1 00:00:06,080 --> 00:00:08,200 Speaker 1: Welcome to Fear and Greed Q and A, where we 2 00:00:08,240 --> 00:00:12,520 Speaker 1: ask and answer questions about business, investing, economics, politics and more. 3 00:00:12,560 --> 00:00:15,200 Speaker 1: I'm Michael Thompson. Every Monday morning, we're joined by economist 4 00:00:15,200 --> 00:00:17,200 Speaker 1: Stephen Could callers to look at the week ahead. You'll 5 00:00:17,200 --> 00:00:19,560 Speaker 1: find him at the kook dot com. That's t g 6 00:00:19,560 --> 00:00:23,319 Speaker 1: e k O UK dot com and on X using 7 00:00:23,320 --> 00:00:27,320 Speaker 1: the handle of the kok Stephen, Good morning, Very good morning, Michael. Wow. 8 00:00:27,520 --> 00:00:31,520 Speaker 1: An absolute bumper week this week, and I sat down 9 00:00:31,560 --> 00:00:33,640 Speaker 1: to look at it. I don't even know where to start, 10 00:00:33,720 --> 00:00:37,960 Speaker 1: so we will start with the biggest, arguably release of 11 00:00:38,000 --> 00:00:42,040 Speaker 1: the week. GDP data for the June quarter comes out 12 00:00:42,120 --> 00:00:43,240 Speaker 1: on Wednesday. 13 00:00:43,720 --> 00:00:47,040 Speaker 2: Yeah. Look, there's a couple of ways that the GDP 14 00:00:47,200 --> 00:00:49,159 Speaker 2: numbers should be looked at. One is that they're a 15 00:00:49,200 --> 00:00:52,400 Speaker 2: little bit old because the June quarter, so here we are, 16 00:00:52,520 --> 00:00:55,600 Speaker 2: what are we September? So these are Dune quarter numbers. 17 00:00:55,640 --> 00:00:59,600 Speaker 2: But they do provide the building block for how the 18 00:00:59,640 --> 00:01:04,520 Speaker 2: Reserve Bank markets, the government read the economy, and on 19 00:01:04,560 --> 00:01:07,880 Speaker 2: that score, we're looking for a little bit more of 20 00:01:07,920 --> 00:01:10,720 Speaker 2: a pickup in economic growth. I think the market consensus 21 00:01:10,800 --> 00:01:13,679 Speaker 2: is about a zero point five percent increase in the 22 00:01:13,760 --> 00:01:18,560 Speaker 2: quarterly GDP rate, which lifts the annual GDP growth rate 23 00:01:18,640 --> 00:01:21,640 Speaker 2: from one point three to about one point six one 24 00:01:21,640 --> 00:01:25,720 Speaker 2: point seven percent growth. It's still pretty sluggish. So yeah, 25 00:01:25,920 --> 00:01:30,520 Speaker 2: we're in this sort of area where things are not horrible, 26 00:01:31,000 --> 00:01:33,480 Speaker 2: but as I've said before, like my school reports could 27 00:01:33,520 --> 00:01:34,520 Speaker 2: be doing a whole lot better. 28 00:01:35,280 --> 00:01:37,520 Speaker 1: There's room for improvement, room for improvement. 29 00:01:37,800 --> 00:01:38,560 Speaker 2: They pay attention. 30 00:01:39,160 --> 00:01:41,960 Speaker 1: We'll take a step back if we can just on GDP. 31 00:01:42,120 --> 00:01:45,360 Speaker 1: Almost get GDP one oh one in terms of the 32 00:01:45,400 --> 00:01:48,760 Speaker 1: different pieces that all flow into it, because I'm curious 33 00:01:48,760 --> 00:01:51,960 Speaker 1: to know if it is old, and we know a 34 00:01:51,960 --> 00:01:55,040 Speaker 1: lot of the different kind of components that go into it. 35 00:01:55,120 --> 00:01:58,160 Speaker 1: Is their room to be surprised by what we could see. 36 00:01:59,080 --> 00:02:02,720 Speaker 2: There's less room to be surprised because the way the 37 00:02:02,720 --> 00:02:06,280 Speaker 2: Bureau of Statistics released that in fact, over the course 38 00:02:06,320 --> 00:02:09,160 Speaker 2: of today and tomorrow, and as we saw last week 39 00:02:09,200 --> 00:02:12,960 Speaker 2: with the CAPEX numbers, there's a lot of quarterly numbers 40 00:02:13,040 --> 00:02:15,400 Speaker 2: that are the subset of GDP. So we've already had 41 00:02:15,440 --> 00:02:19,680 Speaker 2: household spending, which is a really big part of household consumption. 