1 00:00:05,120 --> 00:00:07,720 Sean Aylmer: Welcome to Fear and Greed The Week Ahead. I'm Sean 2 00:00:07,800 --> 00:00:10,360 Sean Aylmer: Aylmer and as always at this time on a Monday morning, 3 00:00:10,360 --> 00:00:14,680 Sean Aylmer: I'm joined by economist Stephen Koukoulas. You'll find him at thekouk.com 4 00:00:14,800 --> 00:00:17,324 Sean Aylmer: and on X using the handle @TheKouk. Stephen, good morning. 5 00:00:17,680 --> 00:00:18,439 Stephen Koukoulas: Good morning, Sean. 6 00:00:18,920 --> 00:00:21,119 Sean Aylmer: Cracking week coming up. We've got the budget, but before 7 00:00:21,160 --> 00:00:24,239 Sean Aylmer: we get there, before we do. We're titillating people at the 8 00:00:24,239 --> 00:00:27,040 Sean Aylmer: moment on that one. Aren't we? We better just quickly 9 00:00:27,080 --> 00:00:29,680 Sean Aylmer: mentioned labour force last week because that was a bit 10 00:00:29,680 --> 00:00:30,120 Sean Aylmer: of a shock. 11 00:00:30,520 --> 00:00:33,560 Stephen Koukoulas: It was a shock. Minus fifty three thousands for employment. 12 00:00:33,640 --> 00:00:36,680 Stephen Koukoulas: Nobody got that, and I think the range that Bloomberg 13 00:00:36,800 --> 00:00:40,440 Stephen Koukoulas: survey about thirty market economists and others, and I think 14 00:00:40,479 --> 00:00:43,600 Stephen Koukoulas: the lowest was plus fifteen thousand. So to say it 15 00:00:43,640 --> 00:00:47,280 Stephen Koukoulas: was a shock is an understatement, however, and it's an 16 00:00:47,280 --> 00:00:49,360 Stephen Koukoulas: important however in economics, we've always got to have a 17 00:00:49,360 --> 00:00:52,600 Stephen Koukoulas: few howevers to justify erroneous forecasts. 18 00:00:53,000 --> 00:00:54,320 Sean Aylmer: Yes. 19 00:00:54,280 --> 00:00:56,560 Stephen Koukoulas: There was a big drop in the participation rate, so 20 00:00:56,640 --> 00:00:59,720 Stephen Koukoulas: the unemployment rate didn't move. So it was one of 21 00:00:59,720 --> 00:01:02,600 Stephen Koukoulas: those numbers that you know, I hate to say, there's 22 00:01:02,600 --> 00:01:06,880 Stephen Koukoulas: always volatility in the monthly seasonally adjusted labour force survey, 23 00:01:07,959 --> 00:01:11,800 Stephen Koukoulas: but there's always volatility in the monthly seasonally adjusted labour 24 00:01:11,840 --> 00:01:15,280 Stephen Koukoulas: force survey. So and it followed, look a year basically 25 00:01:15,360 --> 00:01:19,200 Stephen Koukoulas: of really strong employment gains and the unemployment rate has 26 00:01:19,240 --> 00:01:22,240 Stephen Koukoulas: been steady at plus and minus a few ticks around 27 00:01:22,280 --> 00:01:25,360 Stephen Koukoulas: four percent. So the four point one was seen as 28 00:01:26,600 --> 00:01:29,760 Stephen Koukoulas: an okay number. You know, the economy is still moderate 29 00:01:29,840 --> 00:01:31,920 Stephen Koukoulas: and all these other adjectives that we can use for it. 30 00:01:31,959 --> 00:01:33,480 Stephen Koukoulas: And you know, we saw last week I think some 31 00:01:33,600 --> 00:01:36,840 Stephen Koukoulas: job ads series was down a couple of percent. So, yeah, 32 00:01:36,840 --> 00:01:41,040 Stephen Koukoulas: the economy is still moderate or muddling, whatever that adjective is, 33 00:01:41,520 --> 00:01:44,480 Stephen Koukoulas: and the labour market is still probably going to soften 34 00:01:44,480 --> 00:01:45,119 Stephen Koukoulas: a little bit more. 35 00:01:45,640 --> 00:01:50,010 Sean Aylmer: Okay, before we get to the budget. I'm excited. Inflation figures. 