1 00:00:03,960 --> 00:00:06,720 Jennifer Duke: Welcome to the Fear and Greed Daily Interview. I'm Jennifer 2 00:00:06,720 --> 00:00:10,679 Jennifer Duke: Duke. As Australia's largest bank, Commonwealth Bank already has an 3 00:00:10,679 --> 00:00:13,889 Jennifer Duke: incredible insight into the real economy. That's where and how 4 00:00:13,889 --> 00:00:16,589 Jennifer Duke: we earn, spend, and save our money. When it comes 5 00:00:16,590 --> 00:00:20,430 Jennifer Duke: to consumer activity, those insights just became even more accurate 6 00:00:20,460 --> 00:00:23,579 Jennifer Duke: with the launch of the improved CommBank Household Spending Intentions 7 00:00:23,579 --> 00:00:27,270 Jennifer Duke: Index. Stephen Halmarick is Chief Economist for the Commonwealth Bank. 8 00:00:27,630 --> 00:00:30,630 Jennifer Duke: He's been leading the charge on this new dataset. Stephen, 9 00:00:30,630 --> 00:00:31,890 Jennifer Duke: welcome back to Fear and Greed. 10 00:00:32,519 --> 00:00:34,409 Stephen Halmarick: Thanks very much. Very good to be with you again. 11 00:00:34,889 --> 00:00:36,870 Jennifer Duke: Can you start with the basics for us? Why are 12 00:00:36,870 --> 00:00:39,390 Jennifer Duke: household spending intentions so important? 13 00:00:39,900 --> 00:00:43,440 Stephen Halmarick: Well, household spending is the largest part of the economy. 14 00:00:43,440 --> 00:00:47,790 Stephen Halmarick: Consumer spending is around 50% of the Australian economy, so 15 00:00:47,790 --> 00:00:51,839 Stephen Halmarick: really important to understand what consumers are doing, how much 16 00:00:51,839 --> 00:00:54,719 Stephen Halmarick: money they're spending, what they're spending their money on if 17 00:00:54,720 --> 00:00:57,690 Stephen Halmarick: we want to understand what's happening in the broader Australian 18 00:00:57,690 --> 00:01:01,890 Stephen Halmarick: economy. Of course, that also helps us forecast things like 19 00:01:02,250 --> 00:01:04,410 Stephen Halmarick: what the Reserve Bank might be doing with monetary policy. 20 00:01:08,069 --> 00:01:08,190 Jennifer Duke: Where do you get all of this data from? 21 00:01:08,190 --> 00:01:13,470 Stephen Halmarick: The data is from approximately 7 million Commonwealth Bank customers. 22 00:01:13,980 --> 00:01:19,230 Stephen Halmarick: That's roughly 30% of all consumer transactions in Australia. Really 23 00:01:19,230 --> 00:01:22,619 Stephen Halmarick: importantly, the data is de- identified. We meet all the 24 00:01:22,650 --> 00:01:27,690 Stephen Halmarick: privacy and regulatory requirements. But it's all internally generated data 25 00:01:28,109 --> 00:01:32,220 Stephen Halmarick: from things like credit card spending, debit card spending, keypad 26 00:01:32,220 --> 00:01:38,250 Stephen Halmarick: transactions, BPAY, ATM, direct debit. It's a very comprehensive data set. 27 00:01:39,300 --> 00:01:41,880 Jennifer Duke: You've obviously got a lot of data products already. How 28 00:01:41,880 --> 00:01:44,190 Jennifer Duke: does this new one fit into the mix of that 29 00:01:44,190 --> 00:01:45,030 Jennifer Duke: suite of products? 30 00:01:46,139 --> 00:01:50,010 Stephen Halmarick: We're actually calling this one the CommBank Household Spending Insights 31 00:01:50,280 --> 00:01:56,010 Stephen Halmarick: Report. It replaces the previous Household Spending Intentions. The key 32 00:01:56,010 --> 00:02:02,130 Stephen Halmarick: change here is we have really upgraded the statistical robustness, 33 00:02:02,130 --> 00:02:05,729 Stephen Halmarick: if I can say that, of the series. All the 34 00:02:05,730 --> 00:02:09,900 Stephen Halmarick: data is census weighted to be nationally represented of Australia. 