42 00:02:20,840 --> 00:02:24,000 Speaker 2: The CAPEX numbers business investment numbers feed in to the 43 00:02:24,400 --> 00:02:27,760 Speaker 2: C plus I investment plus G we don't know much 44 00:02:27,760 --> 00:02:30,800 Speaker 2: about government demand yet we get those numbers shortly, but 45 00:02:30,919 --> 00:02:33,639 Speaker 2: we sort of have a pretty good idea. That said, 46 00:02:34,240 --> 00:02:37,320 Speaker 2: the Bureau of Statistics has this history of revising the 47 00:02:37,360 --> 00:02:41,079 Speaker 2: prior quarter. They get more information from the mining companies 48 00:02:41,160 --> 00:02:43,440 Speaker 2: or the retailers, so there can be and often is 49 00:02:43,480 --> 00:02:46,000 Speaker 2: a little tweak in the prior quarter, which can lead 50 00:02:46,040 --> 00:02:48,560 Speaker 2: to a surprise us all in this quarter. And there's 51 00:02:48,639 --> 00:02:54,000 Speaker 2: still a part of the economy things like farm inventores 52 00:02:54,160 --> 00:02:57,799 Speaker 2: and some consumption of services that we don't get pre 53 00:02:57,919 --> 00:03:00,200 Speaker 2: release of and they're the things that tend to throw 54 00:03:00,000 --> 00:03:03,920 Speaker 2: out the economists forecasts from time time. But basically I 55 00:03:03,960 --> 00:03:08,080 Speaker 2: think forecasters have got better at forecasting the number because 56 00:03:08,120 --> 00:03:09,600 Speaker 2: there's so much more information around. 57 00:03:10,040 --> 00:03:12,799 Speaker 1: Okay, there is an absolute wealth of data coming out 58 00:03:12,800 --> 00:03:14,680 Speaker 1: this week, so we'll have to basically go through this 59 00:03:14,720 --> 00:03:18,760 Speaker 1: pretty much as a shopping list. House prices, the housing 60 00:03:18,800 --> 00:03:20,200 Speaker 1: market is strong, YEP. 61 00:03:20,280 --> 00:03:24,040 Speaker 2: Just had confirmation from Totality house prices another solid increase 62 00:03:24,560 --> 00:03:27,880 Speaker 2: in the month of August. So we've had I think 63 00:03:27,919 --> 00:03:29,600 Speaker 2: that's now five or six months in a row where 64 00:03:29,600 --> 00:03:32,240 Speaker 2: we've had that monthly increase about point five point six 65 00:03:32,280 --> 00:03:34,280 Speaker 2: point seven there or thereabouts. We know that the auction 66 00:03:34,360 --> 00:03:36,880 Speaker 2: clearance rates have picked up in the big cities and 67 00:03:36,920 --> 00:03:41,280 Speaker 2: that's a sign of future gains in house prices. So 68 00:03:41,360 --> 00:03:44,280 Speaker 2: the supply and demand imbalance is still in favor of 69 00:03:44,280 --> 00:03:49,840 Speaker 2: a shortage versus strong demand, and that housing effect not 70 00:03:50,200 --> 00:03:53,200 Speaker 2: it's not something that reserve bank look at, but it's 71 00:03:53,240 --> 00:03:56,880 Speaker 2: something that can cause concern if it gets up too 72 00:03:57,000 --> 00:04:01,160 Speaker 2: much momentum. So house prices doing strongly and they're doing 73 00:04:01,240 --> 00:04:02,440 Speaker 2: strongly in most cities now. 74 00:04:02,560 --> 00:04:05,880 Speaker 1: Yeah, And of course, from the demand side, the government's 75 00:04:05,880 --> 00:04:08,640 Speaker 1: announcement of the first home Buyer scheme being expanded and 76 00:04:08,640 --> 00:04:10,960 Speaker 1: being brought forward is really going to add a little 77 00:04:11,000 --> 00:04:14,360 Speaker 1: bit more pressure into the market in what is already 78 00:04:14,360 --> 00:04:17,919 Speaker 1: going to be a fairly intense spring season, right. 