1 00:00:05,370 --> 00:00:07,350 Sean Aylmer: Welcome to Fear and Greed: The Week Ahead. I'm Sean 2 00:00:07,440 --> 00:00:10,800 Sean Aylmer: Aylmer. And as always, I'm joined by Economist Stephen Koukoulas. 3 00:00:10,800 --> 00:00:13,410 Sean Aylmer: You'll find him at thekouk. com, T- H- E- K- O- U- 4 00:00:13,410 --> 00:00:16,739 Sean Aylmer: K, thekouk. com, and on X using the handle thekouk. 5 00:00:16,739 --> 00:00:17,700 Sean Aylmer: Stephen, good morning. 6 00:00:18,000 --> 00:00:19,079 Stephen Koukoulas: Good day, Sean. How are you? 7 00:00:19,440 --> 00:00:22,079 Sean Aylmer: I'm well. Look, the Autumn Racing Carnival, it's pretty much 8 00:00:22,079 --> 00:00:23,880 Sean Aylmer: over. Did you have a good carnival? 9 00:00:24,420 --> 00:00:27,810 Stephen Koukoulas: I had a great carnival. Some wonderful horses running around. 10 00:00:29,010 --> 00:00:33,150 Stephen Koukoulas: Didn't really win enough money to do anything exciting with, 11 00:00:33,150 --> 00:00:36,269 Stephen Koukoulas: but it's more fun. If you lose a few dollars 12 00:00:36,269 --> 00:00:39,510 Stephen Koukoulas: on the races, it's just fun. If you win, it's a 13 00:00:39,510 --> 00:00:42,090 Stephen Koukoulas: little bit more fun. But oh, getting ready for the 14 00:00:42,090 --> 00:00:44,639 Stephen Koukoulas: winter campaign up in Brisbane and a long wait till 15 00:00:44,639 --> 00:00:45,540 Stephen Koukoulas: the spring campaign. 16 00:00:45,570 --> 00:00:49,078 Sean Aylmer: Ah, yeah, it is, it is. Okay, let's jump into 17 00:00:49,080 --> 00:00:51,450 Sean Aylmer: what's happening. Well, let's talk about what happened last week 18 00:00:51,450 --> 00:00:53,850 Sean Aylmer: because there's a bit of news around. Let's start with 19 00:00:53,850 --> 00:00:57,090 Sean Aylmer: house prices, still rising, but that's sort of the pace 20 00:00:57,090 --> 00:00:58,230 Sean Aylmer: of growth is slowing a bit. 21 00:00:58,650 --> 00:01:03,359 Stephen Koukoulas: Yeah, the CoreLogic numbers confirmed a 0. 6% nationwide increase 22 00:01:03,360 --> 00:01:07,649 Stephen Koukoulas: in house prices, following a 0. 6 the month before, and a 0. 3 23 00:01:08,039 --> 00:01:11,760 Stephen Koukoulas: the month before that. So reasonable sort of increases, but 24 00:01:11,760 --> 00:01:13,770 Stephen Koukoulas: as you alluded to, down on what we saw in 25 00:01:13,770 --> 00:01:16,920 Stephen Koukoulas: the middle of 2023 when we were getting monthly increases 26 00:01:17,220 --> 00:01:21,300 Stephen Koukoulas: around about 1%. Now, the really interesting part of the 27 00:01:21,300 --> 00:01:25,440 Stephen Koukoulas: data now and what's happening in the housing market is a 28 00:01:25,440 --> 00:01:30,029 Stephen Koukoulas: massive divergence between who's strong and who's weak. So there's 29 00:01:30,029 --> 00:01:32,880 Stephen Koukoulas: really only three cities that are strong, and that's Adelaide, 30 00:01:32,970 --> 00:01:38,280 Stephen Koukoulas: Perth, and Brisbane, where there's 15 to 18% annual increases. Wow. Yeah, 31 00:01:38,280 --> 00:01:45,690 Stephen Koukoulas: that's strong. Whereas, Melbourne, Sydney, Hobart, Darwin, Canberra, well, certainly 32 00:01:45,690 --> 00:01:47,369 Stephen Koukoulas: in the last three or four months anyway, have been 33 00:01:47,369 --> 00:01:50,610 Stephen Koukoulas: sort of flat or just little increases. So a big 34 00:01:50,610 --> 00:01:53,010 Stephen Koukoulas: divergence. And I think it comes back to which cities 35 00:01:53,010 --> 00:01:55,500 Stephen Koukoulas: have been building lots and which cities have got the 36 00:01:56,280 --> 00:02:01,230 Stephen Koukoulas: really strong population growth that's fueling these divergences in prices. 