1 00:00:03,440 --> 00:00:06,390 Adam Lang: Welcome to the Fear and Greed Daily Interview. I'm Adam Lang. 2 00:00:06,930 --> 00:00:09,209 Adam Lang: If you only look at the headline number from yesterday's 3 00:00:09,210 --> 00:00:12,330 Adam Lang: labour force data, you'd be forgiven for thinking the jobs 4 00:00:12,330 --> 00:00:15,930 Adam Lang: market was going along nicely. The unemployment rate fell from 5 00:00:17,940 --> 00:00:20,070 Adam Lang: 4.6 to 4.5%, but you don't have to go too far 6 00:00:20,070 --> 00:00:22,739 Adam Lang: beyond that to see the real story. There was a 7 00:00:22,739 --> 00:00:27,860 Adam Lang: decline of 146,000 jobs in August, and a significant drop in 8 00:00:27,860 --> 00:00:31,550 Adam Lang: hours worked, as lockdowns in Sydney and Melbourne started to bite. 9 00:00:32,440 --> 00:00:35,070 Adam Lang: Gareth Aird is the Head of Australian Economics at the 10 00:00:35,070 --> 00:00:37,930 Adam Lang: Commonwealth Bank. Gareth, welcome back to Fear and Greed. 11 00:00:38,250 --> 00:00:38,841 Gareth Aird: Thanks, Adam. How you going? 12 00:00:38,841 --> 00:00:41,940 Adam Lang: I'm very well, thanks. And thanks again for joining us. 13 00:00:42,300 --> 00:00:44,720 Adam Lang: First, can you take me through some of the numbers? 14 00:00:44,720 --> 00:00:46,480 Adam Lang: Where were the jobs lost? 15 00:00:46,970 --> 00:00:49,790 Gareth Aird: Well, look, there was a big decline in employment nationally, 16 00:00:49,790 --> 00:00:54,050 Gareth Aird: as you said, 146,000, but the job losses were very 17 00:00:54,050 --> 00:00:59,100 Gareth Aird: much concentrated in New South Wales. Employment contracted by 173,000, 18 00:00:59,580 --> 00:01:02,580 Gareth Aird: which takes the cumulative fall over the past couple of 19 00:01:02,580 --> 00:01:07,020 Gareth Aird: months to 210, 000. So that figure there is really capturing 20 00:01:07,020 --> 00:01:09,630 Gareth Aird: the big impact that the lockdowns are having on the 21 00:01:09,630 --> 00:01:13,020 Gareth Aird: jobs market. What was interesting is that in Victoria, which 22 00:01:13,020 --> 00:01:17,830 Gareth Aird: is obviously also in a lockdown, employment actually rose by 29, 000. Now, 23 00:01:17,830 --> 00:01:20,610 Gareth Aird: that's obviously very misleading, but if you look back at 24 00:01:20,610 --> 00:01:23,380 Gareth Aird: what happened with lockdowns, Victoria actually got a reprieve for 25 00:01:23,380 --> 00:01:26,020 Gareth Aird: a week from the 28th of July to the 4th 26 00:01:26,020 --> 00:01:28,300 Gareth Aird: of August. So that was enough to actually see their 27 00:01:28,300 --> 00:01:31,640 Gareth Aird: employment numbers go up. But what we'll see over September 28 00:01:31,760 --> 00:01:34,669 Gareth Aird: and then into October, is that the lockdown in Victoria 29 00:01:34,670 --> 00:01:37,120 Gareth Aird: really hits those numbers and we'll see a further big 30 00:01:37,120 --> 00:01:40,330 Gareth Aird: decline in employment. So look, there's no doubt that the 31 00:01:40,330 --> 00:01:42,900 Gareth Aird: lockdowns are having a really big impact on the labour market. 