79 00:04:18,040 --> 00:04:20,560 Speaker 2: Yeah, So that effect the five percent deposit guarantee for 80 00:04:20,600 --> 00:04:23,919 Speaker 2: first home buyers takes effect in October. And you've got 81 00:04:23,960 --> 00:04:26,280 Speaker 2: to remember also that one of the election promises that's 82 00:04:26,320 --> 00:04:30,800 Speaker 2: been implemented was cutting hex'teath into by twenty percent, and 83 00:04:30,880 --> 00:04:34,200 Speaker 2: that was a handbreak on some first home buyers getting 84 00:04:34,560 --> 00:04:37,200 Speaker 2: a loan because of course hextet was counted as their 85 00:04:37,240 --> 00:04:40,840 Speaker 2: liabilities and their funding requirements. Except that that's lowered a bit, 86 00:04:41,520 --> 00:04:43,880 Speaker 2: probably gives first home buyers a little bit of a 87 00:04:43,920 --> 00:04:46,280 Speaker 2: leg up in the latter part of this year. And 88 00:04:46,320 --> 00:04:49,559 Speaker 2: throwing another interest rate cud or two and I'd expect 89 00:04:49,600 --> 00:04:53,360 Speaker 2: to see first home buyers really aggressively competing with investors 90 00:04:53,360 --> 00:04:56,800 Speaker 2: at auctions. So it's not just the nasty investors outfitting 91 00:04:57,080 --> 00:04:59,560 Speaker 2: those poor young folks looking to buy their first home. 92 00:05:00,480 --> 00:05:04,159 Speaker 2: Investors don't get access to the five percent deposit scheme, 93 00:05:04,279 --> 00:05:06,480 Speaker 2: and nor probably do many of them have a lot 94 00:05:06,520 --> 00:05:09,000 Speaker 2: of hex stets. So yeah, tick one for the first 95 00:05:09,000 --> 00:05:09,479 Speaker 2: home buyer. 96 00:05:09,520 --> 00:05:11,680 Speaker 1: All right, building approvals. 97 00:05:11,560 --> 00:05:14,520 Speaker 2: Yep, that's a supply side. We're just talking housing, and 98 00:05:15,560 --> 00:05:19,200 Speaker 2: oh gosh, it's one of these ones where it takes 99 00:05:19,200 --> 00:05:22,080 Speaker 2: a long time from a blank piece of dirt to 100 00:05:22,120 --> 00:05:24,719 Speaker 2: be turned into a finished dwelling that someone can move into. 101 00:05:24,880 --> 00:05:27,039 Speaker 2: You know, we know it takes a year eighteen months, Yeah, 102 00:05:27,200 --> 00:05:30,200 Speaker 2: maybe sometimes more for the high rise apartments. And so 103 00:05:30,240 --> 00:05:32,560 Speaker 2: the building approvals are I've got a block of land 104 00:05:32,600 --> 00:05:35,400 Speaker 2: I want to build a house. But nonetheless that's leading 105 00:05:35,400 --> 00:05:38,240 Speaker 2: indicator of new supply the last twelve months it's picked 106 00:05:38,320 --> 00:05:42,120 Speaker 2: up thirty three zero percent. It's one of these sleepers 107 00:05:42,120 --> 00:05:45,880 Speaker 2: that's out there, that we have had a solid rebound 108 00:05:45,960 --> 00:05:51,560 Speaker 2: in home dwelling approvals. Well month and month. They're very volatile, 109 00:05:51,600 --> 00:05:53,559 Speaker 2: So a bit of a pullback after an eleven percent 110 00:05:53,640 --> 00:05:56,640 Speaker 2: increase last month's expected in the building approvals numbers, but 111 00:05:57,279 --> 00:05:59,479 Speaker 2: I think the trend is still up and we heaven knows, 112 00:05:59,520 --> 00:06:02,520 Speaker 2: we need an upturn in new construction activity. 