35 00:02:10,380 --> 00:02:13,650 Stephen Halmarick: We take out the skew of market share changes that 36 00:02:13,650 --> 00:02:16,260 Stephen Halmarick: we might have or parts of the population we may have 37 00:02:16,260 --> 00:02:20,369 Stephen Halmarick: a higher or lower... that bank with us. Also, the 38 00:02:20,370 --> 00:02:24,240 Stephen Halmarick: data is now all seasonally adjusted. People who are used 39 00:02:24,240 --> 00:02:27,480 Stephen Halmarick: to looking at Australian Bureau of Statistics data... We usually 40 00:02:27,480 --> 00:02:30,029 Stephen Halmarick: always look at the seasonally adjusted numbers. Now, we're seasonally 41 00:02:30,030 --> 00:02:34,260 Stephen Halmarick: adjusting all the data. It's representative of the Australian population. 42 00:02:34,620 --> 00:02:39,209 Stephen Halmarick: It's seasonally adjusted, all de- identified. We're looking at 12 43 00:02:39,240 --> 00:02:44,850 Stephen Halmarick: different spending categories, which align with the ABS definitions and 44 00:02:44,850 --> 00:02:49,080 Stephen Halmarick: categories as well. It's very much aligned with the type 45 00:02:49,080 --> 00:02:51,540 Stephen Halmarick: of data that people would be used to seeing. But 46 00:02:51,540 --> 00:02:54,269 Stephen Halmarick: it's a very large data set. It comes very quickly. 47 00:02:55,139 --> 00:02:57,989 Jennifer Duke: Sounds like you've been very, very busy. Looking at that 48 00:02:57,990 --> 00:03:00,180 Jennifer Duke: July report as well, what does that tell us about 49 00:03:00,180 --> 00:03:01,680 Jennifer Duke: the state of the economy right now? 50 00:03:03,180 --> 00:03:05,160 Stephen Halmarick: For the month of July, which is the first month 51 00:03:05,160 --> 00:03:09,270 Stephen Halmarick: we've released under this new Household Spending Insights, spending on 52 00:03:09,270 --> 00:03:12,690 Stephen Halmarick: the month was actually unchanged. 0% change on the month 53 00:03:13,440 --> 00:03:17,549 Stephen Halmarick: relative to June. We could see there was increases in 54 00:03:17,549 --> 00:03:21,210 Stephen Halmarick: spending on things like household goods and transport and hospitality, 55 00:03:21,630 --> 00:03:25,860 Stephen Halmarick: and education. They're offset by reductions in spending on things 56 00:03:25,860 --> 00:03:31,050 Stephen Halmarick: like household services, recreation, and utilities. But I think that 57 00:03:31,258 --> 00:03:34,079 Stephen Halmarick: the number we're really focused on is the annual percent 58 00:03:34,079 --> 00:03:39,120 Stephen Halmarick: change. July this year compared to July last year was up only 1. 59 00:03:39,120 --> 00:03:44,340 Stephen Halmarick: 3%. We have to remember that's in nominal dollars. After 60 00:03:44,340 --> 00:03:50,490 Stephen Halmarick: inflation, it's going backwards. That annual rate was running at 8. 61 00:03:50,820 --> 00:03:54,119 Stephen Halmarick: 3% in May last year when the Reserve Bank first 62 00:03:54,119 --> 00:04:00,600 Stephen Halmarick: started increasing interest rates and actually peaked at 18.7% in August- 63 00:04:01,770 --> 00:04:01,771 Jennifer Duke: Gosh. 64 00:04:01,771 --> 00:04:05,159 Stephen Halmarick: ... before all the interest rates rises had started to 65 00:04:05,160 --> 00:04:09,570 Stephen Halmarick: have an impact. Since August last year to July this 66 00:04:09,570 --> 00:04:13,380 Stephen Halmarick: year, the annual rate's gone from 18. 7% to 1. 3. 