36 00:01:50,010 --> 00:01:53,240 Sean Aylmer: We've got monthly inflation figures this week, which funnily enough, 37 00:01:53,640 --> 00:01:55,120 Sean Aylmer: have become very, very important. 38 00:01:55,560 --> 00:01:58,840 Stephen Koukoulas: They are, particularly with the RBA meeting next week. This 39 00:01:58,880 --> 00:02:01,240 Stephen Koukoulas: is the last bit of information that they need. While 40 00:02:01,240 --> 00:02:04,840 Stephen Koukoulas: it's only a slight probability in the futures markets of 41 00:02:04,840 --> 00:02:08,160 Stephen Koukoulas: a rate cut on the first of April, I guess 42 00:02:08,200 --> 00:02:12,480 Stephen Koukoulas: if we saw a stonkingly low inflation number come out 43 00:02:12,520 --> 00:02:15,000 Stephen Koukoulas: on top of those labour force numbers and the like. 44 00:02:15,160 --> 00:02:17,720 Stephen Koukoulas: They might they might give a very dovish tone to 45 00:02:17,760 --> 00:02:19,239 Stephen Koukoulas: what they're going to be saying, but that's next week. 46 00:02:19,280 --> 00:02:22,120 Stephen Koukoulas: But bottom line is that we know that the inflation 47 00:02:22,240 --> 00:02:24,400 Stephen Koukoulas: rate has been cooling over the last year or two. 48 00:02:24,639 --> 00:02:28,000 Stephen Koukoulas: I think the market expectation for the headline inflation number 49 00:02:28,000 --> 00:02:30,720 Stephen Koukoulas: in annual terms for the month of February is about 50 00:02:30,880 --> 00:02:32,760 Stephen Koukoulas: sort of two and a half two point five two 51 00:02:32,760 --> 00:02:35,760 Stephen Koukoulas: point six, and the trimmed mean sort of holding around 52 00:02:35,760 --> 00:02:38,640 Stephen Koukoulas: that two point seven two point eight, so in the 53 00:02:38,680 --> 00:02:41,520 Stephen Koukoulas: target band, and that's the consensus. But as we saw 54 00:02:41,600 --> 00:02:43,960 Stephen Koukoulas: with the labour force numbers, you know, we might not 55 00:02:44,000 --> 00:02:45,880 Stephen Koukoulas: even hit the dartboard with those forecasts. 56 00:02:47,120 --> 00:02:50,880 Sean Aylmer: Okay, the federal budget. Do you have favourite federal budget 57 00:02:51,000 --> 00:02:54,600 Sean Aylmer: like I'm guessing I don't know, but you've probably been 58 00:02:54,639 --> 00:02:57,240 Sean Aylmer: involved in the federal budget for thirty plus years? Is 59 00:02:57,280 --> 00:02:58,320 Sean Aylmer: that being unkind? 60 00:02:58,480 --> 00:03:01,040 Stephen Koukoulas: Something like that. From different perspectives too. I think my 61 00:03:01,160 --> 00:03:04,840 Stephen Koukoulas: favorite ones was when I was absolutely a junior operative, 62 00:03:04,880 --> 00:03:08,480 Stephen Koukoulas: if I can call it that, working treasury in the 63 00:03:08,520 --> 00:03:11,160 Stephen Koukoulas: mid to late nineteen eighties and Paul Keating was treasurer 64 00:03:11,160 --> 00:03:13,560 Stephen Koukoulas: and even though I was the poor sucker, we had 65 00:03:13,560 --> 00:03:16,880 Stephen Koukoulas: the spreadsheets out and ticking off numbers, checking every number 66 00:03:16,880 --> 00:03:19,120 Stephen Koukoulas: in the budget paper, so not involved at all in 67 00:03:19,160 --> 00:03:22,400 Stephen