113 00:06:02,960 --> 00:06:07,280 Speaker 1: Now household spending for July. This should be interesting, shouldn't it, 114 00:06:07,320 --> 00:06:10,159 Speaker 1: because we have seen this increase in consumer sentiment. There's 115 00:06:10,160 --> 00:06:11,920 Speaker 1: a bit more confidence out there. Do we see that 116 00:06:11,960 --> 00:06:13,239 Speaker 1: then reflected in spending? 117 00:06:13,720 --> 00:06:16,159 Speaker 2: Yes, it has. The last couple of months on the 118 00:06:16,200 --> 00:06:20,440 Speaker 2: household spending. Just to reiterate, the old retail sales released 119 00:06:21,720 --> 00:06:25,560 Speaker 2: has finished rest in peace, and this household spending survey 120 00:06:26,080 --> 00:06:28,680 Speaker 2: is the old retail spending plus a whole lot more 121 00:06:28,720 --> 00:06:30,920 Speaker 2: things that were not counted in retail, a lot of 122 00:06:30,960 --> 00:06:33,520 Speaker 2: services for example. So what we've seen in the last 123 00:06:33,560 --> 00:06:37,039 Speaker 2: few months is a pickup in household spending. The rate 124 00:06:37,120 --> 00:06:41,040 Speaker 2: cuts higher real wages, so wages growth increasing as inflation 125 00:06:41,360 --> 00:06:45,160 Speaker 2: has come down a bit, has increased the purchasing power 126 00:06:45,240 --> 00:06:49,280 Speaker 2: of us householders. Sentiments picked up and spending's picked up, 127 00:06:49,320 --> 00:06:51,679 Speaker 2: So I think the market's looking for another zero point 128 00:06:51,720 --> 00:06:55,560 Speaker 2: five percent increase in household spending in July, which, if 129 00:06:55,560 --> 00:06:59,200 Speaker 2: we get it, is one of these ones that's reasonably good. 130 00:07:00,480 --> 00:07:02,760 Speaker 1: And one more international trade. 131 00:07:03,360 --> 00:07:07,680 Speaker 2: Yes, our export sector being hit by global tariffs and 132 00:07:08,160 --> 00:07:11,880 Speaker 2: a change in when we are sending a lot of 133 00:07:11,920 --> 00:07:15,120 Speaker 2: our stuff to the US, and the Chinese economic slow 134 00:07:15,160 --> 00:07:18,520 Speaker 2: down impacting. But look, we've been running international trade surpluses 135 00:07:18,560 --> 00:07:21,600 Speaker 2: for the last few years. The size of the surplus 136 00:07:21,600 --> 00:07:24,080 Speaker 2: has come down as commodity prices have edged lower. So 137 00:07:24,120 --> 00:07:27,000 Speaker 2: the iron ore price now about roughly one hundred US 138 00:07:27,000 --> 00:07:28,960 Speaker 2: dollars a ton. What was it a year ago, one 139 00:07:29,000 --> 00:07:30,920 Speaker 2: hundred and thirty one hundred and forty dollars, So the 140 00:07:31,000 --> 00:07:33,360 Speaker 2: dollars that we get in are coming down. Volumes are 141 00:07:33,360 --> 00:07:36,680 Speaker 2: still pretty good, long way of saying, probably another surplus 142 00:07:36,720 --> 00:07:39,920 Speaker 2: of around about five billion for the month, so our 143 00:07:39,960 --> 00:07:41,320 Speaker 2: exporters are paying their way. 144 00:07:41,440 --> 00:07:44,800 Speaker 1: Let's say, now, I want to ask you about two things. 