1 00:00:08,280 --> 00:00:10,260 Sean Aylmer: Welcome to Fear and Greed: The Week Ahead. I'm Sean 2 00:00:10,260 --> 00:00:13,530 Sean Aylmer: Aylmer. And as always, I'm joined by economist Stephen Koukoulas. 3 00:00:13,799 --> 00:00:16,199 Sean Aylmer: You'll find him at thekouk. com and on Twitter using 4 00:00:16,199 --> 00:00:18,480 Sean Aylmer: the handle, TheKouk. Steven, good morning. 5 00:00:19,020 --> 00:00:20,280 Stephen Koukoulas: A very good morning to you, Sean. 6 00:00:20,670 --> 00:00:22,290 Sean Aylmer: What a week we've just had. 7 00:00:22,560 --> 00:00:26,579 Stephen Koukoulas: Oh, last week was huge and obviously, the highlight was 8 00:00:26,579 --> 00:00:29,550 Stephen Koukoulas: the Reserve Bank of Australia leaving rates on hold. It 9 00:00:29,550 --> 00:00:32,790 Stephen Koukoulas: was, as we discussed last week, a sort of a 50/ 50 10 00:00:32,790 --> 00:00:35,729 Stephen Koukoulas: probability. There were some very good people in the markets 11 00:00:35,729 --> 00:00:40,140 Stephen Koukoulas: calling a hike, some calling steady. And when you read 12 00:00:40,140 --> 00:00:45,000 Stephen Koukoulas: this statement from the RBA, the RBA governor, it was reasonably finely 13 00:00:45,000 --> 00:00:48,509 Stephen Koukoulas: balanced, but, and this is the critical thing, the RBA 14 00:00:48,570 --> 00:00:51,509 Stephen Koukoulas: did acknowledge that growth is slowing, I think that's apparent 15 00:00:51,509 --> 00:00:54,540 Stephen Koukoulas: to everyone looking at the data. There is a risk 16 00:00:54,540 --> 00:00:58,200 Stephen Koukoulas: that the unemployment rate will increase and increase reasonably steadily 17 00:00:58,200 --> 00:01:00,120 Stephen Koukoulas: over the course of the next six to 12 months, 18 00:01:00,480 --> 00:01:02,819 Stephen Koukoulas: and inflation is falling, and while it's still too high, 19 00:01:02,970 --> 00:01:04,500 Stephen Koukoulas: it's at least moving in the right direction. 20 00:01:05,520 --> 00:01:07,650 Sean Aylmer: What about the data that came out last week, does 21 00:01:07,650 --> 00:01:09,209 Sean Aylmer: that support what the Reserve Bank was saying? 22 00:01:09,780 --> 00:01:11,850 Stephen Koukoulas: Well, there was mixed news. We had the Building Approvals 23 00:01:11,850 --> 00:01:15,539 Stephen Koukoulas: numbers and they were up 20%. So we had this 24 00:01:15,540 --> 00:01:19,380 Stephen Koukoulas: really strong lift, but that was really only in apartments 25 00:01:19,560 --> 00:01:22,229 Stephen Koukoulas: in New South Wales. So when you dig into the 26 00:01:22,230 --> 00:01:24,719 Stephen Koukoulas: data, it's probably one or two high rise developments that 27 00:01:24,719 --> 00:01:27,600 Stephen Koukoulas: got approved. That's good news, of course, there's still dwellings 28 00:01:27,660 --> 00:01:30,569 Stephen Koukoulas: for people to live in, but nonetheless, you just want 29 00:01:30,569 --> 00:01:33,179 Stephen Koukoulas: to see a bit more consolidation, a bit more breadth 30 00:01:33,180 --> 00:01:34,800 Stephen Koukoulas: in the numbers before you can be confident that we're 31 00:01:34,800 --> 00:01:38,729 Stephen Koukoulas: going to be getting a housing construction rebound. On house 32 00:01:38,730 --> 00:01:41,939 Stephen Koukoulas: prices, we had confirmation that house prices are going up, so 33 00:01:41,940 --> 00:01:45,029 Stephen Koukoulas: the CoreLogic and the PropTrack data, by the way, both 34 00:01:45,030 --> 00:01:47,098 Stephen Koukoulas: confirmed that house prices have been increasing for the last 35 00:01:47,100 --> 00:01:52,110 Stephen Koukoulas: four to five months, not booming, but trending higher as 36 00:01:52,110 --> 00:01:54,840 Stephen Koukoulas: well. And so, the picture for the economy is one 37 00:01:54,840 --> 00:01:59,340 Stephen