37 00:02:01,230 --> 00:02:05,219 Stephen Koukoulas: But overall, price is still going up, but just less 38 00:02:05,219 --> 00:02:06,930 Stephen Koukoulas: rapidly than, say, 12 months ago. 39 00:02:07,650 --> 00:02:11,280 Sean Aylmer: So talking about building, building approvals, not a lot going 40 00:02:11,280 --> 00:02:12,959 Sean Aylmer: on in that sector at the moment. 41 00:02:13,470 --> 00:02:20,460 Stephen Koukoulas: Yeah, really disappointing. Linked to what we were just saying3. . About house prices, we 42 00:02:20,460 --> 00:02:22,349 Stephen Koukoulas: know that we've got to build a lot more houses 43 00:02:22,350 --> 00:02:26,040 Stephen Koukoulas: in Australia to deal with this really strong lift in 44 00:02:26,070 --> 00:02:29,580 Stephen Koukoulas: population growth and the shortage that currently exists even without 45 00:02:29,580 --> 00:02:32,820 Stephen Koukoulas: any more population growth. So the building approval is down 1. 46 00:02:33,150 --> 00:02:37,889 Stephen Koukoulas: 9% following a fall of 2. 9% the prior month. The 47 00:02:37,889 --> 00:02:40,440 Stephen Koukoulas: level of building, sort of tracking at its lowest level 48 00:02:40,440 --> 00:02:43,768 Stephen Koukoulas: in about 11 years. To put it into sort of another 49 00:02:43,770 --> 00:02:48,630 Stephen Koukoulas: context, we're currently building at an annualized rate of about 150, 000 50 00:02:48,630 --> 00:02:52,109 Stephen Koukoulas: dwellings per year, which sounds a lot in a way, 51 00:02:52,440 --> 00:02:57,360 Stephen Koukoulas: but when our population's increasing by 500, 600, 000, we're not building 52 00:02:57,360 --> 00:03:00,720 Stephen Koukoulas: enough to allow for that population growth. So the shortage 53 00:03:00,720 --> 00:03:04,020 Stephen Koukoulas: in housing, pressure on prices, pressure on rents will probably 54 00:03:04,020 --> 00:03:05,040 Stephen Koukoulas: continue a little longer. 55 00:03:05,550 --> 00:03:07,230 Sean Aylmer: Okay. What about this week? We don't have a lot 56 00:03:07,230 --> 00:03:10,110 Sean Aylmer: of domestic information coming out, the National Australia Bank Survey, 57 00:03:10,110 --> 00:03:11,579 Sean Aylmer: but plenty going on overseas. 58 00:03:11,969 --> 00:03:15,750 Stephen Koukoulas: Yeah, look, the NAB Survey, as always, is an interesting, 59 00:03:15,839 --> 00:03:18,960 Stephen Koukoulas: contemporary, up- to- date read on what the business sector's 60 00:03:18,960 --> 00:03:22,109 Stephen Koukoulas: telling us. And it's been resilient. It's come off the 61 00:03:22,110 --> 00:03:25,050 Stephen Koukoulas: strength that we saw in the latter part of 2023, 62 00:03:25,050 --> 00:03:29,969 Stephen Koukoulas: but nonetheless, business confidence, business conditions are okay, they're in 63 00:03:29,969 --> 00:03:32,400 Stephen Koukoulas: the groove. And also, we get a lot of the 64 00:03:32,400 --> 00:03:36,629 Stephen Koukoulas: subcomponents on price pressures and wage pressures, labor costs in 65 00:03:36,810 --> 00:03:39,690 Stephen Koukoulas: the survey as well. So that'll be interesting. But arguably, 66 00:03:39,690 --> 00:03:43,620 Stephen Koukoulas: all of our eyes will be overseas during the course 67 00:03:43,620 --> 00:03:45,869 Stephen Koukoulas: of this week. We've got three really important central bank 68 00:03:45,870 --> 00:03:50,099 Stephen Koukoulas: meetings, RBNZ, New Zealand's in a recession. They're probably not 69 00:03:50,099 --> 00:03:53,279 Stephen Koukoulas: going to cut, but they'll certainly sound dovish. European Central 70 00:03:53,279 --> 00:03:56,670 Stephen Koukoulas: Bank, similar story. Germany's very weak. And of course, that's 71 00:03:56,670 --> 00:04:01,410 Stephen