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Speaker 1: Welcome to Fear and Greed, Summer Investing series, brought to

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Speaker 1: you by vanta specialist in compliance lead growth. I'm sean

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Speaker 1: almer for investors, for homeowners, for businesses, pretty much everyone.

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Speaker 1: It's important to have an idea of where the Australian

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Speaker 1: economy is headed. Fear and Greed's resident economist is Stephen Coculis.

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Speaker 1: You'll find he him at the cook dot com or

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Speaker 1: a next using the handle of kok. That's thh e

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Speaker 1: K a u K Stephen. Welcome to Fear and Greed.

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Speaker 1: This wonderful new year.

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Speaker 2: And a happy new year, let's hope twenty twenty five

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Speaker 2: is absolute corker for investors. The economy, low inflation, and

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Speaker 2: this bird that's squeaking behind me.

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Speaker 1: Indeed, well the bird sounds pretty happy to me. What's

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Speaker 1: going to happen on inflation, slash interest rates this year?

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Speaker 2: Yeah? Look, I think well, we ended twenty twenty four

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Speaker 2: with well mixed news. The economy was weak. We ended

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Speaker 2: the year with that stunning unemployment number, but back below

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Speaker 2: four percent for the unemployment rate. But and it's a

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Speaker 2: really important, but we also saw the econom me muddling along.

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Speaker 2: I think it's fair to say GDP growth under one

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Speaker 2: percent in annual terms, wages growth coming off a bit,

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Speaker 2: but there are also some green shirts if I hear

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Speaker 2: that cliche, in things like building approvals starting to edge

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Speaker 2: up from middlely a low base. But maybe twenty twenty

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Speaker 2: five is a year that we get a bit of

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Speaker 2: a supply side response on construction, so that's better the

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Speaker 2: consumer looking okay, so that we pour all this into

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Speaker 2: the melting pot to walk. Okay, what's the RBA going

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Speaker 2: to do with interestrates? Where is inflation going? And I

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Speaker 2: think that we've still up this proposition that the subdued growth,

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Speaker 2: despite those good later numbers, is going to see inflation

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Speaker 2: continue to tick down and down and down, and that

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Speaker 2: with that interest rates will tick down and down and down.

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Speaker 2: So before we get too excited about you know which

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Speaker 2: months will they cut and how many cuts will there be,

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Speaker 2: I think it's just going to be this issue, as

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Speaker 2: Michelle Bollock said in her presentation at the end of

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Speaker 2: last year, that it really depends on the inflation slash

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Speaker 2: unemployment numbers. If that next inflation comes out at the

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Speaker 2: end of January low, they could start in February, and

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Speaker 2: probably every alternate meeting they might go twenty five.

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Speaker 1: Okay, So your best bet though February or later.

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Speaker 2: Yeah, I'd say sooner, because the economy is still subdued,

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Speaker 2: and you know, we've got to celebrate low unemployment. It's

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Speaker 2: a mighty good thing. I was cheering that we've got

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Speaker 2: low unemployment. Let's lock it in. So by the end

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Speaker 2: of the year we probably have four rate casses, would

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Speaker 2: be my semi educated guests, So from four point three

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Speaker 2: to five to three point three five, not much more

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Speaker 2: than that, because I don't think we need more than that.

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Speaker 2: And because of that, you know, inflation is inflation taking

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Speaker 2: down both headline trimmed mean and the what do we

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Speaker 2: call it the time of the election might only be

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Speaker 2: might be as bit of a thorn in the side

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Speaker 2: of what we see and what we do, and in fact,

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Speaker 2: from a fiscal policy perspective, it could be important too. Okay.

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Speaker 1: So I mean that means hopefully homeland rates high fives,

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Speaker 1: low six is by the end of the year. What

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Speaker 1: about house prices, what do you think will happen there

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Speaker 1: this year?

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Speaker 2: Yeah, well the end of the year. With it, with

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Speaker 2: that trend weakness coming through, Sydney joined the ranks of Melbourne, Hovart,

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Speaker 2: Canberra and Darwin, which were already falling, not majorly, but falling,

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Speaker 2: you know, a couple of tenths of a percent per month.

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Speaker 2: Now Sydney's moved into that negative territory. Perth, Adelaide, Brisbane,

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Speaker 2: the strong cities have also slowed down, so they're still

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Speaker 2: positive at slowing down. So you mix that all up

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Speaker 2: to and so well. House price is probably on the

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Speaker 2: back of a fall in the immigration intake, on the

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Speaker 2: back of some new listings coming through from in most

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Speaker 2: of the city. It's not all that the SQM research

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Speaker 2: has some really good data on listings and it's sort

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Speaker 2: of confirming that we've got this supply and demand moving

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Speaker 2: back into kilter house prices. Look, I wouldn't die in addictionate,

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Speaker 2: but probably just flat. You know, we were surprised how

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Speaker 2: strong they were, you know, in the in the leadout

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Speaker 2: of the pandemic when we had rate hikes. I think

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Speaker 2: even if we get rate cuts, it's sort of going

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Speaker 2: to be more a financial relief for those with a

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Speaker 2: mortgage rather than rekindling a house price bin. So nationwide,

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Speaker 2: i'll call it flat.

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Speaker 1: Okay, last part fiscal policy, We've got an election coming up.

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Speaker 1: You've already mentioned that great time for governments and oppositions

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Speaker 1: to make big promises on spending. Where do you think

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Speaker 1: we'll end up this year with government spending?

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Speaker 2: Do you know what? I think? I live in hope,

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Speaker 2: but I think we're going to see quite or semi

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Speaker 2: responsible electioneering. As I said, I live in hope that

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Speaker 2: we'll see. I think Jim Chalmers gets and I think

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Speaker 2: the Coalition get it too. That at a time when

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Speaker 2: you're just starting or probably starting an interest rate cutting cycle,

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Speaker 2: when we know that government demand is a record share

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Speaker 2: of the economy. Gave the National Accouncil figures for the

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Speaker 2: September quarter of at the end of December or early December,

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Speaker 2: confirmed that public sector spending sort of a record share

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Speaker 2: of the economy. A little bit of prudence on the

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Speaker 2: budget side would be a good thing. Now they're still

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Speaker 2: going to make promises. My hunch is that they won't

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Speaker 2: be hellishly expensive. They'll be appealing to the voters, but

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Speaker 2: they're not going to be that multiple, multiple billions of

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Speaker 2: dollars that sees the budget blow out and cause the

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Speaker 2: Reserve Bank griefs. So I'd like to think that this

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Speaker 2: might well be the one with an interest rates also

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Speaker 2: permeating the election campaign, even though of course political parties

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Speaker 2: don't control interest rates. The people vote on the back

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Speaker 2: to them. They just don't want to be seeing the

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Speaker 2: one saying, oh, you're promising this massive fiscal sin of this,

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Speaker 2: and you're going to be the reason why the RBA

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Speaker 2: is not going to cut if you win. And I

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Speaker 2: think they get it. And that's an encouraging sign too.

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Speaker 2: When we look we're going to be having a budget

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Speaker 2: deficit over the next couple of years. Let's not make

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Speaker 2: it too big.

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Speaker 1: Steven, thanks for joining us.

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Speaker 2: Thanks Sean.

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Speaker 1: That was economist Stephen Cooculis. You'll find him at the

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Speaker 1: cook dot com or on x using the handle to cook.

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Speaker 1: This is for and Greeds Summer investing series, brought to

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Speaker 1: you by vanter. Vanta automates compliance for frameworks like ISO

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Speaker 1: dot com, slash Dear and Greed. I'm Sean Elmer. I'm

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Speaker 1: enjoying your day