1 00:00:08,730 --> 00:00:11,570 Sean Aylmer: Welcome to Fear and Greed, The Week Ahead. This is where we take 2 00:00:11,570 --> 00:00:13,770 Sean Aylmer: a look at the big events, reports and releases coming 3 00:00:13,770 --> 00:00:16,400 Sean Aylmer: up this week. They give insight into the economy and 4 00:00:16,400 --> 00:00:18,829 Sean Aylmer: a look back at what happened last week, too. I'm 5 00:00:18,829 --> 00:00:20,850 Sean Aylmer: Sean Aylmer, and every Monday I'm joined for The Week 6 00:00:20,850 --> 00:00:24,310 Sean Aylmer: Ahead by economist Stephen Koukoulas. You'll find him at TheKouk.com 7 00:00:25,010 --> 00:00:29,930 Sean Aylmer: and on Twitter using to handle @TheKouk. Good morning, Stephen. 8 00:00:30,360 --> 00:00:31,470 Stephen Koukoulas: And good morning, Sean. 9 00:00:31,870 --> 00:00:34,270 Sean Aylmer: Now, how did you go at the races on the weekend? I know there 10 00:00:34,270 --> 00:00:35,849 Sean Aylmer: were a few horses that you're a bit keen on. 11 00:00:36,220 --> 00:00:38,520 Stephen Koukoulas: A couple. Look at the end of the day, I did very well. 12 00:00:38,520 --> 00:00:41,209 Stephen Koukoulas: So a couple of good seconds and thirds, but also 13 00:00:41,210 --> 00:00:43,460 Stephen Koukoulas: a couple of winners amongst it all too. So a 14 00:00:43,460 --> 00:00:46,190 Stephen Koukoulas: lot of fun when you're in lockdown following what's the 15 00:00:46,190 --> 00:00:48,510 Stephen Koukoulas: lead into the spring carnival. It's fabulous. 16 00:00:48,510 --> 00:00:51,360 Sean Aylmer: That's right. It's good when the good horses come back because then it's 17 00:00:51,360 --> 00:00:52,860 Sean Aylmer: actually just a little bit more interesting. 18 00:00:53,040 --> 00:00:53,950 Stephen Koukoulas: It is indeed. 19 00:00:54,390 --> 00:00:56,280 Sean Aylmer: So tell me, the week that was and such a big week 20 00:00:56,280 --> 00:00:59,220 Sean Aylmer: last week, although the central banks seemed to dominate. We start 21 00:00:59,220 --> 00:01:01,160 Sean Aylmer: with the Reserve Bank minutes before moving on to the 22 00:01:01,160 --> 00:01:03,990 Sean Aylmer: US Fed. Didn't really say too much new, I suppose. 23 00:01:04,230 --> 00:01:07,000 Stephen Koukoulas: Not too much new. They reiterated their view that they're 24 00:01:07,000 --> 00:01:10,819 Stephen Koukoulas: confident that when the lockdowns end, when vaccination rates are 80% 25 00:01:10,819 --> 00:01:14,950 Stephen Koukoulas: plus for everybody basically, that the conditions are still positive 26 00:01:14,950 --> 00:01:17,280 Stephen Koukoulas: for the economy that I guess when they are talking 27 00:01:17,280 --> 00:01:21,420 Stephen Koukoulas: very late 2021. So probably December, and then certainly into 2022. 28 00:01:22,530 --> 00:01:27,270 Stephen Koukoulas: They're optimistic that there's enough in easy monetary policy, there's 29 00:01:27,270 --> 00:01:31,670 Stephen Koukoulas: still some lingering fiscal stimulus, the Aussie dollar's in the 30 00:01:31,670 --> 00:01:36,500 Stephen Koukoulas: low seventies region, and that's competitive for our economy. And 31 00:01:36,500 --> 00:01:39,510 Stephen Koukoulas: they're saying that, we should be resuming that path to 32 00:01:39,520 --> 00:01:43,300 Stephen Koukoulas: pretty strong growth, to getting jobs being created, and even 33 00:01:43,300 --> 00:01:45,910 Stephen Koukoulas: though we've obviously got an air pocket in the economy 34 00:01:45,910 --> 00:01:48,240 Stephen Koukoulas: right now, it's not as deep as it was last year. 35 00:01:48,400 --> 00:01:50,300 Stephen Koukoulas: And even what we're seeing in some of the labour 36 00:01:50,300 --> 00:01:53,640 Stephen Koukoulas: market indicators, job ads, job vacancies, and things like that, 37 00:01:54,020 --> 00:01:56,730 Stephen