32 00:01:43,380 --> 00:01:45,959 Gareth Aird: I think the unemployment rate that we got is pretty misleading, 33 00:01:45,959 --> 00:01:48,890 Gareth Aird: because the vast majority of people who have been stood 34 00:01:48,900 --> 00:01:51,300 Gareth Aird: down are just simply not looking for a job during 35 00:01:51,300 --> 00:01:54,520 Gareth Aird: the lockdown, therefore they're not considered unemployed. But I think 36 00:01:54,670 --> 00:01:57,130 Gareth Aird: what's going to be really interesting and really important is 37 00:01:57,130 --> 00:01:59,850 Gareth Aird: when we come out of these lockdowns, what proportion of 38 00:01:59,850 --> 00:02:02,730 Gareth Aird: those people that are currently not working have a job 39 00:02:02,730 --> 00:02:05,300 Gareth Aird: to go back to. And that unfortunately is what we 40 00:02:05,300 --> 00:02:06,330 Gareth Aird: don't know at the moment. 41 00:02:07,050 --> 00:02:09,139 Adam Lang: The amount of data and the speed that we're getting 42 00:02:09,139 --> 00:02:11,500 Adam Lang: it at the moment is so helpful. Those are two 43 00:02:11,500 --> 00:02:15,130 Adam Lang: really interesting comparisons between Victoria and New South Wales. Are 44 00:02:15,130 --> 00:02:18,359 Adam Lang: you able to see into the hours worked and the participation 45 00:02:18,360 --> 00:02:20,210 Adam Lang: rate to see what the effects are there? 46 00:02:20,690 --> 00:02:24,610 Gareth Aird: Look, the hours work declined by massive amounts in New 47 00:02:24,610 --> 00:02:27,180 Gareth Aird: South Wales. I mean, New South Wales hours worked in 48 00:02:27,180 --> 00:02:29,859 Gareth Aird: August were down six and a half per cent, and that 49 00:02:29,860 --> 00:02:33,600 Gareth Aird: built on a 7% contraction in July. So in just the 50 00:02:33,600 --> 00:02:35,880 Gareth Aird: two months that New South Wales has been in lockdown, 51 00:02:36,260 --> 00:02:39,239 Gareth Aird: hours worked have actually contracted by 13%. And I think 52 00:02:39,690 --> 00:02:44,329 Gareth Aird: that's probably the statistic which most accurately captures what is 53 00:02:44,330 --> 00:02:47,270 Gareth Aird: actually happening to the labour market. And that's also, hours worked 54 00:02:47,270 --> 00:02:50,919 Gareth Aird: is most correlated with GDP or production, so we're going 55 00:02:50,919 --> 00:02:53,610 Gareth Aird: to see a huge contraction in state final demand in New 56 00:02:53,610 --> 00:02:55,850 Gareth Aird: South Wales over the September quarter that will flow through 57 00:02:55,850 --> 00:02:58,919 Gareth Aird: to October. And I mean, a 13% odd fall in 58 00:02:58,919 --> 00:03:01,889 Gareth Aird: hours worked is just incredible. But then in a lot 59 00:03:01,889 --> 00:03:05,210 Gareth Aird: of ways, it's just intuitive given how many businesses are shut at the moment. 60 00:03:05,590 --> 00:03:08,530 Gareth Aird: In Victoria, hours worked didn't fall by as much, down 61 00:03:08,530 --> 00:03:10,760 Gareth Aird: around three and a half percent over the month. But as I said, 62 00:03:11,340 --> 00:03:13,299 Gareth Aird: Victoria got a bit of reprieve there because they had 63 00:03:13,300 --> 00:03:15,910 Gareth Aird: a week out of lockdown. But the numbers are going 64 00:03:15,910 --> 00:03:19,020 Gareth Aird: to look pretty bleak in the next employment report. What's 65 00:03:19,020 --> 00:03:26,590 Gareth Aird: going on in Victoria will be more accurately captured. It's just going to paint a picture of a labor market that's really struggling at the moment given we've got more 66 00:03:26,590 --> 00:03:27,880 Gareth Aird: than half the country in lockdown. 