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Speaker 1: Welcome to Fear and Greed Q and A, where we

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Speaker 1: ask and answer questions about business, investing, economics, politics and more.

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Speaker 1: I'm Michael Thompson, and every Monday morning we are joined

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Speaker 1: by economist Stephen Coucoulis to look at the week ahead.

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Speaker 1: You'll find him at the kook dot com. That's THHG

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Speaker 1: kouk dot com and on X using the handle of

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Speaker 1: the Kok Stephen.

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Speaker 2: Good morning, Good morning, Michael.

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Speaker 1: Now tomorrow we get the minutes of the RBA meeting

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Speaker 1: from a fortnight ago, which was the all important meeting

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Speaker 1: where they cut rates. What are we expecting to see

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Speaker 1: in the minutes? What are you looking for?

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Speaker 2: Yeah? That will dare I put a bit of a

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Speaker 2: damp squib on this one because we do know that

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Speaker 2: immediately after that rate cut decision, the Governor, Michelle Bullok

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Speaker 2: gave her her usual press conference, So I suspect the

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Speaker 2: minutes will reflect what she said there that they're confident

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Speaker 2: that inflation is back under control. So that's a really,

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Speaker 2: really good thing.

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Speaker 1: Are the minutes less important now because we have so

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Speaker 1: much more access and transparency because of that the press

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Speaker 1: conference that comes straight.

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Speaker 2: After exactly, they are less important now there's still going

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Speaker 2: to be a few subtleties that perhaps weren't revealed in

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Speaker 2: the press conference afterwards. But look at this stage, I

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Speaker 2: think we having sort of digested that rate cut from

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Speaker 2: two weeks ago, we're now into the mode of just

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Speaker 2: sort of seeing how this momentum in the economy is going,

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Speaker 2: whether inflation is going to be entrenched at that two

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Speaker 2: and a half plus on minus a small margin. And critically,

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Speaker 2: there are two other issues that are emerging. What happens

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Speaker 2: to the labor market is unemployment sort of peaking it

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Speaker 2: around about these levels. And I'm going to put my

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Speaker 2: optimistic hat on for a minute there, Michael. There's been

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Speaker 2: a little bit or more than a little bit of

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Speaker 2: decent news on the economy in recent week. So not

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Speaker 2: that the minutes will necessarily reflect that, because some of

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Speaker 2: the numbers have come out since the last board meetings.

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Speaker 1: Right, because we had both the wages data, didn't we

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Speaker 1: and we had the labor force figures.

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Speaker 2: They all came out and.

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Speaker 1: The days straight after the IBA meeting.

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Speaker 2: Consumer sentiment and that was probably that was post the

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Speaker 2: rate cuts. So obviously consumers saw the rate coverment, you'd

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Speaker 2: be and you know, so consumer sentiments are a three

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Speaker 2: and a half year high and something that doesn't get

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Speaker 2: a lot of attention. And I don't want to oigh reckon.

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Speaker 2: I'm not just sort of clutching for you know, little

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Speaker 2: pearls of optimism here, but the standard and pause to

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Speaker 2: a Purchasing Managers index, it's sort of like a business

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Speaker 2: survey for want of a better term, right, and that

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Speaker 2: survey showed that both for the services sectors, so the

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Speaker 2: dominant part of the economy, but also for manufacturing optimism

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Speaker 2: is it a three and a half year high as well.

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Speaker 2: So the business sector is actually sort of saying, well, yeah, things, Yeah,

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Speaker 2: we're getting through this period of cost of living, cost

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Speaker 2: of business, high inflation pressures, we're seeing interest rates coming down,

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Speaker 2: and we're seeing a little bit lifted activity. So again

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Speaker 2: I don't want to overreg it, but I'm starting to

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Speaker 2: put on my rose colored glasses and see hy bit

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Speaker 2: of optimism about there.

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Speaker 1: Over egg Away. I mean, that's positivity both on the

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Speaker 1: consumer side and on the business side. I think we

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Speaker 1: can be very excited about that. You mentioned inflation on

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Speaker 1: Wednesday of this week. From the ABS we get monthly

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Speaker 1: inflation figures.