Koukoulas: which came out last week. There's not the same lack 38 00:01:56,730 --> 00:01:59,260 Stephen Koukoulas: of confidence, I suppose, in the labour market. And that 39 00:01:59,260 --> 00:02:03,540 Stephen Koukoulas: was something that the RBA was reasonably confident would bode well when the 40 00:02:03,540 --> 00:02:04,360 Stephen Koukoulas: lockdowns end. 41 00:02:04,930 --> 00:02:07,070 Sean Aylmer: Now there were a bunch of central banks last week, 42 00:02:07,070 --> 00:02:09,540 Sean Aylmer: prognosticating, shall we say. There was the US Fed, there 43 00:02:09,540 --> 00:02:11,829 Sean Aylmer: was Japan, there was England, there was Norway. I must 44 00:02:11,830 --> 00:02:14,160 Sean Aylmer: say I did read that they didn't understand much of 45 00:02:14,160 --> 00:02:15,790 Sean Aylmer: it. The big one of course was the Fed. 46 00:02:16,610 --> 00:02:19,130 Stephen Koukoulas: Yes, the Fed came out and it'd be an exaggeration to 47 00:02:19,130 --> 00:02:23,549 Stephen Koukoulas: say hawkish, but they certainly were talking. The chairperson, Jerome Powell, 48 00:02:23,550 --> 00:02:28,100 Stephen Koukoulas: was sort of talking about tighter policy, the ending of 49 00:02:28,100 --> 00:02:31,799 Stephen Koukoulas: the QE (Quantitative Easing). So the tapering was front of their agenda, their 50 00:02:31,800 --> 00:02:35,160 Stephen Koukoulas: policy agenda. And even the discussion of maybe just sort 51 00:02:35,160 --> 00:02:37,540 Stephen Koukoulas: of thinking about hiking interest rates in the next 12 52 00:02:37,540 --> 00:02:40,560 Stephen Koukoulas: months or so was something that caught the market's attention. 53 00:02:40,800 --> 00:02:42,660 Stephen Koukoulas: And while we might have been focused on the property 54 00:02:42,660 --> 00:02:45,970 Stephen Koukoulas: sector in China for some of the market volatility, at 55 00:02:45,970 --> 00:02:49,190 Stephen Koukoulas: the end of the day, the Fed was pretty confident 56 00:02:49,190 --> 00:02:51,850 Stephen Koukoulas: about its economy recovering. And of course, that's good news 57 00:02:51,850 --> 00:02:54,889 Stephen Koukoulas: for the global economy, because the US is really still 58 00:02:54,889 --> 00:02:57,530 Stephen Koukoulas: the driver, even though of course China's an important part 59 00:02:57,530 --> 00:03:00,410 Stephen Koukoulas: as well. So if the Fed's upbeat and the other 60 00:03:00,410 --> 00:03:04,700 Stephen Koukoulas: central banks are a little more confident about the economic outlook, 61 00:03:04,700 --> 00:03:07,840 Stephen Koukoulas: but in the meantime keeping policy very easy, it does 62 00:03:07,840 --> 00:03:10,239 Stephen Koukoulas: just reiterate what the RBA was thinking last week, and 63 00:03:10,240 --> 00:03:12,389 Stephen Koukoulas: that is that 2022 could actually be a pretty good 64 00:03:12,389 --> 00:03:15,470 Stephen Koukoulas: year for the economy. One other thing that's really, I 65 00:03:15,470 --> 00:03:18,100 Stephen Koukoulas: think interesting on that score too, while here in Australia, 66 00:03:18,169 --> 00:03:20,400 Stephen Koukoulas: we focus on iron ore prices and rightly so, it's 67 00:03:20,500 --> 00:03:24,100 Stephen Koukoulas: our dominant export and its price has dropped by roughly 50% 68 00:03:24,310 --> 00:03:26,430 Stephen Koukoulas: in the last few months, despite the volatility at the 69 00:03:26,430 --> 00:03:28,560 Stephen Koukoulas: end of last week. If you look at the broader 70 00:03:28,560 --> 00:03:33,951 Stephen Koukoulas: commodity indices that includes oil, copper, aluminium, tin, a lot of... 71 00:03:33,951 --> 00:03:35,760 Sean Aylmer: Coal, are we allowed to say coal anymore? 72 00:03:36,360 --> 00:03:38,190 Stephen Koukoulas: Coal, it was a slip of the mind. 73 00:03:38,190 --> 00:03:38,310 Sean Aylmer: Uranium, some of the favourites. 