67 00:03:28,540 --> 00:03:31,010 Adam Lang: Outside the lockdowns, are you able to see any bright 68 00:03:31,010 --> 00:03:33,619 Adam Lang: spots because hopefully we can all look forward to getting 69 00:03:33,620 --> 00:03:36,220 Adam Lang: out of lockdown across the country. Are you seeing any 70 00:03:36,220 --> 00:03:36,870 Adam Lang: bright spots? 71 00:03:37,480 --> 00:03:39,710 Gareth Aird: Yeah, look, the main bright spot I would say is 72 00:03:39,710 --> 00:03:42,160 Gareth Aird: that the labor market outside of the states that are 73 00:03:42,160 --> 00:03:45,240 Gareth Aird: in lockdown is holding up quite well. We're sort of 74 00:03:45,240 --> 00:03:47,590 Gareth Aird: running an experiment in real time where we've never really 75 00:03:47,590 --> 00:03:50,180 Gareth Aird: been sure up until now just how kind of interdependent 76 00:03:50,180 --> 00:03:53,190 Gareth Aird: the states are on each other. But so far we 77 00:03:53,190 --> 00:03:55,580 Gareth Aird: haven't seen too much of a negative spillover from what's 78 00:03:55,580 --> 00:03:58,410 Gareth Aird: been going on in Victoria and New South Wales into 79 00:03:58,410 --> 00:04:00,810 Gareth Aird: the other states. I mean, it definitely would be having 80 00:04:00,810 --> 00:04:03,760 Gareth Aird: an impact on the tourism industry, for example, in Queensland. 81 00:04:03,760 --> 00:04:06,100 Gareth Aird: But in the main, those states that have not got 82 00:04:06,100 --> 00:04:09,470 Gareth Aird: problems with COVID at the moment are actually doing pretty well. 83 00:04:10,010 --> 00:04:12,140 Gareth Aird: I think the thing though, to keep in mind though, 84 00:04:12,140 --> 00:04:15,320 Gareth Aird: is when New South Wales and Victoria reopen, they're not 85 00:04:15,320 --> 00:04:18,040 Gareth Aird: going to reopen to look like the states that are 86 00:04:18,040 --> 00:04:21,089 Gareth Aird: not currently in lockdown. They're going to reopen and try 87 00:04:21,089 --> 00:04:25,159 Gareth Aird: and manage basically COVID cases and hospitalisations. So I think 88 00:04:25,160 --> 00:04:27,020 Gareth Aird: that things are going to get better. I mean, they 89 00:04:27,020 --> 00:04:29,589 Gareth Aird: have to just because we're coming out of lockdown, but 90 00:04:30,010 --> 00:04:31,779 Gareth Aird: I don't think we're going to snap back to the 91 00:04:31,779 --> 00:04:34,150 Gareth Aird: kind of outcomes that we're seeing in other parts of 92 00:04:34,150 --> 00:04:37,070 Gareth Aird: the country, in New South Wales and Victoria straight away. Namely, 93 00:04:37,070 --> 00:04:39,760 Gareth Aird: because there's still going to be restrictions on what we 94 00:04:39,820 --> 00:04:41,770 Gareth Aird: can and can't do. I think we're going to see 95 00:04:41,770 --> 00:04:45,210 Gareth Aird: a gradual easing of restrictions. And I think also there's 96 00:04:45,210 --> 00:04:48,450 Gareth Aird: just an adjustment process that comes from having to live 97 00:04:48,450 --> 00:04:51,680 Gareth Aird: with COVID. We don't really know what that means for 98 00:04:51,680 --> 00:04:54,100 Gareth Aird: the services sector and just how much people are out 99 00:04:54,410 --> 00:04:57,050 Gareth Aird: and about spending. And we also don't really know what 100 00:04:57,050 --> 00:05:00,700 Gareth Aird: labour market disruption is coming, by virtue of the fact 101 00:05:00,700 --> 00:05:03,400 Gareth