Koukoulas: the decision making process. The highlight was the budget night 68 00:03:22,480 --> 00:03:25,520 Stephen Koukoulas: binge where we went to the old Canberra Workers Club 69 00:03:25,680 --> 00:03:29,160 Stephen Koukoulas: after the budget speech. We had the odd beer or two. 70 00:03:29,360 --> 00:03:32,000 Stephen Koukoulas: But the highlight was when treasurer Paul Keating came along 71 00:03:32,000 --> 00:03:33,480 Stephen Koukoulas: and sort of gave a bit of a rah rah 72 00:03:33,520 --> 00:03:39,600 Stephen Koukoulas: speech to us treasury officials. So, yeah, but you gotta 73 00:03:39,640 --> 00:03:41,520 Stephen Koukoulas: love the budget. There's so much information there. 74 00:03:42,080 --> 00:03:45,039 Sean Aylmer: Yeah, I just I can't imagine the Canberra Workers and 75 00:03:45,080 --> 00:03:48,190 Sean Aylmer: Paul Keating were together that often, really, am I right 76 00:03:48,190 --> 00:03:48,640 Sean Aylmer: in saying that? 77 00:03:49,080 --> 00:03:51,000 Stephen Koukoulas: I think you're right saying that. It's been bulldozed now. 78 00:03:51,000 --> 00:03:54,000 Stephen Koukoulas: I think there's some sort of car park there or 79 00:03:54,320 --> 00:03:56,680 Stephen Koukoulas: something now. But it was a place that we... don't 80 00:03:56,920 --> 00:03:58,760 Stephen Koukoulas: forget back in the day, and you know, this is 81 00:03:58,800 --> 00:04:01,080 Stephen Koukoulas: something for the, okay, boomer set out there. I was 82 00:04:01,080 --> 00:04:03,320 Stephen Koukoulas: getting paid about eighteen thousand bucks a year as a 83 00:04:03,920 --> 00:04:07,800 Stephen Koukoulas: graduate in Treasury and so yeah, we didn't have a lot 84 00:04:07,800 --> 00:04:09,760 Stephen Koukoulas: of money back then. So the Workers Club, I think 85 00:04:09,800 --> 00:04:12,040 Stephen Koukoulas: we got this deal where you get a jug for 86 00:04:12,040 --> 00:04:13,120 Stephen Koukoulas: about two dollars eighty. 87 00:04:14,040 --> 00:04:16,520 Sean Aylmer: The equivalent of the Reserve Bank where I sort of 88 00:04:16,560 --> 00:04:19,240 Sean Aylmer: came through was the New South Wales Leagues Club. Actually, 89 00:04:19,279 --> 00:04:23,120 Sean Aylmer: same deal. We should move on though. Tell me tomorrow night, 90 00:04:23,160 --> 00:04:25,200 Sean Aylmer: what are we going to get from Jim Chalmers. 91 00:04:25,360 --> 00:04:28,240 Stephen Koukoulas: I think Jim Chalmers, the Treasurer, gave a speech last 92 00:04:28,279 --> 00:04:31,120 Stephen Koukoulas: week's which basically put a lot of the flesh on 93 00:04:31,600 --> 00:04:34,760 Stephen Koukoulas: what the big picture parameters are. So the economy will 94 00:04:34,760 --> 00:04:37,159 Stephen Koukoulas: be picking up a bit of momentum, so GDP growth 95 00:04:37,520 --> 00:04:39,840 Stephen Koukoulas: probably from that one point three percent we saw at 96 00:04:39,839 --> 00:04:41,120 Stephen Koukoulas: the end of last year to sort of two and 97 00:04:41,160 --> 00:04:44,839 Stephen Koukoulas: a half, probably confirming the inflations in the two to 98 00:04:44,880 --> 00:04:48,279 Stephen Koukoulas: three range, which is good news. Probably confirming that wages 99 00:04:48,360 --> 00:04:50,800 Stephen Koukoulas: grows at three to three and a half percent, so 100 00:04:50,880 --> 00:04:53,960 Stephen Koukoulas: a little bit of real wage increases there. So they're 