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Speaker 2: Yes, and even though they're downplayed. We don't get the

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Speaker 2: comprehensive monthly inflation numbers still November. So these are still

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Speaker 2: what we might call the experimental or preliminary inflation numbers. However,

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Speaker 2: they do contain a good amount of information, and we've

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Speaker 2: got the market expecting the annual figure to come at

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Speaker 2: about two point three percent. So again there we are

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Speaker 2: middle or fraction below the middle point of the target band.

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Speaker 2: It's not a comprehensive indicator of price pressures, but hey,

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Speaker 2: it's a decent indicator where prices are going. So if

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Speaker 2: we get confirmation that both the trimmed meen and the

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Speaker 2: headline figure are chugging along around about that two point

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Speaker 2: two to two point three percent, they'll give confidence to

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Speaker 2: the RBA that they've got inflation under control and confidence

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Speaker 2: to the market that there will be another rate cut

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Speaker 2: or two between now and early twenty twenty six.

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Speaker 1: So you mentioned that that changes in November, that those

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Speaker 1: monthly figures become more comprehensive. What is that change? What

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Speaker 1: does that look like?

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Speaker 2: Yeah, a couple of years ago, now, the Bureau of

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Speaker 2: Statistics did about a pressure I suppose, because remember we

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Speaker 2: only used to have quarterly inflation numbers, so we had

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Speaker 2: to wait three months, and if there was a quirk

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Speaker 2: in those numbers, which there often was with Lettus prices

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Speaker 2: or something like that, we'd have to wait another three

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Speaker 2: months to see whether those figures were validated. Anyway, So

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Speaker 2: they did this experimental monthly inflation indicator and for the

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Speaker 2: two outlying months, So in the September quarter, for example,

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Speaker 2: the July and the September monthly numbers were not comprehensive.

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Speaker 2: They didn't include a lot of services prices, where that

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Speaker 2: one in the middle August had a lot more services prices.

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Speaker 2: Now they're moving to the point where every month, in November,

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Speaker 2: everything will be surveyed properly. So that's why they're little

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Speaker 2: bit experimental. Both the RBA and the market sort of

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Speaker 2: look at them. Yes, they definitely do, but they're not

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Speaker 2: that comprehensive. They don't survey the full basket of goods

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Speaker 2: and services that go into the existing quarterly And from November, Yay,

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Speaker 2: we're going to have a comprehensive, accurate monthly inflation reading.

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Speaker 1: And will we still receive them the quarterly numbers will

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Speaker 1: or are they pretty much redundant to that point?

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Speaker 2: Look, we'll still receive them. The Bureau of Statistics will

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Speaker 2: still produce the quarterly numbers in line with the monthly numbers,

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Speaker 2: and they'll probably be a smidge different. But hey, I

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Speaker 2: think at the end of the day, when we look

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Speaker 2: at any say six month or two quarter moving average,

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Speaker 2: they'll be the same number.

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Speaker 1: Okay, all right. The other big thing this week private

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Speaker 1: sector business investment, which later this week. This is really important,

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Speaker 1: really important, and I know how much Sean and you,

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Speaker 1: Michael are really hunkering and looking at private sect capex.

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Speaker 1: And we've just gone through last week the productivity summit,

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Speaker 1: all the economic summit, and one of the issues that's there,

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Speaker 1: and one of the reasons why productivity has been relatively poor,

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Speaker 1: to be frank, for the last decade or so, is

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Speaker 1: that the private sector has not been investing as much

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Speaker 1: as it could have should have in machinery, equipment, AI technology,

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Speaker 1: these sorts of things that make us as work is

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Speaker 1: more efficient, you know, so rather than using a pen

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Speaker 1: and pencil and graph paper, we click a few buttons

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Speaker 1: and outcomes of graph for an economist's perspective, So those

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Speaker 1: sorts of productivity enhancing things are part of this CAPEX

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Speaker 1: number and so we've had capex. It's basically been flat

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Speaker 1: for the last year. In fact, it's been down for

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Speaker 1: the last decade, but it sort of finding a bit

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Speaker 1: of a base, and we're hoping that we see a

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Speaker 1: little bit of an upturn in private sector business investment

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Speaker 1: in the September quarter, looking for a figure of about

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Speaker 1: plus one percent, So it'd be nice just to see

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Speaker 1: that turning point coming through. What's the trigger for increasing

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Speaker 1: that is it does do you see optimism and confidence

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Speaker 1: business confidence rising before you see an increase in investment,

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Speaker 1: or does investment come and then the confidence follows after that.