Aird: that COVID cases are going to rise pretty significantly. I mean, 102 00:05:03,400 --> 00:05:05,820 Gareth Aird: we're going to have lots of workers who are basically 103 00:05:05,820 --> 00:05:08,420 Gareth Aird: told to isolate for two weeks because they've either caught 104 00:05:08,420 --> 00:05:11,180 Gareth Aird: COVID or they're a close contact, and that's going to cause quite 105 00:05:11,180 --> 00:05:13,529 Gareth Aird: a bit of disruption. And then we also might find 106 00:05:13,529 --> 00:05:15,990 Gareth Aird: that some people just don't want to go back to 107 00:05:15,990 --> 00:05:18,980 Gareth Aird: work straight away while COVID cases go up because they're 108 00:05:18,980 --> 00:05:22,659 Gareth Aird: concerned about getting the virus. And we've seen that happen overseas. 109 00:05:22,660 --> 00:05:24,349 Gareth Aird: So I think there's lots of uncertainty. I mean, the 110 00:05:24,350 --> 00:05:26,599 Gareth Aird: good news is that in a couple of months, things will get better. 111 00:05:27,029 --> 00:05:30,570 Gareth Aird: But I think the rate of improvement is still up for grabs, given there's so much we don't know about how this is going 112 00:05:31,940 --> 00:05:32,360 Gareth Aird: to play out. 113 00:05:32,940 --> 00:05:35,900 Adam Lang: And the question about the live experiment as you referred 114 00:05:35,900 --> 00:05:38,349 Adam Lang: to it, because so much of what we're seeing won't 115 00:05:38,350 --> 00:05:42,169 Adam Lang: be even around the country or even within states. Do 116 00:05:42,170 --> 00:05:45,640 Adam Lang: you think we'll see different speeds of employment and recovery 117 00:05:45,710 --> 00:05:48,650 Adam Lang: as each market goes through those lockdown liberations? 118 00:05:49,720 --> 00:05:51,820 Gareth Aird: Well, I think a lot of it's going to come down 119 00:05:51,820 --> 00:05:55,349 Gareth Aird: to what restrictions or not are imposed by each state 120 00:05:55,350 --> 00:05:58,740 Gareth Aird: premier in terms of dealing with COVID. I mean, the 121 00:05:58,740 --> 00:06:01,710 Gareth Aird: more liberal approach you have when you come out of lockdown, 122 00:06:01,750 --> 00:06:05,700 Gareth Aird: the better probably labour market outcomes you're going to see. Equally, 123 00:06:05,700 --> 00:06:08,870 Gareth Aird: you probably see a higher number of cases. So in 124 00:06:08,870 --> 00:06:11,539 Gareth Aird: some sense, it's going to be dictated to, by what 125 00:06:11,870 --> 00:06:15,349 Gareth Aird: state premiers across the country impose and what they basically 126 00:06:15,350 --> 00:06:18,410 Gareth Aird: allow in terms of social distancing, number of people that can 127 00:06:18,450 --> 00:06:20,270 Gareth Aird: be at venues and all that sort of stuff. I mean, 128 00:06:20,270 --> 00:06:23,100 Gareth Aird: all that is going to feed into, I think, the labour 129 00:06:23,410 --> 00:06:26,210 Gareth Aird: market outcomes that we get. Probably the other thing to 130 00:06:26,210 --> 00:06:28,470 Gareth Aird: be thinking about is that New South Wales and Victoria 131 00:06:28,470 --> 00:06:30,839 Gareth Aird: have now been in lockdown for quite a while, and 132 00:06:30,839 --> 00:06:32,909 Gareth Aird: the number of weeks are adding up and in New 133 00:06:32,910 --> 00:06:35,190 Gareth Aird: South Wales there's at least another four weeks to go. 134 00:06:35,600 --> 