101 00:04:53,960 --> 00:04:57,920 Stephen Koukoulas: the sort of macro parameters and a budget deficit, which, yeah, 102 00:04:57,920 --> 00:04:59,880 Stephen Koukoulas: the debate is are they spending too much or is 103 00:04:59,880 --> 00:05:02,040 Stephen Koukoulas: it appropriate given that the private sector is so weak. 104 00:05:02,080 --> 00:05:04,400 Stephen Koukoulas: That's a debate that I think will be more political 105 00:05:04,520 --> 00:05:07,360 Stephen Koukoulas: rather than economic. But at this stage I think it'll 106 00:05:07,400 --> 00:05:10,960 Stephen Koukoulas: be the government sort of keeping within those broad parameters 107 00:05:10,960 --> 00:05:14,520 Stephen Koukoulas: and a budget deficit around about one percent of GDP, 108 00:05:14,800 --> 00:05:18,039 Stephen Koukoulas: so it's still a pretty, pretty solid result when the 109 00:05:18,040 --> 00:05:21,600 Stephen Koukoulas: economy has been weak, clearly with the election only what 110 00:05:21,760 --> 00:05:25,560 Stephen Koukoulas: five or six weeks away now, there'll be some issues 111 00:05:25,600 --> 00:05:28,040 Stephen Koukoulas: there for cost of living pressures. They're going to clearly 112 00:05:28,080 --> 00:05:31,279 Stephen Koukoulas: extend the electricity subsidies possibly if you have the bits 113 00:05:31,279 --> 00:05:33,760 Stephen Koukoulas: and bobs to make us voters feel a bit more happy, 114 00:05:34,120 --> 00:05:38,360 Stephen Koukoulas: but not big ticket, big reform items in the budget. 115 00:05:38,920 --> 00:05:41,680 Sean Aylmer: So the thing that we can take away from it 116 00:05:41,800 --> 00:05:43,719 Sean Aylmer: in terms of what it means for rates and things 117 00:05:43,760 --> 00:05:47,440 Sean Aylmer: like that almost 'steady as she goes' it sounds Stephen, 118 00:05:47,480 --> 00:05:48,799 Sean Aylmer: what you're saying in a way. 119 00:05:49,120 --> 00:05:52,240 Stephen Koukoulas: Yes, look, I think so. And to the extent that 120 00:05:52,279 --> 00:05:55,120 Stephen Koukoulas: there has been a surge in public demand, both at 121 00:05:55,120 --> 00:05:57,400 Stephen Koukoulas: the state and local and also the federal level, and 122 00:05:57,560 --> 00:06:00,839 Stephen Koukoulas: lots of hiring of people in the service base industries 123 00:06:00,839 --> 00:06:02,840 Stephen Koukoulas: which the government, the federal government wanted to do. They 124 00:06:02,880 --> 00:06:05,040 Stephen Koukoulas: wanted to have nurses in age care homes, they wanted 125 00:06:05,080 --> 00:06:08,400 Stephen Koukoulas: to ramp up in NDIS although there's reforms going on 126 00:06:08,440 --> 00:06:12,400 Stephen Koukoulas: there as well, education healthcare. So they've employed a lot 127 00:06:12,400 --> 00:06:14,839 Stephen Koukoulas: of people or indirectly employed a lot of people through 128 00:06:15,320 --> 00:06:17,960 Stephen Koukoulas: some of their measures that they've put in place, and 129 00:06:18,000 --> 00:06:20,919 Stephen Koukoulas: so that's part of what they've done that's sort of 130 00:06:20,960 --> 00:06:23,600 Stephen Koukoulas: come to an end. And as we've seen in gosh, 131 00:06:23,640 --> 00:06:26,640 Stephen Koukoulas: even going back to those old enough on this podcast, 132 00:06:26,640 --> 00:06:30,080 Stephen Koukoulas: remember the John Houston Fightback policy. You know, the days 133 00:06:30,080 --> 