145 00:07:45,120 --> 00:07:47,200 Speaker 1: One is about what happened last week, and also then 146 00:07:47,240 --> 00:07:49,400 Speaker 1: something else to look forward to this week. Last week 147 00:07:49,440 --> 00:07:52,520 Speaker 1: we had a we had monthly inflation figures and there 148 00:07:52,560 --> 00:07:58,680 Speaker 1: was a surprise uptick in inflation, and there was a 149 00:07:58,720 --> 00:08:02,720 Speaker 1: lot of next, broadly about the impact that this is 150 00:08:02,760 --> 00:08:06,160 Speaker 1: going to have on interest rates and the potential for 151 00:08:06,240 --> 00:08:09,440 Speaker 1: future interest rate cuts. Now, I saw some commentary from 152 00:08:09,480 --> 00:08:12,560 Speaker 1: you basically just telling people just calm down, it's not 153 00:08:12,680 --> 00:08:14,800 Speaker 1: that big a deal and the trend is your friend. Right. 154 00:08:14,880 --> 00:08:17,920 Speaker 1: And this week we're going to be hearing from RBA 155 00:08:18,000 --> 00:08:20,400 Speaker 1: Governor Michelle Bullock, We're going to be hearing from Deputy 156 00:08:20,440 --> 00:08:23,760 Speaker 1: Governor Andrew Howser. They're both giving speeches. Are we going 157 00:08:23,800 --> 00:08:26,840 Speaker 1: to hear more about what they're thinking about inflation and 158 00:08:27,120 --> 00:08:28,920 Speaker 1: in the context of what we saw last week? 159 00:08:29,360 --> 00:08:31,480 Speaker 2: Don't listen to me, listen to the RBA governor and 160 00:08:31,560 --> 00:08:32,600 Speaker 2: the Deputy. 161 00:08:32,320 --> 00:08:35,400 Speaker 1: Do you reckon? They'll be saying the same thing as you, though, well. 162 00:08:35,240 --> 00:08:36,719 Speaker 2: I'm saying the same as them. I'm not sure he's 163 00:08:36,720 --> 00:08:40,199 Speaker 2: following who I dare say to me following them? I'm 164 00:08:40,240 --> 00:08:44,520 Speaker 2: a humble I'm a humble economist here. But the the RBA, 165 00:08:44,760 --> 00:08:47,480 Speaker 2: for the last oh, I don't know a year, possibly longer, 166 00:08:47,800 --> 00:08:53,480 Speaker 2: have downplayed the current methodology of the monthly CPI. They've 167 00:08:53,480 --> 00:08:56,600 Speaker 2: they've always been look, we look at the information, but 168 00:08:56,800 --> 00:09:00,880 Speaker 2: we are concerned that it is not the comprehensive measure 169 00:09:01,240 --> 00:09:04,679 Speaker 2: of all goods and services prices, so we look at it, 170 00:09:04,920 --> 00:09:06,440 Speaker 2: but we don't react to it. And I think this 171 00:09:06,480 --> 00:09:09,320 Speaker 2: is the classic monthly number that we saw last week, 172 00:09:09,320 --> 00:09:11,800 Speaker 2: the jump in the headline rate to two point eight percent, 173 00:09:12,280 --> 00:09:14,720 Speaker 2: trimmed mean jump to two point seven percent. So the 174 00:09:14,720 --> 00:09:16,520 Speaker 2: reason why I'm saying for people to have a cup 175 00:09:16,559 --> 00:09:18,560 Speaker 2: of tea and a lie down is because it's still 176 00:09:18,559 --> 00:09:22,840 Speaker 2: within the target band. And as the Bureau of Statistics noted, 177 00:09:23,480 --> 00:09:25,760 Speaker 2: they're in the state of New South Wales and the 178 00:09:25,840 --> 00:09:29,360 Speaker 2: territory of the Act, so together making up roughly a 179 00:09:29,400 --> 00:09:36,520 Speaker 2: third of the Australian economy, will have their electricity rebates 180 00:09:36,600 --> 00:09:39,960 Speaker 2: counted in August, which will pull back on the August 181 00:09:40,240 --> 00:09:42,160 Speaker 2: reading of inflation. So we're probably going to get a 182 00:09:43,040 --> 00:09:45,200 Speaker 2: month on month negative reading