00:06:38,839 Gareth Aird: And in Victoria, probably looking at six odd weeks. We don't 135 00:06:38,839 --> 00:06:42,430 Gareth Aird: know yet the number of businesses that have shut down 136 00:06:42,670 --> 00:06:44,600 Gareth Aird: through that period. And it may not be the case 137 00:06:44,600 --> 00:06:47,830 Gareth Aird: that they were insolvent, but they've just simply decided to 138 00:06:47,830 --> 00:06:50,960 Gareth Aird: shut the doors permanently because it's all gotten too hard. 139 00:06:50,960 --> 00:06:53,560 Gareth Aird: and they've felt that it's not worth it anymore. And 140 00:06:53,560 --> 00:06:55,409 Gareth Aird: maybe they sort of are aware that coming out on 141 00:06:55,410 --> 00:06:57,900 Gareth Aird: the other side, that things aren't going to snap back the way 142 00:06:57,900 --> 00:07:01,900 Gareth Aird: that makes their business viable. For example, like CBD businesses 143 00:07:01,900 --> 00:07:05,210 Gareth Aird: that need people in the city. So, it could be the 144 00:07:05,210 --> 00:07:07,870 Gareth Aird: case that a decent chunk of workers who have been 145 00:07:07,870 --> 00:07:11,540 Gareth Aird: stood down through this period realise that, actually, their old 146 00:07:11,540 --> 00:07:13,870 Gareth Aird: job isn't there to go back to. So I think 147 00:07:13,870 --> 00:07:16,790 Gareth Aird: there's still lots that we don't know. The good news 148 00:07:16,840 --> 00:07:19,330 Gareth Aird: is that there's still plenty of income support to the 149 00:07:19,330 --> 00:07:22,370 Gareth Aird: workers that have been stood down through this process. I 150 00:07:22,370 --> 00:07:24,220 Gareth Aird: think when we come out, we're going to learn a 151 00:07:24,220 --> 00:07:27,080 Gareth Aird: lot about how big or not the disruption of COVID 152 00:07:27,080 --> 00:07:29,940 Gareth Aird: is on the jobs market and on the economy more broadly. 153 00:07:30,310 --> 00:07:32,330 Adam Lang: Stay with me, Gareth. We'll be back in a minute. 154 00:07:37,350 --> 00:07:40,230 Adam Lang: My guest this morning is Gareth Aird, Head of Australian 155 00:07:40,230 --> 00:07:43,410 Adam Lang: Economics at the Commonwealth Bank. So you've been looking at 156 00:07:43,410 --> 00:07:47,930 Adam Lang: data related to household incomes and COVID 19 support payments, in 157 00:07:48,120 --> 00:07:50,910 Adam Lang: particular for the states in lockdown. What have you found 158 00:07:50,910 --> 00:07:51,360 Adam Lang: through that? 159 00:07:51,890 --> 00:07:53,940 Gareth Aird: Yeah, look, it's been fascinating. I mean, one of the 160 00:07:53,940 --> 00:07:56,540 Gareth Aird: beauties of working at Commonwealth Bank is we have access 161 00:07:56,540 --> 00:07:59,390 Gareth Aird: to a range of high frequency internal data. And what 162 00:07:59,390 --> 00:08:02,270 Gareth Aird: we've been able to do is monitor the payments that 163 00:08:02,270 --> 00:08:04,950 Gareth Aird: have been going into CBA bank accounts in the form 164 00:08:04,950 --> 00:08:07,810 Gareth Aird: of wages and salaries paid from an employer. And then 165 00:08:07,810 --> 00:08:10,940 Gareth Aird: also the government benefit payments, which are picking up all 166 00:08:10,940 --> 00:08:13,880 Gareth Aird: sorts of different government payments, but they of course include 167 00:08:14,370 --> 00:08:18,300 Gareth Aird: the important COVID 19 disaster payment, which is the money that 168 00:08:18,300 --> 00:08:21,170 Gareth Aird: the government's channelling into workers who have lost hours through 169 00:08:21,170 --> 00:08:24,910 Gareth Aird: the lockdown. And what our data indicates is that the 170 00:08:24,910 --> 00:08:28,640 Gareth Aird: government payments have more than offset the lost wages and 171 00:08:28,640 --> 00:08:32,010 Gareth Aird: salaries at an aggregate level in New South Wales and Victoria. 