00,120 --> 00:01:04,200 Stephen Koukoulas: just how strong, weak or indifferent they were. So 40, 000 22 00:01:04,200 --> 00:01:06,929 Stephen Koukoulas: jobs created in the month, which is good. And I 23 00:01:06,929 --> 00:01:09,719 Stephen Koukoulas: think my friends at Commonwealth Bank Economics Department who do 24 00:01:09,719 --> 00:01:13,620 Stephen Koukoulas: some great research, they've actually calculated that you need or 25 00:01:13,620 --> 00:01:18,390 Stephen Koukoulas: Australia needs 35 to 40,000 jobs per month to keep 26 00:01:18,390 --> 00:01:21,928 Stephen Koukoulas: the unemployment rate broadly steady, given the very strong lift 27 00:01:21,929 --> 00:01:24,569 Stephen Koukoulas: in population growth that we've got. Lo and behold, we've 28 00:01:24,569 --> 00:01:27,479 Stephen Koukoulas: got the 40,000 jobs and at the second decimal point, 29 00:01:27,480 --> 00:01:30,300 Stephen Koukoulas: we rounded down the unemployment rate from 4. 1 to 4.0. 30 00:01:30,300 --> 00:01:35,040 Stephen Koukoulas: So look, you take that, given how weak the economy's 31 00:01:35,040 --> 00:01:37,500 Stephen Koukoulas: been, and I think last week we discussed those pretty 32 00:01:37,500 --> 00:01:42,509 Stephen Koukoulas: soggy GDP retail sales numbers. So in a way it 33 00:01:42,509 --> 00:01:44,790 Stephen Koukoulas: was a pleasant surprise that it wasn't worse. 34 00:01:45,539 --> 00:01:47,188 Sean Aylmer: Right- o. This week, what have we got? The Reserve 35 00:01:47,190 --> 00:01:48,600 Sean Aylmer: Bank board meeting. It's a big one. 36 00:01:49,080 --> 00:01:52,800 Stephen Koukoulas: Yeah, so tomorrow, 2: 30 Sydney time, they announce their 37 00:01:52,800 --> 00:01:55,200 Stephen Koukoulas: decision on interest rates. They now have 2 day meetings, 38 00:01:55,440 --> 00:01:59,669 Stephen Koukoulas: well this afternoon, Monday afternoon that carries over into Tuesday 39 00:01:59,670 --> 00:02:03,119 Stephen Koukoulas: with the announced at 2:30 and the Governor, Michele Bullock, she's going 40 00:02:03,120 --> 00:02:06,119 Stephen Koukoulas: to give a press conference about an hour after the 41 00:02:06,510 --> 00:02:10,500 Stephen Koukoulas: announcement's made public. Nobody that I'm aware of is expecting 42 00:02:10,500 --> 00:02:12,990 Stephen Koukoulas: a change. The money markets have got about a 0% 43 00:02:13,440 --> 00:02:15,690 Stephen Koukoulas: chance of rates going up, down or anywhere else, so 44 00:02:15,690 --> 00:02:18,419 Stephen Koukoulas: just sideways. So in a sense that might sound a 45 00:02:18,419 --> 00:02:22,919 Stephen Koukoulas: bit ho- hum, a bit oh god. Not a lot of excitement on a no 46 00:02:22,919 --> 00:02:27,360 Stephen Koukoulas: change decision, but, that's a really important but, a lot 47 00:02:27,360 --> 00:02:29,400 Stephen Koukoulas: has happened since the last meeting. As we just sort 48 00:02:29,400 --> 00:02:34,049 Stephen Koukoulas: of said, we've got disappointing GDP numbers, that inflation rate 49 00:02:34,110 --> 00:02:36,599 Stephen Koukoulas: ticked up. Oh last week, we had the US Federal 50 00:02:36,599 --> 00:02:40,859 Stephen Koukoulas: Reserve leaving interest rates steady but still anticipating lower rates 51 00:02:41,038 --> 00:02:43,410 Stephen Koukoulas: later rather than sooner in the US. That was an 52 00:02:43,410 --> 00:02:46,230 Stephen Koukoulas: important indicator. And so all of those sort of things 53 00:02:46,230 --> 00:02:49,380 Stephen Koukoulas: will go into the analysis that the bank will put 54 00:02:49,380 --> 00:02:51,510 Stephen Koukoulas: out and the questioning that I'm sure Michele Bullock will 55 00:02:51,510 --> 00:02:55,380 Stephen Koukoulas: get at the press conference afterwards. Just how weak will 56 00:02:55,380 --> 00:02:58,619 Stephen Koukoulas: the economy be before (inaudible) going up, before inflation 57 00:02:58,619 --> 