74 00:03:39,300 --> 00:03:42,400 Stephen Koukoulas: Uranium. But even AG prices. 75 00:03:42,400 --> 00:03:43,130 Sean Aylmer: The soft commodities. 76 00:03:43,790 --> 00:03:47,200 Stephen Koukoulas: The soft commodities. Those commodity indices are really, really strong, 77 00:03:47,200 --> 00:03:49,670 Stephen Koukoulas: and that says to me that the global economy's actually growing and 78 00:03:49,670 --> 00:03:52,310 Stephen Koukoulas: that inflation pulse is something that's there. 79 00:03:53,210 --> 00:03:54,700 Sean Aylmer: That was last week. We'll be back in a moment 80 00:03:54,980 --> 00:03:56,220 Sean Aylmer: and get into the week ahead. 81 00:04:01,270 --> 00:04:04,960 Sean Aylmer: I'm with economist, Stephen Koukoulas aka The Kouk. So Stephen, what have 82 00:04:04,960 --> 00:04:06,730 Sean Aylmer: we got on this week? Retail trade, I suppose, will 83 00:04:06,730 --> 00:04:07,250 Sean Aylmer: be the big one. 84 00:04:07,590 --> 00:04:10,560 Stephen Koukoulas: The big one, yes for the month of August. Look, 85 00:04:10,630 --> 00:04:13,390 Stephen Koukoulas: it's going to be a soft number. We know that 86 00:04:13,460 --> 00:04:16,700 Stephen Koukoulas: the lockdowns do cause people to shy away from the 87 00:04:16,700 --> 00:04:19,839 Stephen Koukoulas: retail sector, even the online spending while it's been really 88 00:04:19,839 --> 00:04:23,120 Stephen Koukoulas: supportive of a lot of companies, it's not really driving 89 00:04:23,120 --> 00:04:26,529 Stephen Koukoulas: enough of the retail sector with hospitalities and other domestic 90 00:04:26,529 --> 00:04:29,740 Stephen Koukoulas: tourism type businesses are largely closed. So looking for a 91 00:04:29,740 --> 00:04:32,140 Stephen Koukoulas: fall of about 2% for the month of August and 92 00:04:32,350 --> 00:04:35,470 Stephen Koukoulas: yeah, just reinforcing that hole in the September quarter numbers 93 00:04:35,470 --> 00:04:36,469 Stephen Koukoulas: when they finally come out. 94 00:04:36,930 --> 00:04:38,880 Sean Aylmer: Now, before the break, we were talking about the employment 95 00:04:38,880 --> 00:04:41,460 Sean Aylmer: market and job vacancies. We get more data on that 96 00:04:41,460 --> 00:04:44,560 Sean Aylmer: this week. They've held up reasonably well. I mean, notwithstanding 97 00:04:44,560 --> 00:04:46,470 Sean Aylmer: they'll probably fall, but they're probably not as bad as they 98 00:04:46,470 --> 00:04:46,980 Sean Aylmer: could have been. 99 00:04:47,760 --> 00:04:50,140 Stephen Koukoulas: Look, these are the official ABS job vacancies numbers. Look, 100 00:04:50,200 --> 00:04:53,620 Stephen Koukoulas: a fall of about 5% is in order, and that 101 00:04:53,620 --> 00:04:55,150 Stephen Koukoulas: would put it in line with what we've seen from 102 00:04:55,870 --> 00:04:59,350 Stephen Koukoulas: the ANZ series, from the Indeed and SEEK vacancies numbers. 103 00:04:59,350 --> 00:05:02,099 Stephen Koukoulas: And when we compare with what happened last year with 104 00:05:02,100 --> 00:05:04,870 Stephen Koukoulas: lockdown number one, if we can call it that, when 105 00:05:04,870 --> 00:05:10,120 Stephen Koukoulas: job vacancies were falling 50%, 60%. The peak to trough level 106 00:05:10,120 --> 00:05:12,500 Stephen Koukoulas: in this cycle is probably only going to be around 107 00:05:12,500 --> 00:05:17,040 Stephen Koukoulas: about 15%, maybe 20% before that recovery comes through. So 108 00:05:17,040 --> 00:05:21,010 Stephen Koukoulas: it says to me anyway, that with the international borders closed, 109 00:05:21,010 --> 00:05:25,080 Stephen Koukoulas: the foreign worker inflows basically at zero, that demand for 110 00:05:25,170 --> 00:05:27,650 Stephen Koukoulas: labour is still pretty strong and they're sourcing their labour 111 00:05:27,650 --> 00:05:29,480 Stephen Koukoulas: from the domestic labour force. 