Koukoulas: the big part of the ECB or the European area. They're weakening 72 00:04:01,410 --> 00:04:04,020 Stephen Koukoulas: too, so probably a dovish take from them. And our 73 00:04:04,020 --> 00:04:06,090 Stephen Koukoulas: friends in Canada, they're probably going to be a little 74 00:04:06,090 --> 00:04:09,599 Stephen Koukoulas: bit more resilient. So the Bank of Canada, again, on 75 00:04:09,599 --> 00:04:12,599 Stephen Koukoulas: hold, but we're going to be watching for which Central 76 00:04:12,660 --> 00:04:15,030 Stephen Koukoulas: Bank blinks first, which is going to be the first 77 00:04:15,030 --> 00:04:17,760 Stephen Koukoulas: to signal an easing bias in this cycle. So there's 78 00:04:17,760 --> 00:04:20,430 Stephen Koukoulas: three big ones to watch out for this week. 79 00:04:21,059 --> 00:04:24,450 Sean Aylmer: I suppose, just going on that theme, Jerome Powell, last 80 00:04:24,450 --> 00:04:28,049 Sean Aylmer: week, the US Federal Reserve chair, he still seems pretty 81 00:04:28,049 --> 00:04:30,238 Sean Aylmer: determined to cut rates at some point this year. 82 00:04:30,420 --> 00:04:33,238 Stephen Koukoulas: Yeah. Well, we had some reasonable data last week. They 83 00:04:33,240 --> 00:04:35,070 Stephen Koukoulas: had a couple that were a bit weaker too. So 84 00:04:35,070 --> 00:04:38,339 Stephen Koukoulas: again, it's that it's not unambiguously strong or weak, which 85 00:04:38,339 --> 00:04:40,859 Stephen Koukoulas: is, of course, where us market economists get a little 86 00:04:40,860 --> 00:04:43,889 Stephen Koukoulas: bit confused from time to time when some strong, some 87 00:04:43,889 --> 00:04:46,109 Stephen Koukoulas: weak, what do we do? Same with central banks. But 88 00:04:46,109 --> 00:04:49,260 Stephen Koukoulas: Powell was saying that the Fed in the US still 89 00:04:49,260 --> 00:04:51,330 Stephen Koukoulas: has a bias to cut interest rates. He still is 90 00:04:51,330 --> 00:04:54,570 Stephen Koukoulas: seeing a number of rate cuts over the remainder of 91 00:04:54,600 --> 00:04:57,779 Stephen Koukoulas: 2024 and probably to 2025. And a few of his 92 00:04:57,779 --> 00:05:01,409 Stephen Koukoulas: other FOMC committee members were saying a similar sort of 93 00:05:01,410 --> 00:05:04,709 Stephen Koukoulas: thing. So while there's still a little bit of ambiguity 94 00:05:04,709 --> 00:05:08,700 Stephen Koukoulas: about how commodity prices, oil shot up dramatically last week, 95 00:05:08,700 --> 00:05:12,089 Stephen Koukoulas: will that impact on inflation? There's many moving parts to 96 00:05:12,089 --> 00:05:15,270 Stephen Koukoulas: this story, but it does appear that the Fed does 97 00:05:15,270 --> 00:05:17,969 Stephen Koukoulas: want to cut rates. The interest rates are very restrictive 98 00:05:17,969 --> 00:05:20,609 Stephen Koukoulas: in the US, but what we're talking about here, Sean, 99 00:05:20,610 --> 00:05:23,309 Stephen Koukoulas: I think it's important to emphasize, is not a mega rate 100 00:05:23,309 --> 00:05:27,180 Stephen Koukoulas: cutting cycle, but probably two to four rate cuts over 101 00:05:27,180 --> 00:05:28,770 Stephen Koukoulas: the next 12 months, no more than that. 102 00:05:29,310 --> 00:05:30,420 Sean Aylmer: Stephen, enjoy your week. 103 00:05:30,720 --> 00:05:31,290 Stephen Koukoulas: Thank you, Sean. 104 00:05:31,890 --> 00:05:34,739 Sean Aylmer: Economist Stephen Koukoulas, better known as The Kouk. You can find him @ 105 00:05:34,920 --> 00:05:38,248 Sean Aylmer: thekouk, and follow him on X using the handle thekouk. 106 00:05:38,490 --> 00:05:40,499 Sean Aylmer: I'm Sean Aylmer and this is Fear and Greed: The 107 00:05:40,500 --> 00:05:41,070 Sean Aylmer: Week Ahead.