00:03:02,250 Stephen Koukoulas: comes down. So that wonderful linkage between different parts of 58 00:03:02,250 --> 00:03:05,010 Stephen Koukoulas: the economy will be what we economists will be looking 59 00:03:05,010 --> 00:03:09,540 Stephen Koukoulas: at for clues on whether rates are going down, up, steady 60 00:03:09,540 --> 00:03:12,779 Stephen Koukoulas: for another few months and when and how much they might change by. 61 00:03:13,349 --> 00:03:15,179 Sean Aylmer: How much do you think that the Reserve Bank cares 62 00:03:15,179 --> 00:03:18,809 Sean Aylmer: about what happens in the US and then other places 63 00:03:18,810 --> 00:03:22,200 Sean Aylmer: like the European Central Bank and Bank of Canada? Last 64 00:03:22,200 --> 00:03:25,828 Sean Aylmer: week, of course, we had the mean pretty good inflation 65 00:03:25,830 --> 00:03:28,018 Sean Aylmer: figures really for the month of May, but the Fed 66 00:03:28,020 --> 00:03:30,479 Sean Aylmer: then became a little more hawkish about when rates were 67 00:03:30,480 --> 00:03:31,320 Sean Aylmer: going to be cut. 68 00:03:32,219 --> 00:03:34,439 Stephen Koukoulas: And just recently, as you were just alerting to, the 69 00:03:34,440 --> 00:03:37,410 Stephen Koukoulas: European Central Bank and the Bank of Canada have both started their rate 70 00:03:37,860 --> 00:03:41,460 Stephen Koukoulas: cutting cycles and we had the Deputy Governor, Andrew Hauser, 71 00:03:41,460 --> 00:03:45,090 Stephen Koukoulas: who's the recently appointed Deputy Governor of the RBA. So 72 00:03:45,090 --> 00:03:47,849 Stephen Koukoulas: he's, with all due respect, finding his feet and all 73 00:03:47,849 --> 00:03:49,830 Stephen Koukoulas: the rest of it and he gave a very good 74 00:03:49,830 --> 00:03:52,319 Stephen Koukoulas: speech, a little chat, I think it was, oh, I 75 00:03:52,350 --> 00:03:54,149 Stephen Koukoulas: can't remember the date, about a week or 10 days ago. 76 00:03:54,149 --> 00:03:59,430 Stephen Koukoulas: And he said that those developments in the international economy 77 00:03:59,700 --> 00:04:02,880 Stephen Koukoulas: won't sway the Reserve Bank. But then on the other 78 00:04:02,880 --> 00:04:06,300 Stephen Koukoulas: hand, what's happening in global economy does impact Australia and 79 00:04:06,300 --> 00:04:08,639 Stephen Koukoulas: therefore what the Reserve Bank says. So I think it was 80 00:04:08,639 --> 00:04:11,309 Stephen Koukoulas: a roundabout way of he is Deputy Governor of the 81 00:04:11,309 --> 00:04:15,030 Stephen Koukoulas: bank saying, " Look, just because the Europeans and the Canadians 82 00:04:15,030 --> 00:04:19,470 Stephen Koukoulas: have started cutting interest rates, we don't automatically follow the 83 00:04:19,470 --> 00:04:24,719 Stephen Koukoulas: direction." However, if they're cutting because growth is weak, inflation's 84 00:04:24,719 --> 00:04:28,800 Stephen Koukoulas: falling, the US joins them in September, October, November- ish 85 00:04:28,980 --> 00:04:31,380 Stephen Koukoulas: with a rate cut. And then we get our friends 86 00:04:31,380 --> 00:04:35,160 Stephen Koukoulas: in New Zealand possibly cutting interest rates, the UK possibly 87 00:04:35,160 --> 00:04:38,039 Stephen Koukoulas: cutting interest rates. They had disappointing labor market numbers last 88 00:04:38,040 --> 00:04:40,559 Stephen Koukoulas: week too. Then we are going to be part of 89 00:04:40,559 --> 00:04:44,070 Stephen Koukoulas: the global story, not that we're following central banks, we're 90 00:04:44,070 --> 00:04:45,570 Stephen Koukoulas: going to be part of the global story where growth 91 00:04:45,570 --> 00:04:48,719 Stephen Koukoulas: is weak and inflation is coming down. So we think 92 00:04:48,720 --> 00:04:52,650 Stephen Koukoulas: about the rate hiking cycle from late 2021 to, what 93 00:04:52,650 --> 00:04:56,099 Stephen Koukoulas: was it? The middle