which will pull back both 183 00:09:45,200 --> 00:09:47,400 Speaker 2: the headline and trimmed me That's a round about way 184 00:09:47,400 --> 00:09:49,400 Speaker 2: of saying that. I think when we see Michelle Bullock 185 00:09:49,480 --> 00:09:53,280 Speaker 2: and Andrew Howser talking later this week, they will say, look, 186 00:09:53,320 --> 00:09:58,360 Speaker 2: as we noted recently, we're content and happy with the 187 00:09:58,440 --> 00:10:01,520 Speaker 2: progress we've made on inflation. Yes, we saw the July 188 00:10:01,600 --> 00:10:04,880 Speaker 2: inflation number, but we want to see the September core 189 00:10:05,000 --> 00:10:08,680 Speaker 2: inflation numbers that come out in October. So that's I 190 00:10:08,679 --> 00:10:10,280 Speaker 2: think the messaging that they'll be sending. 191 00:10:10,880 --> 00:10:12,720 Speaker 1: It's nice and consistent, isn't it. 192 00:10:12,720 --> 00:10:15,480 Speaker 2: It's consistent. Yes, when it blipped down, they said, you 193 00:10:15,559 --> 00:10:18,640 Speaker 2: hold your horses. And remember that they paused in July 194 00:10:19,480 --> 00:10:22,960 Speaker 2: when there was a very low monthly CPI. Well, yeah, 195 00:10:23,000 --> 00:10:24,720 Speaker 2: so we got to the NEXTBA meeting at the end 196 00:10:24,760 --> 00:10:27,120 Speaker 2: of September. Yeah, probably a pause, I think it's fair 197 00:10:27,160 --> 00:10:29,440 Speaker 2: to say, and for many of the same reasons. Look, 198 00:10:29,480 --> 00:10:32,760 Speaker 2: we just want to see whether that little tick up 199 00:10:32,760 --> 00:10:35,360 Speaker 2: in inflation in the month of July is part of 200 00:10:35,400 --> 00:10:37,600 Speaker 2: a trend or whether it's just that noise that we see. 201 00:10:37,760 --> 00:10:39,840 Speaker 1: So next rate cuts still November. 202 00:10:39,960 --> 00:10:42,400 Speaker 2: Look, I think so, yes. I think by then we'll 203 00:10:42,400 --> 00:10:44,480 Speaker 2: obviously have the next inflation number, and if it's just 204 00:10:44,480 --> 00:10:48,200 Speaker 2: within the band, we get a couple more labor market releases, 205 00:10:48,240 --> 00:10:51,240 Speaker 2: and the unemployment rate will be critical to what they're 206 00:10:51,240 --> 00:10:56,200 Speaker 2: doing in terms of the next interstrate cup. But there's yeah, 207 00:10:56,200 --> 00:10:58,160 Speaker 2: there's still enough going on as a victually with the 208 00:10:58,200 --> 00:11:01,480 Speaker 2: GDP fig is out on Wednesday this week. If they're 209 00:11:01,480 --> 00:11:04,600 Speaker 2: showing the annual GDP sort of sub two percent. You know, 210 00:11:05,360 --> 00:11:07,440 Speaker 2: we need a little bit more of an adrenaline shot 211 00:11:07,440 --> 00:11:08,640 Speaker 2: from the monetary policy leaver. 212 00:11:08,920 --> 00:11:10,920 Speaker 1: All right, big week ahead, enjoy it. 213 00:11:11,400 --> 00:11:13,160 Speaker 2: I can't wait. There's going to be so much fun 214 00:11:13,200 --> 00:11:15,640 Speaker 2: to and so much to talk about this time next week. 215 00:11:15,760 --> 00:11:17,960 Speaker 1: So thanks there certainly will be. That was economist Stephen 216 00:11:18,000 --> 00:11:20,199 Speaker 1: ko Coolest, better known as the Kuk. You can find 217 00:11:20,280 --> 00:11:22,120 Speaker 1: him at the kouk dot com and follow him on 218 00:11:22,280 --> 00:11:24,840 Speaker 1: ex using the handle of the Kouk. I'm Michael Thompson 219 00:11:24,840 --> 00:11:26,280 Speaker 1: and this is Fear and Greed Q and a