Koukoulas: where, yeah, we're still muddling along, growth is slower, but 38 00:01:59,400 --> 00:02:02,190 Stephen Koukoulas: I think all eyes will be really towards the end 39 00:02:02,190 --> 00:02:03,990 Stephen Koukoulas: of this month and next month when we get the 40 00:02:03,990 --> 00:02:06,690 Stephen Koukoulas: next round of labor force and inflation numbers, they're the 41 00:02:06,690 --> 00:02:08,490 Stephen Koukoulas: thing that Reserve Bank are going to be focusing on. 42 00:02:09,180 --> 00:02:10,770 Sean Aylmer: Okay. Now we're going to hear from the Reserve Bank 43 00:02:10,770 --> 00:02:14,160 Sean Aylmer: Governor Phil Lowe, the guessing game, I mean, we'll talk 44 00:02:14,160 --> 00:02:17,279 Sean Aylmer: monetary policy in a moment, Steven, just park that, does 45 00:02:17,280 --> 00:02:18,119 Sean Aylmer: he want the job? 46 00:02:19,080 --> 00:02:21,329 Stephen Koukoulas: I think he wants it, but all of the media 47 00:02:21,330 --> 00:02:24,089 Stephen Koukoulas: speculation that's been out in the last week or so 48 00:02:24,360 --> 00:02:27,510 Stephen Koukoulas: has been listing other candidates to replace him as governor 49 00:02:27,510 --> 00:02:29,370 Stephen Koukoulas: in September. His term comes up in the middle of 50 00:02:29,370 --> 00:02:32,280 Stephen Koukoulas: September. He's been there for seven years, he was deputy 51 00:02:32,280 --> 00:02:35,190 Stephen Koukoulas: governor for five years before that, so he's been in 52 00:02:35,190 --> 00:02:37,980 Stephen Koukoulas: the sort of upper echelons and on the RBA board 53 00:02:37,980 --> 00:02:41,250 Stephen Koukoulas: for well over a decade now. And I think as 54 00:02:41,250 --> 00:02:43,050 Stephen Koukoulas: part of the Reserve Bank review, we've got to remember 55 00:02:43,050 --> 00:02:44,790 Stephen Koukoulas: that there is this review of the bank too that's 56 00:02:44,790 --> 00:02:47,850 Stephen Koukoulas: going to be implemented by the Treasurer, Jim Chalmers. It's 57 00:02:47,850 --> 00:02:51,780 Stephen Koukoulas: not just the personalities of the governor and deputy governor 58 00:02:51,780 --> 00:02:55,500 Stephen Koukoulas: necessarily, it's also the revamping of a monetary policy board 59 00:02:55,500 --> 00:02:58,649 Stephen Koukoulas: as opposed to administrative board. So I dare say, that's 60 00:02:58,650 --> 00:03:00,990 Stephen Koukoulas: a long, convoluted way of saying that I think we 61 00:03:00,990 --> 00:03:03,000 Stephen Koukoulas: are going to be getting a new governor and it could 62 00:03:03,000 --> 00:03:04,230 Stephen Koukoulas: be announced very, very shortly. 63 00:03:05,010 --> 00:03:08,190 Sean Aylmer: Okay. So he's talking this week, Phil Lowes, so presumably, 64 00:03:08,190 --> 00:03:11,550 Sean Aylmer: he'll give us more information on monetary policy and the 65 00:03:11,550 --> 00:03:12,419 Sean Aylmer: state of the economy. 66 00:03:12,929 --> 00:03:15,630 Stephen Koukoulas: Indeed. Well, the topic is monetary policy and indeed, the 67 00:03:15,630 --> 00:03:18,930 Stephen Koukoulas: review of the Reserve Bank. So yes, and he'll be 68 00:03:18,930 --> 00:03:20,579 Stephen Koukoulas: able to put a bit more flesh on the bones 69 00:03:20,580 --> 00:03:23,430 Stephen Koukoulas: of why they held rates steady at the board meeting 70 00:03:23,430 --> 00:03:25,889 Stephen Koukoulas: last week. And as we said, I think he's going 71 00:03:25,889 --> 00:03:29,698 Stephen Koukoulas: to be acknowledging a few things, that inflation's still high, 72 00:03:30,090 --> 00:03:32,729 Stephen Koukoulas: it's still, on their figuring, some way from the two 73 00:03:32,730 --> 00:03:35,879 Stephen Koukoulas: to 3% target band, and other central banks have got 74 00:03:35,879 --> 00:03:39,510 Stephen Koukoulas: cash rates at 5% or