of 2023. We didn't move in 94 00:04:56,099 --> 00:04:57,719 Stephen Koukoulas: lockstep with the other central banks, but when they were 95 00:04:57,719 --> 00:05:00,390 Stephen Koukoulas: putting up, we put them up too. Not as much in 96 00:05:00,570 --> 00:05:02,910 Stephen Koukoulas: some instances, a little bit later, or a little bit 97 00:05:02,910 --> 00:05:05,639 Stephen Koukoulas: sooner than other central banks. So what happens to the 98 00:05:05,639 --> 00:05:07,500 Stephen Koukoulas: global economy does matter to us. 99 00:05:08,160 --> 00:05:10,320 Sean Aylmer: It's going to be a fascinating few months, Stephen. I 100 00:05:10,320 --> 00:05:12,360 Sean Aylmer: mean we have an election cycle coming in too. We 101 00:05:12,360 --> 00:05:13,469 Sean Aylmer: don't know when that is. It has to be done 102 00:05:13,470 --> 00:05:16,919 Sean Aylmer: by May next year. We have the US elections. We 103 00:05:16,920 --> 00:05:19,560 Sean Aylmer: certainly, I think most people would agree, the next move 104 00:05:20,309 --> 00:05:22,709 Sean Aylmer: in rates in the US will be down, and in 105 00:05:22,709 --> 00:05:25,050 Sean Aylmer: all likelihood in Australia will be down. It's just a 106 00:05:25,050 --> 00:05:29,790 Sean Aylmer: fascinating little period. The politics and economic cycles running together 107 00:05:29,790 --> 00:05:30,060 Sean Aylmer: a bit. 108 00:05:30,450 --> 00:05:32,130 Stephen Koukoulas: They are, and they're running in the UK too because 109 00:05:32,130 --> 00:05:35,339 Stephen Koukoulas: it's election (inaudible) . Of course, the conservatives are in 110 00:05:35,700 --> 00:05:39,928 Stephen Koukoulas: deep trouble. I think they're going to lose pretty comfortably 111 00:05:39,928 --> 00:05:42,479 Stephen Koukoulas: so it seems. Whereas in the US, it's as far 112 00:05:42,480 --> 00:05:44,400 Stephen Koukoulas: as I can tell from the polls, it's line ball. 113 00:05:45,810 --> 00:05:48,660 Stephen Koukoulas: Here, I think we had a news poll last week, 50- 114 00:05:48,690 --> 00:05:51,450 Stephen Koukoulas: 50 or thereabouts, and of course a year's a long 115 00:05:51,450 --> 00:05:55,139 Stephen Koukoulas: time to next election and things could change very, very rapidly. 116 00:05:55,139 --> 00:06:00,359 Stephen Koukoulas: So economics does matter in politics that, I think it 117 00:06:00,359 --> 00:06:01,920 Stephen Koukoulas: was Paul Keating who says, " If you get the economy 118 00:06:01,920 --> 00:06:05,010 Stephen Koukoulas: right, people will reelect you." If you're the incumbent and 119 00:06:05,010 --> 00:06:08,279 Stephen Koukoulas: you've got a job, you're getting rising wages, the budget's 120 00:06:08,279 --> 00:06:10,948 Stephen Koukoulas: in decent shape. People will say, " Oh you guys, whoever 121 00:06:10,950 --> 00:06:13,678 Stephen Koukoulas: it is, labor, liberal, liberal, labor, whatever, you've done a 122 00:06:13,678 --> 00:06:15,869 Stephen Koukoulas: pretty good job. I'm feeling okay, so I've going to 123 00:06:15,870 --> 00:06:20,070 Stephen Koukoulas: reelect you." Whereas if you're presiding over recessions and falling 124 00:06:20,070 --> 00:06:23,729 Stephen Koukoulas: living standards, the electorate's going to blame someone and inevitably 125 00:06:24,089 --> 00:06:25,110 Stephen Koukoulas: it's the incumbent government. 126 00:06:25,529 --> 00:06:26,700 Sean Aylmer: Fair enough. Stephen, enjoy your week. 127 00:06:27,000 --> 00:06:27,960 Stephen Koukoulas: Will do. Thanks Sean. 128 00:06:28,349 --> 00:06:30,779 Sean Aylmer: That was economist, Stephen Koukoulas, better known as The Kouk. You can 129 00:06:30,779 --> 00:06:33,149 Sean Aylmer: find him at thekouk. com and follow him on X 130 00:06:33,389 --> 00:06:36,479 Sean Aylmer: using the handle, TheKouk. I'm Sean Aylmer and this is Fear & Greed - The 131 00:06:36,480 --> 00:06:36,960 Sean Aylmer: Week Ahead.