172 00:08:32,010 --> 00:08:35,180 Gareth Aird: So we've got this counterintuitive dynamic underway at the moment, 173 00:08:35,670 --> 00:08:39,309 Gareth Aird: where growth in household income over the past few months 174 00:08:39,380 --> 00:08:42,100 Gareth Aird: in the states in lockdown has actually been the strongest. 175 00:08:42,570 --> 00:08:45,340 Gareth Aird: Because even though you've had that drop off in wages, 176 00:08:45,679 --> 00:08:47,459 Gareth Aird: and we saw that obviously relates to the labour market data today 177 00:08:48,350 --> 00:08:52,210 Gareth Aird: because less people are working, the government payments have more 178 00:08:52,400 --> 00:08:55,190 Gareth Aird: than offset that. Now, it doesn't mean for every individual 179 00:08:55,190 --> 00:08:56,969 Gareth Aird: they're better off. There's going to be individuals that are 180 00:08:56,970 --> 00:08:58,930 Gareth Aird: worse off. But if we look at the household sector 181 00:08:59,030 --> 00:09:02,610 Gareth Aird: at an aggregate, there's way more money going in than 182 00:09:02,610 --> 00:09:07,230 Gareth Aird: there would've been without the lockdowns. So it's an unusual dynamic. 183 00:09:07,230 --> 00:09:09,690 Gareth Aird: It's one though that we did actually see last year 184 00:09:09,770 --> 00:09:12,780 Gareth Aird: when we had the national lockdown, where growth in income 185 00:09:12,780 --> 00:09:16,189 Gareth Aird: was so strong because the government's support was massive. The 186 00:09:16,190 --> 00:09:18,710 Gareth Aird: government support this time around for businesses is not as much, 187 00:09:18,720 --> 00:09:22,520 Gareth Aird: but certainly, for impacted workers, it's very significant and overall 188 00:09:22,520 --> 00:09:23,440 Gareth Aird: income has stepped up. 189 00:09:23,929 --> 00:09:28,010 Adam Lang: That is so interesting. So with household cash maybe going 190 00:09:28,010 --> 00:09:31,030 Adam Lang: up a bit, surely that'll be a boost when restrictions 191 00:09:31,030 --> 00:09:33,130 Adam Lang: are lifted and we can all start spending again? 192 00:09:33,840 --> 00:09:37,610 Gareth Aird: Look, absolutely. I think, whatever outcomes we get when restrictions 193 00:09:37,610 --> 00:09:41,360 Gareth Aird: are eased, they're not going to be negatively impacted by a lack 194 00:09:41,360 --> 00:09:43,520 Gareth Aird: of money, by a lack of spending power or a 195 00:09:43,520 --> 00:09:45,320 Gareth Aird: lack of cash in the system however you want to 196 00:09:45,320 --> 00:09:49,350 Gareth Aird: define it. There is a truckload of household savings sitting there. 