even a little above that, 75 00:03:40,020 --> 00:03:43,020 Stephen Koukoulas: we are at 4.1%. So he may be sort of 76 00:03:43,020 --> 00:03:45,660 Stephen Koukoulas: grilled or quizzed on why our rates are below those 77 00:03:45,660 --> 00:03:49,230 Stephen Koukoulas: of the US, New Zealand, UK, for example. Those are 78 00:03:49,259 --> 00:03:51,419 Stephen Koukoulas: just a sort of a snapshot of other things. But 79 00:03:51,420 --> 00:03:53,819 Stephen Koukoulas: he'll also be talking about the outlook for jobs, the 80 00:03:53,820 --> 00:03:57,750 Stephen Koukoulas: outlook for unemployment, the outlook for just how the momentum 81 00:03:57,750 --> 00:03:58,890 Stephen Koukoulas: on the economy's going. 82 00:03:59,880 --> 00:04:01,290 Sean Aylmer: Okay, what else is out this week? 83 00:04:02,130 --> 00:04:04,860 Stephen Koukoulas: It's all about sentiment and confidence, they're the only other 84 00:04:05,160 --> 00:04:08,969 Stephen Koukoulas: key economic data releases. We've got the Westpac Consumer Sentiment 85 00:04:08,969 --> 00:04:13,080 Stephen Koukoulas: numbers. Consumer sentiment is really bad, we're in the doldrums. 86 00:04:13,230 --> 00:04:15,270 Stephen Koukoulas: Maybe there'll be a little bit of a bounce because 87 00:04:15,270 --> 00:04:18,510 Stephen Koukoulas: of the rates on hold decision. So always watch the 88 00:04:18,510 --> 00:04:21,029 Stephen Koukoulas: consumer sentiment numbers because they are a pretty good leading 89 00:04:21,029 --> 00:04:24,330 Stephen Koukoulas: indicator on consumer spending. And of course, with weak consumer 90 00:04:24,360 --> 00:04:28,139 Stephen Koukoulas: sentiment, we have had weak retail spending, so the correlation's been 91 00:04:28,139 --> 00:04:30,720 Stephen Koukoulas: holding, which is always good for us economists trying to 92 00:04:30,720 --> 00:04:34,678 Stephen Koukoulas: forecast these things. The other arguably more important indicator will 93 00:04:34,680 --> 00:04:38,488 Stephen Koukoulas: be the NAB Business Confidence Survey. Confidence has come off 94 00:04:38,490 --> 00:04:41,010 Stephen Koukoulas: the boil, but it's still way above what consumers are 95 00:04:41,010 --> 00:04:44,009 Stephen Koukoulas: thinking. So we'll be looking at the NAB survey for 96 00:04:44,009 --> 00:04:47,459 Stephen Koukoulas: clues on softer growth. There's also a range of questions 97 00:04:47,459 --> 00:04:52,169 Stephen Koukoulas: about employment intentions, profitability, what's happening to selling prices and these 98 00:04:52,170 --> 00:04:54,210 Stephen Koukoulas: sorts of things. So there'll be a myriad of news 99 00:04:54,210 --> 00:04:56,910 Stephen Koukoulas: in the NAB survey to sort of work out just 100 00:04:56,910 --> 00:04:58,080 Stephen Koukoulas: how the business sector's going. 101 00:04:58,710 --> 00:05:01,020 Sean Aylmer: Okay. Now, before I leave, there was a great story 102 00:05:01,020 --> 00:05:03,959 Sean Aylmer: last week and I thought of you immediately. So Gina Cass- 103 00:05:03,960 --> 00:05:06,900 Sean Aylmer: Gottlieb is the head of these Australian Competition and Consumer 104 00:05:06,900 --> 00:05:12,089 Sean Aylmer: Commission, and she talked about a conundrum for competition regulators. 105 00:05:12,420 --> 00:05:18,000 Sean Aylmer: And what it was was it was the report on childcare fees. And 106 00:05:18,000 --> 00:05:23,729 Sean Aylmer: she said, where there's more competition in the cities, prices 107 00:05:23,820 --> 00:05:26,760 Sean Aylmer: are higher. And she actually said, it's quite a conundrum 108 00:05:27,089 --> 00:05:29,190 Sean Aylmer: for we competition regulators. I thought it was a great 109 00:05:29,310 --> 00:05:32,519 Sean Aylmer: quote. And explain that one to me, Steven. 