67 00:04:14,310 --> 00:04:17,760 Stephen Halmarick: That really shows the big impact of the 400 basis 68 00:04:17,760 --> 00:04:20,730 Stephen Halmarick: points of rate hikes from the RBA over the course 69 00:04:20,730 --> 00:04:21,599 Stephen Halmarick: of the last year or so. 70 00:04:22,650 --> 00:04:25,649 Jennifer Duke: Now, you mentioned the RBA. They only just released their 71 00:04:25,650 --> 00:04:28,650 Jennifer Duke: meeting minutes yesterday for the August meeting. What do you 72 00:04:28,650 --> 00:04:31,320 Jennifer Duke: think the RBA might make of your new data? What 73 00:04:31,320 --> 00:04:32,820 Jennifer Duke: does it mean for interest rates going forward? 74 00:04:33,510 --> 00:04:36,390 Stephen Halmarick: Well, our view is that the interest rate hiking cycle's 75 00:04:36,390 --> 00:04:41,040 Stephen Halmarick: now done. In hindsight, the June rate hike was the 76 00:04:41,040 --> 00:04:43,589 Stephen Halmarick: last one, having kept rates on hold in July and 77 00:04:43,589 --> 00:04:48,599 Stephen Halmarick: August. The minutes, we think, reinforces that. There was actually 78 00:04:48,600 --> 00:04:51,150 Stephen Halmarick: a section in there where the Reserve Bank said that, 79 00:04:51,720 --> 00:04:55,200 Stephen Halmarick: at the current cash rate, there was a credible path 80 00:04:55,200 --> 00:04:58,740 Stephen Halmarick: for inflation to return to target over a reasonable timeframe. 81 00:04:59,160 --> 00:05:03,779 Stephen Halmarick: They still are hinting at potentially another rate rise. But 82 00:05:03,960 --> 00:05:06,660 Stephen Halmarick: our view is that we've seen the last rate increase. 83 00:05:06,990 --> 00:05:11,100 Stephen Halmarick: The hurdle to another rate rise is quite high. Our 84 00:05:11,100 --> 00:05:15,448 Stephen Halmarick: Household Spending Insights Report... That big reduction in the annual 85 00:05:15,450 --> 00:05:19,950 Stephen Halmarick: rate of spending growth reinforces in our mind that the 86 00:05:19,950 --> 00:05:22,198 Stephen Halmarick: RBA can now hold the cash rate steady for an 87 00:05:22,199 --> 00:05:23,010 Stephen Halmarick: extended period. 88 00:05:23,549 --> 00:05:25,589 Jennifer Duke: Stay with me, Stephen. We'll be back in a minute. 89 00:05:31,950 --> 00:05:34,770 Jennifer Duke: I am speaking to Commonwealth Bank chief economist Stephen Halmarick. 90 00:05:35,639 --> 00:05:39,330 Jennifer Duke: Clearly, your insights report is very, very helpful for economists 91 00:05:39,330 --> 00:05:41,820 Jennifer Duke: who are looking to see where things are moving and 92 00:05:41,820 --> 00:05:44,909 Jennifer Duke: what's happening. But how can businesses use the information? What 93 00:05:44,910 --> 00:05:47,039 Jennifer Duke: about policymakers as well? 94 00:05:47,790 --> 00:05:50,820 Stephen Halmarick: As I mentioned, we have 12 separate categories. It's really, 95 00:05:50,820 --> 00:05:54,149 Stephen Halmarick: I think, interesting to see what people are spending more 96 00:05:54,150 --> 00:05:57,000 Stephen Halmarick: money on and what they're spending less money on. If 97 00:05:57,000 --> 00:05:58,948 Stephen Halmarick: you look at, again, the change over the year to 98 00:05:58,949 --> 00:06:02,610 Stephen Halmarick: July, some of the big increases in spending were on 99 00:06:02,610 --> 00:06:05,130 Stephen Halmarick: things we probably don't like spending a lot more money 100 00:06:05,130 --> 00:06:09,719 Stephen Halmarick: on. Number one was insurance: was up 13. 2%, education 101 00:06:09,719 --> 00:06:14,549 Stephen Halmarick: up 9%, health up 8%. But interestingly, recreation spending was 102 00:06:14,549 --> 00:06:20,010 Stephen Halmarick: still up 7.1%. It seems like Australians are still wanting to spend money 103 00:06:20,010 --> 00:06:23,219 Stephen Halmarick: on recreation but really going for the big- ticket items. 