197 00:09:49,400 --> 00:09:52,730 Gareth Aird: I mean, our internal data indicates that the average bank 198 00:09:52,730 --> 00:09:55,559 Gareth Aird: account at CBA has $ 10, 000 odd more in it 199 00:09:55,559 --> 00:09:58,610 Gareth Aird: sitting in there than pre COVID. And that's supported by 200 00:09:58,610 --> 00:10:01,540 Gareth Aird: what the national accounts is saying around the level of 201 00:10:01,540 --> 00:10:05,010 Gareth Aird: savings in the economy and the savings rate. So there 202 00:10:05,010 --> 00:10:07,750 Gareth Aird: is plenty of money there that can generate some really 203 00:10:07,750 --> 00:10:10,870 Gareth Aird: good outcomes. It all comes down to, I think, really 204 00:10:11,400 --> 00:10:14,240 Gareth Aird: what kind of restrictions we still have, what the health 205 00:10:14,240 --> 00:10:17,189 Gareth Aird: outcomes are looking like, and how concerned or not are 206 00:10:17,190 --> 00:10:20,710 Gareth Aird: households around doing things, if they're concerned about catching COVID. So, you know, 207 00:10:21,630 --> 00:10:23,490 Gareth Aird: we could find that we get a really fast snap 208 00:10:23,490 --> 00:10:26,980 Gareth Aird: back if nobody is worried about COVID and the hospitalisation 209 00:10:27,110 --> 00:10:29,030 Gareth Aird: numbers don't go up too much and the vaccines do 210 00:10:29,030 --> 00:10:32,559 Gareth Aird: their job and that'd be the ideal outcome. I just think at 211 00:10:32,559 --> 00:10:35,030 Gareth Aird: this stage, as much as things are going to get better, 212 00:10:35,230 --> 00:10:38,020 Gareth Aird: we've just got to be aware that they may not 213 00:10:38,020 --> 00:10:41,280 Gareth Aird: snap back as quickly as we'd like, just given we're 214 00:10:41,280 --> 00:10:43,660 Gareth Aird: going through an adjustment process with COVID. And we could find 215 00:10:43,660 --> 00:10:46,689 Gareth Aird: that four to six weeks in the case numbers go 216 00:10:46,690 --> 00:10:50,330 Gareth Aird: up so quickly that more restrictions come back. So again 217 00:10:50,330 --> 00:10:52,829 Gareth Aird: much like the labour market, lots of uncertainty out there, 218 00:10:52,830 --> 00:10:55,870 Gareth Aird: but certainly from an income side, there's no issues there. 219 00:10:55,870 --> 00:10:58,500 Gareth Aird: I mean, households are cashed up in a way we 220 00:10:58,500 --> 00:10:59,729 Gareth Aird: have not seen before, really. 221 00:11:00,130 --> 00:11:02,370 Adam Lang: We certainly don't want to go backwards once we start 222 00:11:02,370 --> 00:11:06,880 Adam Lang: working out of our lockdown situations. Since you've last appeared on 223 00:11:06,890 --> 00:11:10,080 Adam Lang: Fear and Greed, there's been house price data that showed 224 00:11:10,080 --> 00:11:14,840 Adam Lang: residential property prices have jumped 6.7% in the June quarter. 225 00:11:15,400 --> 00:11:18,599 Adam Lang: It's the strongest quarterly growth since the Bureau of Statistics 226 00:11:18,600 --> 00:11:22,230 Adam Lang: started keeping records in 2003. How do you see that 227 00:11:22,230 --> 00:11:23,800 Adam Lang: playing out over the next 12 months? 228 00:11:25,120 --> 00:11:28,280 Gareth Aird: Well, the housing market at the moment is basically divorced from 229 00:11:28,280 --> 00:11:31,530 Gareth Aird: the economy in terms of... Well in New South Wales and Victoria, 230 00:11:31,530 --> 00:11:35,099 Gareth Aird: there is no negative impact from lockdowns on the housing market. 