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Speaker 2: It's often one of these ones where it's forced upon business,

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Speaker 2: and particularly in this last little while, where businesses that

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Speaker 2: have been slow on the uptake of technology have been

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Speaker 2: left behind clearly, or the leaders, if you like, the

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Speaker 2: early movers on technology innovation, different sorts of marketing, the

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Speaker 2: ones that have done very very well. So you think

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Speaker 2: that would be in everyone's incentive to ramp up their capex,

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Speaker 2: but it's also a recognition that what are your competitors

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Speaker 2: doing that if you can get away without ramping up

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Speaker 2: that extra several million dollars, tens of millions or in

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Speaker 2: some business's billions of dollars in CAPEX, and I can

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Speaker 2: still make a decent profit, I'll shy away from it.

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Speaker 2: So it's a little bit to do with attitude to risk.

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Speaker 2: Interest rates can play effected because of course, a lot

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Speaker 2: of CAPEX is with borrowed money, and the lower interest

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Speaker 2: rates are that threshold to say, I'm going to borrow

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Speaker 2: a bit of money, ramp up my investment in a

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Speaker 2: new hotel tower, or a new warehouse, or a new

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Speaker 2: machinery and new equipment and the like. If interest rates

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Speaker 2: come down, that'll help capex as well.

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Speaker 1: Okay, we are pretty much out of time in thirty

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Speaker 1: seconds or less, and I don't like to put you

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Speaker 1: on a time limit like this, but I'm going to

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Speaker 1: thoughts on last week's round table, the economic reform round table.

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Speaker 1: Did enough come out of it to really help fix

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Speaker 1: our productivity challenges?

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Speaker 2: To be blunt, there was nothing there that I or

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Speaker 2: most other peoplet Wow, that's a new idea. And I

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Speaker 2: think as we discussed last week, everything that was discussed

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Speaker 2: has been well known, and it's be it tax be

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Speaker 2: at education, skills and training, be it getting rid of

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Speaker 2: red tape, these sorts of things just we know they're important.

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Speaker 2: Where I get a hint of optimism again, maybe I'm

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Speaker 2: getting a bit more optimistic in my old age. There's

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Speaker 2: this little bit of optimism that if and it does

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Speaker 2: rely on the government to take up these good ideas.

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Speaker 2: The ideas have been well, it needs the government to say, look, yep,

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Speaker 2: we are going to run with this elimination of rent tape. Yep,

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Speaker 2: We're going to ramp up skills education and training. Yep,

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Speaker 2: we're going to be doing something on infrastructure spending to

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Speaker 2: make our economy more efficient and more productive. The onus

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Speaker 2: or the ballers in the government's court now to run

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Speaker 2: with these good ideas that were raised there. So do

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Speaker 2: I sort of stand here and say, look, we're about

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Speaker 2: to have a productivity boom? No, am I hopeful that

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Speaker 2: we're going to see some policy reforms that will lead

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Speaker 2: to productivity improvements over the next one, two, five, ten years.

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Speaker 2: A little bit hopeful.

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Speaker 1: Well, you do sound a little bit optimistic, just.

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Speaker 2: A little bit. And that's after, you know, and remember

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Speaker 2: that we've gone through a pandemic, we had an inflation surge,

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Speaker 2: we had RT hiking surge. Oh, we had good reasons

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Speaker 2: to be feeling pretty glum.

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Speaker 1: Some dark days behind.

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Speaker 2: Us, dark economic days. And look, let's embrace good news

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Speaker 2: and we see it. I like that.

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Speaker 1: Stephen, have a great week.

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Speaker 2: Thanks Michael.

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Speaker 1: That was economist Stephen could cool Us. Better known as

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Speaker 1: the Kuk. You can find him at the kook dot

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Speaker 1: com and follow him on X using the handle the

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Speaker 1: Kook and Michael Thompson. And this is Deer and Greed

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Speaker 1: Q and a