104 00:06:23,910 --> 00:06:27,510 Stephen Halmarick: We could see, in July, not surprisingly, a big increase 105 00:06:27,510 --> 00:06:30,089 Stephen Halmarick: in cinemas. That's the- 106 00:06:30,119 --> 00:06:30,149 Jennifer Duke: Barbenheimer. 107 00:06:31,500 --> 00:06:32,669 Stephen Halmarick: Barbenheimer effect. 108 00:06:33,660 --> 00:06:33,930 Jennifer Duke: Yeah. 109 00:06:34,020 --> 00:06:36,569 Stephen Halmarick: Also, there's some big events happening at the moment: as 110 00:06:36,570 --> 00:06:39,089 Stephen Halmarick: we all know, the FIFA World Cup. There was the 111 00:06:39,089 --> 00:06:44,250 Stephen Halmarick: Bledisloe Cup down in Melbourne. These bigger events... People still 112 00:06:44,250 --> 00:06:47,159 Stephen Halmarick: look like they're setting some money aside. But if we 113 00:06:47,160 --> 00:06:50,640 Stephen Halmarick: look at what spending has declined over the last year, 114 00:06:50,940 --> 00:06:55,320 Stephen Halmarick: household services... down a long way, down nearly 8%, transport 115 00:06:55,320 --> 00:07:00,330 Stephen Halmarick: down 6%, household goods down 5. 4%. We're spending less 116 00:07:00,330 --> 00:07:03,750 Stephen Halmarick: money on those things into the house, both services and 117 00:07:03,750 --> 00:07:06,779 Stephen Halmarick: goods, and having to spend more money on things like 118 00:07:06,779 --> 00:07:10,319 Stephen Halmarick: insurance, education, and health with a little bit for some 119 00:07:10,320 --> 00:07:11,820 Stephen Halmarick: big ticket items on recreation. 120 00:07:12,330 --> 00:07:15,660 Jennifer Duke: I do love that people somehow managed to find the 121 00:07:15,660 --> 00:07:18,960 Jennifer Duke: space in their budget to go to the Matildas and 122 00:07:18,960 --> 00:07:22,710 Jennifer Duke: go and watch Barbie. It's brilliant. While I've got you, 123 00:07:22,710 --> 00:07:24,719 Jennifer Duke: can you take me through the wages data that came 124 00:07:24,719 --> 00:07:27,329 Jennifer Duke: out yesterday? Were there any surprises in those figures for you? 125 00:07:28,020 --> 00:07:31,199 Stephen Halmarick: Well, it was a touch lower than both our forecast and the 126 00:07:31,230 --> 00:07:34,080 Stephen Halmarick: consensus forecast. It came in at 0. 8% for the quarter 127 00:07:34,200 --> 00:07:39,000 Stephen Halmarick: against our forecast of 0. 9%. The annual rate really 128 00:07:39,000 --> 00:07:42,420 Stephen Halmarick: not accelerating. Actually, we've now had three quarters in a 129 00:07:42,420 --> 00:07:47,309 Stephen Halmarick: row of 0. 8%. There's not a lot of sign 130 00:07:47,309 --> 00:07:49,770 Stephen Halmarick: of a big acceleration in wages growth on that measure. 131 00:07:50,310 --> 00:07:54,060 Stephen Halmarick: But I would caution that this is the June quarter 132 00:07:54,060 --> 00:07:57,450 Stephen Halmarick: numbers. In fact, the numbers are collected in May. They're 133 00:07:57,450 --> 00:08:00,960 Stephen Halmarick: a little bit dated now. They don't take into account 134 00:08:01,110 --> 00:08:07,020 Stephen Halmarick: the national wage increase or the larger public sector agreements 135 00:08:07,020 --> 00:08:09,480 Stephen Halmarick: that have happened recently, around 4%, particularly here in New 136 00:08:09,480 --> 00:08:13,530 Stephen Halmarick: South Wales. That September quarter wages number, which we don't 137 00:08:13,530 --> 00:08:17,400 Stephen Halmarick: get until November, is more likely