00:06:34,040 Stephen Koukoulas: of big reforming budgets are rare, and when you've got 134 00:06:34,080 --> 00:06:37,479 Stephen Koukoulas: the budget a couple of weeks before the election even 135 00:06:37,560 --> 00:06:41,200 Stephen Koukoulas: rarer still. Maybe next budget, whoever wins, whichever side wins 136 00:06:41,240 --> 00:06:43,760 Stephen Koukoulas: the election, might be wanting to do something a bit 137 00:06:43,760 --> 00:06:47,960 Stephen Koukoulas: more exciting, adventurous and reforming in the next budget. For 138 00:06:48,000 --> 00:06:50,320 Stephen Koukoulas: this one, it'll be a solid one. I think it's 139 00:06:50,520 --> 00:06:52,360 Stephen Koukoulas: going to be one of those ones where it's not 140 00:06:52,400 --> 00:06:53,600 Stephen Koukoulas: going to ruffle any feathers. 141 00:06:54,120 --> 00:06:56,160 Sean Aylmer: And if you, if any listener wants to listen to 142 00:06:56,200 --> 00:06:59,640 Sean Aylmer: Stephen's take on it Wednesday morning, tune in to Fear and Greed, our interview, 143 00:06:59,680 --> 00:07:02,719 Sean Aylmer: where you're our guest. We will be doing it the 144 00:07:02,839 --> 00:07:05,440 Sean Aylmer: night after the budget. You get around on budget night, 145 00:07:05,480 --> 00:07:07,279 Sean Aylmer: Stephen and the next morning as well. You've got a 146 00:07:07,279 --> 00:07:08,320 Sean Aylmer: bit on? 147 00:07:08,320 --> 00:07:10,800 Stephen Koukoulas: Bit on next week, yes, there. So I'll be cruising 148 00:07:10,800 --> 00:07:13,000 Stephen Koukoulas: around the scene a bit of media and a couple 149 00:07:13,080 --> 00:07:16,120 Stephen Koukoulas: of presentations to a few different groups, which will be 150 00:07:16,160 --> 00:07:18,440 Stephen Koukoulas: a lot of fun, but it's really just what's the 151 00:07:18,480 --> 00:07:20,440 Stephen Koukoulas: budget mean? And as I said, I'll be up all 152 00:07:20,520 --> 00:07:24,240 Stephen Koukoulas: night not having fun, but rather looking through the myriad 153 00:07:24,280 --> 00:07:26,680 Stephen Koukoulas: of budget papers to see if there's any gems there, 154 00:07:27,000 --> 00:07:29,920 Stephen Koukoulas: and really, as I said, looking at the key economic parameters, 155 00:07:30,280 --> 00:07:33,240 Stephen Koukoulas: what's the budget bottom line, the budget deficit numbers and 156 00:07:33,240 --> 00:07:35,800 Stephen Koukoulas: the like, what's the borrowing requirement? How much is government 157 00:07:35,800 --> 00:07:38,080 Stephen Koukoulas: debt going up by coming down by those sorts of 158 00:07:38,080 --> 00:07:41,720 Stephen Koukoulas: things and then trying to overlay that on, well, what's 159 00:07:41,720 --> 00:07:45,560 Stephen Koukoulas: it mean for interest rates and the macroeconomy more generally. So, a 160 00:07:45,640 --> 00:07:46,239 Stephen Koukoulas: fun time. 161 00:07:46,880 --> 00:07:48,680 Sean Aylmer: Enjoy it, Steven, enjoy it. 162 00:07:49,040 --> 00:07:50,760 Stephen Koukoulas: Will do. Talk to you next week. 163 00:07:50,680 --> 00:07:52,760 Sean Aylmer: That was economist Stephen Koukoulas, better known as The Kouk. 164 00:07:52,800 --> 00:07:55,040 Sean Aylmer: You can find him at thekouk.com and follow him on 165 00:07:55,160 --> 00:07:57,840 Sean Aylmer: X using the handle @TheKouk. I'm Sean Aylmer and this 166 00:07:58,040 --> 00:08:00,640 Sean Aylmer: is Fear and Greed The week Ahead.