112 00:05:29,970 --> 00:05:32,460 Sean Aylmer: And there'll be a bit of news around housing this 113 00:05:32,460 --> 00:05:35,420 Sean Aylmer: week as well. Obviously we get the CoreLogic house prices, 114 00:05:35,480 --> 00:05:38,080 Sean Aylmer: which we all love, but also the RBA credit data. 115 00:05:38,080 --> 00:05:40,900 Sean Aylmer: And last week, Michelle Bullock, the Assistant Governor of the 116 00:05:40,900 --> 00:05:44,320 Sean Aylmer: Reserve Bank, talked about, I don't know whether concerns is overstating 117 00:05:44,320 --> 00:05:46,900 Sean Aylmer: it, but just talked about the idea that people were 118 00:05:46,900 --> 00:05:49,719 Sean Aylmer: extending themselves in terms of how much credit they were 119 00:05:49,720 --> 00:05:51,730 Sean Aylmer: accessing to borrow for housing. 120 00:05:52,320 --> 00:05:54,419 Stephen Koukoulas: Indeed, and she would've known these numbers that are coming 121 00:05:54,420 --> 00:05:58,099 Stephen Koukoulas: out on the credit side and they'll show almost inevitably 122 00:05:58,100 --> 00:06:02,050 Stephen Koukoulas: that credit growth for both owner occupiers, and interestingly investors, 123 00:06:02,050 --> 00:06:05,339 Stephen Koukoulas: is starting to step up again. The housing credit growth 124 00:06:05,339 --> 00:06:08,410 Stephen Koukoulas: should be of the order of 0.6, 0.7 for the month, which 125 00:06:08,810 --> 00:06:10,900 Stephen Koukoulas: if we annualise that, we're getting close to double digit 126 00:06:10,900 --> 00:06:13,600 Stephen Koukoulas: sort of growth rates occurring again. And that's the sort 127 00:06:13,600 --> 00:06:17,400 Stephen Koukoulas: of imbalance that I think that Michelle was talking about and the RBA. Look, 128 00:06:17,400 --> 00:06:20,290 Stephen Koukoulas: they're always worried about the impact of housing on the 129 00:06:20,290 --> 00:06:23,820 Stephen Koukoulas: economy and financial risk and financial instability, but they'll be 130 00:06:23,820 --> 00:06:25,870 Stephen Koukoulas: looking at it in sort of more at this stage 131 00:06:25,870 --> 00:06:27,870 Stephen Koukoulas: of the economic cycle as a positive because it's helping 132 00:06:27,870 --> 00:06:29,930 Stephen Koukoulas: the economy to grow. But I think it's more a 133 00:06:29,930 --> 00:06:32,580 Stephen Koukoulas: question for again, when the lockdowns end, will the Reserve 134 00:06:32,580 --> 00:06:35,589 Stephen Koukoulas: Bank and the other regulators be looking at macro prudential 135 00:06:35,589 --> 00:06:38,880 Stephen Koukoulas: issues to cool this housing market down? And as you mentioned, 136 00:06:39,100 --> 00:06:42,040 Stephen Koukoulas: CoreLogic put out their monthly house price series. It'll be 137 00:06:42,040 --> 00:06:44,510 Stephen Koukoulas: another strong month, around about one and a half per cent 138 00:06:44,589 --> 00:06:48,290 Stephen Koukoulas: increase in house prices. Around about 20% annual increases in 139 00:06:48,290 --> 00:06:51,330 Stephen Koukoulas: most of the big cities, and that's really, really strong 140 00:06:51,330 --> 00:06:52,070 Stephen Koukoulas: in anybody's language. 141 00:06:52,070 --> 00:06:53,960 Sean Aylmer: It's great, isn't it? Stephen, have a great week. 142 00:06:54,250 --> 00:06:55,260 Stephen Koukoulas: Thanks, Sean. Same to you. 143 00:06:55,620 --> 00:06:57,940 Sean Aylmer: That was economist Stephen Koukoulas, better known as The Kouk. 144 00:06:58,240 --> 00:07:00,830 Sean Aylmer: You can find him at TheKouk.com and follow him on Twitter, 145 00:07:00,830 --> 00:07:03,750 Sean Aylmer: using the handle @TheKouk. I'm Sean Aylmer, and this is Fear 146 00:07:03,750 --> 00:07:04,930 Sean Aylmer: and Greed, The Week Ahead.