to be a higher 138 00:08:17,400 --> 00:08:21,389 Stephen Halmarick: number given that national wage case and some big increases 139 00:08:21,389 --> 00:08:24,090 Stephen Halmarick: in public sector pay rises. But the number we got 140 00:08:24,330 --> 00:08:30,030 Stephen Halmarick: yesterday just reinforces, in our mind, that the wages outlook 141 00:08:30,630 --> 00:08:34,650 Stephen Halmarick: is consistent with inflation returning to target range over a 142 00:08:34,650 --> 00:08:38,550 Stephen Halmarick: reasonable period and the RBA rate hike cycle now being done. 143 00:08:39,929 --> 00:08:41,699 Jennifer Duke: If you can look into your crystal ball for a 144 00:08:41,699 --> 00:08:44,400 Jennifer Duke: minute for me, what do you think we might see 145 00:08:44,400 --> 00:08:47,458 Jennifer Duke: in the spending insights next year at about this time? 146 00:08:48,420 --> 00:08:50,820 Stephen Halmarick: Well, over the next six months, we would expect it 147 00:08:50,820 --> 00:08:55,439 Stephen Halmarick: to continue to weaken. We have not yet seen the 148 00:08:55,440 --> 00:08:58,858 Stephen Halmarick: full impact of the RBA's rate hikes. The May and 149 00:08:58,859 --> 00:09:01,559 Stephen Halmarick: June rate hikes are not yet being paid by people. 150 00:09:01,740 --> 00:09:05,400 Stephen Halmarick: That's still to come through the variable interest rate mortgage 151 00:09:05,400 --> 00:09:09,240 Stephen Halmarick: system. In addition, we're pretty much, right now, at the 152 00:09:09,240 --> 00:09:12,330 Stephen Halmarick: peak of the fixed- rate mortgage rollover that will extend 153 00:09:12,599 --> 00:09:16,320 Stephen Halmarick: into 2024. The next six months or so, we'd expect 154 00:09:16,320 --> 00:09:19,559 Stephen Halmarick: to see our Household Spending Insights number continue to soften. 155 00:09:19,830 --> 00:09:24,780 Stephen Halmarick: But we are expecting rate cuts to get underway, potentially, 156 00:09:24,780 --> 00:09:28,020 Stephen Halmarick: as early as the March RBA board meeting next year, 157 00:09:28,290 --> 00:09:30,960 Stephen Halmarick: which, under the new timing, will be the 19th of 158 00:09:30,960 --> 00:09:35,309 Stephen Halmarick: March rather than the first week of March. Rate cuts 159 00:09:35,820 --> 00:09:40,170 Stephen Halmarick: through 2024 should help household spending stabilize and begin to 160 00:09:40,170 --> 00:09:42,270 Stephen Halmarick: pick up a bit towards the end of next year. 161 00:09:43,350 --> 00:09:46,559 Jennifer Duke: That sounds quite positive, actually. I'm hoping that we get 162 00:09:46,620 --> 00:09:49,978 Jennifer Duke: a little bit of an uptick towards the beginning half 163 00:09:49,980 --> 00:09:53,039 Jennifer Duke: of next year. that's very exciting. Look, Stephen, thank you 164 00:09:53,039 --> 00:09:54,929 Jennifer Duke: very much for talking to Fear and Greed. I really 165 00:09:54,929 --> 00:09:55,710 Jennifer Duke: appreciate it. 166 00:09:56,370 --> 00:09:58,260 Stephen Halmarick: My pleasure. Always good to be on Fear and Greed. 167 00:09:58,260 --> 00:10:02,578 Jennifer Duke: That was Stephen Halmarick, Commonwealth Bank chief economist. This is 168 00:10:02,580 --> 00:10:05,160 Jennifer Duke: the Fear and Greed Daily Interview. Join us every morning 169 00:10:05,160 --> 00:10:07,469 Jennifer Duke: for the full episode of Fear and Greed, Australia's most 170 00:10:07,469 --> 00:10:11,458 Jennifer Duke: popular business podcast. I'm Jennifer Duke, economics correspondent at Capital 171 00:10:11,458 --> 00:10:14,069 Jennifer Duke: Brief, and filling in for Sean Elmer. Have a great day.