110 00:05:33,660 --> 00:05:37,289 Stephen Koukoulas: Sean, I don't know if I can, there are a 111 00:05:37,290 --> 00:05:40,680 Stephen Koukoulas: few anomalies in economics. And it could just be simply 112 00:05:40,680 --> 00:05:44,250 Stephen Koukoulas: because there's such hot demand for childcare, and because people 113 00:05:44,250 --> 00:05:46,560 Stephen Koukoulas: are now seeing some government subsidies coming through on childcare, " 114 00:05:46,800 --> 00:05:48,930 Stephen Koukoulas: Let's get our kids into childcare." So in a funny 115 00:05:48,930 --> 00:05:52,260 Stephen Koukoulas: way, you actually boost demand as prices go up. There's 116 00:05:52,260 --> 00:05:53,849 Stephen Koukoulas: another way of looking at it, there's a thing called 117 00:05:53,849 --> 00:05:56,428 Stephen Koukoulas: a Giffen good in economics, which is- 118 00:05:56,549 --> 00:05:58,410 Sean Aylmer: Oh my God, I'm back in Macro 1. 119 00:05:58,440 --> 00:06:00,269 Stephen Koukoulas: Yeah, the more expensive they're the more desirable they are. 120 00:06:00,270 --> 00:06:03,660 Stephen Koukoulas: So it's a bit like I've got a Louis Vuitton 121 00:06:03,660 --> 00:06:07,500 Stephen Koukoulas: handbag versus a Big W owned brand one, they're obviously, 122 00:06:08,040 --> 00:06:10,889 Stephen Koukoulas: 50 bucks versus 5, 000 bucks, but people will want 123 00:06:10,889 --> 00:06:13,529 Stephen Koukoulas: the expensive one for status and all these other things. 124 00:06:13,529 --> 00:06:15,659 Stephen Koukoulas: So the more expensive it is, the hotter the demand, 125 00:06:15,839 --> 00:06:16,799 Stephen Koukoulas: go figure that one out. 126 00:06:17,639 --> 00:06:20,250 Sean Aylmer: Ah, I don't know. Gina Cass- Gottlieb did also mention 127 00:06:20,250 --> 00:06:22,529 Sean Aylmer: about capacity to pay and things like that, but you've 128 00:06:22,529 --> 00:06:24,390 Sean Aylmer: got to be a pretty smart operator to understand. I 129 00:06:24,390 --> 00:06:26,099 Sean Aylmer: mean, I suppose if you're sitting in the middle of 130 00:06:26,099 --> 00:06:28,200 Sean Aylmer: Toorak, you understand the people there are going to pay 131 00:06:28,200 --> 00:06:30,179 Sean Aylmer: more than if you are in Woop Woop. 132 00:06:30,990 --> 00:06:33,899 Stephen Koukoulas: Correct. And of course, that's where the densely populated parts 133 00:06:33,900 --> 00:06:37,350 Stephen Koukoulas: of the population is in the big cities. And there 134 00:06:37,380 --> 00:06:39,900 Stephen Koukoulas: has been, and probably still is, a scarcity of childcare 135 00:06:39,900 --> 00:06:42,420 Stephen Koukoulas: places. And well, dare I say, one of the things 136 00:06:42,420 --> 00:06:45,360 Stephen Koukoulas: that happened during the pandemic is that we had more 137 00:06:45,420 --> 00:06:49,950 Stephen Koukoulas: babies produced, now they're been born and they're growing up and going 138 00:06:49,950 --> 00:06:51,719 Stephen Koukoulas: into childcare. So in a sense, we've had a bit 139 00:06:51,719 --> 00:06:54,359 Stephen Koukoulas: of a, not just immigration that's boosting population, it's a 140 00:06:54,360 --> 00:06:57,450 Stephen Koukoulas: bit of natural increase too and well, by definition, that 141 00:06:57,450 --> 00:06:58,740 Stephen Koukoulas: adds to demand for childcare. 142 00:06:59,220 --> 00:07:00,900 Sean Aylmer: Indeed. Steven, have a great week. 143 00:07:01,529 --> 00:07:02,040 Stephen Koukoulas: Thank you, Sean. 144 00:07:02,760 --> 00:07:05,099 Sean Aylmer: That was economist Stephen Koukoulas, better known as The Kouk. 145 00:07:05,160 --> 00:07:07,678 Sean Aylmer: You can find him at thekouk. com and follow him 146 00:07:07,678 --> 00:07:10,529 Sean Aylmer: on Twitter using the handle, TheKouk. I'm Sean Aylmer, this 147 00:07:10,529 --> 00:07:12,000 Sean Aylmer: is Fear and Greed: The Week Ahead.