231 00:11:35,660 --> 00:11:38,170 Gareth Aird: And I think what we're finding is that because the 232 00:11:38,170 --> 00:11:41,400 Gareth Aird: vast majority of people have not actually lost their job through COVID, 233 00:11:41,920 --> 00:11:43,650 Gareth Aird: the people that have kept their job, they're the ones 234 00:11:43,650 --> 00:11:46,390 Gareth Aird: that are transacting in the housing market. And the thing 235 00:11:46,390 --> 00:11:49,490 Gareth Aird: that matters most to them is the level of interest rates. 236 00:11:49,720 --> 00:11:52,739 Gareth Aird: Interest rates are still incredibly low. The Reserve Bank Governor 237 00:11:53,190 --> 00:11:55,490 Gareth Aird: is out there. And again, he reminded people this week 238 00:11:55,490 --> 00:11:58,870 Gareth Aird: that he doesn't think that he'll be raising the cash rate until 2024. 239 00:11:59,420 --> 00:12:02,730 Gareth Aird: So I think provided households still feel confident that interest 240 00:12:02,730 --> 00:12:05,090 Gareth Aird: rates are going to stay low, they're going to be 241 00:12:05,090 --> 00:12:08,290 Gareth Aird: willing to pay more for an asset. That's what's basically 242 00:12:08,290 --> 00:12:12,540 Gareth Aird: generated the lift in home prices. The higher frequency monthly 243 00:12:12,540 --> 00:12:16,820 Gareth Aird: CoreLogic data indicates that prices continued to rise through August 244 00:12:16,820 --> 00:12:19,670 Gareth Aird: and the early part of September. And I think there's 245 00:12:19,670 --> 00:12:22,150 Gareth Aird: enough momentum in the housing market that prices are just going 246 00:12:22,390 --> 00:12:25,880 Gareth Aird: to keep rising into next year. The pace of increases 247 00:12:25,880 --> 00:12:28,490 Gareth Aird: will slow. It kind of has to, just by virtue 248 00:12:28,490 --> 00:12:32,170 Gareth Aird: of the fact that affordability gets stretched, but there's enough 249 00:12:32,170 --> 00:12:34,010 Gareth Aird: steam in the market at the moment that I think 250 00:12:34,010 --> 00:12:37,670 Gareth Aird: prices will keep rising and it would probably take intervention 251 00:12:37,670 --> 00:12:40,319 Gareth Aird: from the regulator. So that's APRA (Australian Prudential Regulation Authority) in the form of 252 00:12:40,420 --> 00:12:45,030 Gareth Aird: macroprudential policies to slow the housing market. Otherwise, I don't 253 00:12:45,030 --> 00:12:47,670 Gareth Aird: think over the next 12 months it's going to slow 254 00:12:47,700 --> 00:12:50,550 Gareth Aird: of its own accord. Yes, the monthly growth rates will 255 00:12:50,550 --> 00:12:52,589 Gareth Aird: come down a bit, but I don't think prices are 256 00:12:52,590 --> 00:12:55,360 Gareth Aird: going backwards until we see either a shift in interest rates, 257 00:12:55,840 --> 00:12:58,160 Gareth Aird: or macroprudential policies come in from the regulator. 258 00:12:58,550 --> 00:13:01,230 Adam Lang: It's so interesting. Gareth, thanks again for talking to Fear 259 00:13:01,230 --> 00:13:01,400 Adam Lang: and Greed. 260 00:13:01,400 --> 00:13:03,180 Gareth Aird: It's a pleasure. Nice to be on again. 261 00:13:03,500 --> 00:13:06,210 Adam Lang: That was Gareth Aird, Head of Australian Economics at the 262 00:13:06,210 --> 00:13:09,410 Adam Lang: Commonwealth Bank. This is a Fear and Greed Daily Interview. 263 00:13:09,470 --> 00:13:12,440 Adam Lang: Join Sean Aylmer every morning for the full Fear and 264 00:13:12,450 --> 00:13:15,010 Adam Lang: Greed podcast with all the business news you need to know. 265 00:13:15,380 --> 00:13:17,050 Adam Lang: I'm Adam Lang. Enjoy your day.