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Speaker 1: Welcome to Fear and Greed QNA, where we ask and

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Speaker 1: answer questions about business, investing, economics, politics and more. I'm

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Speaker 1: Sean Ailma and today's question fairly and squarely in the

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Speaker 1: economics category, will the Reserve Bank finally cut interest rates

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Speaker 1: the third time when it meets this week? Of course

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Speaker 1: every Monday, we're joined by economist Stephen Coucoulis. You'll find

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Speaker 1: him at the cook dot com and on next using

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Speaker 1: the handle that Kirk Stephen. The question is will the

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Speaker 1: Reserve Bank cut interest rates when they meet this week?

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Speaker 2: I'm going to answer this way, Sean. They should, oh,

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Speaker 2: and they probably, They very probably will after last month

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Speaker 2: when the vast majority of us got it wrong. The

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Speaker 2: market pricing was wrong, and they surprised by that on

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Speaker 2: whole decision. If we think back to the thing, it

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Speaker 2: was the eighth of July this week, so tomorrow at

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Speaker 2: two thirty Sydney time when they make their announcement, Yes,

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Speaker 2: they cut rates, and the reasons are relatively straightforward. It's

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Speaker 2: one of these ones where it's not rocket science, or

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Speaker 2: it shouldn't be rocket science, because since that meeting when

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Speaker 2: the Governor Michelle Buller quite explicitly said, the decision to

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Speaker 2: hold back then was not a question of direction. There

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Speaker 2: was a question of timing. And in the intervening five

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Speaker 2: weeks or so that we've experienced data, we had confirmation

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Speaker 2: from the June quarter CPI that inflation trendmin headline, whichever

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Speaker 2: way you want to slice and dice, it is still decelerating.

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Speaker 2: It's still within the RBA target pan tick for right cut.

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Speaker 2: And from the labor market, which is part of its

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Speaker 2: dual mandate, we had a well, frankly, a disappointing labor

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Speaker 2: market release. We chatted about a couple of weeks ago

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Speaker 2: where the unemployment rate kicked from four point one percent

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Speaker 2: to four point three percent, the highest level in about

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Speaker 2: three and a half years. So on those two indicators,

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Speaker 2: inflation and unemployment, and the market, as I glanced at

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Speaker 2: my screen's basically got a one hundred percent priced in

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Speaker 2: They have to deliver.

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Speaker 1: Okay, you use the word decelerating, Can I just dive

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Speaker 1: into that a little bit more? Because the trimmed mean

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Speaker 1: measure of inflation over the last twelve months is actually

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Speaker 1: above the halfway point of the two to three percent band.

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Speaker 1: The headline inflation is at the bottom part of it.

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Speaker 1: They like the trim mean the Reserve Bank the fact

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Speaker 1: that it's decelerating. So we're talking about the trend as

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Speaker 1: opposed to a point in time. Is that right?

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Speaker 2: Yes, And if we look back, I won't take the

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Speaker 2: absolute high point in inflation. I think with the end

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Speaker 2: of twenty twenty two, in the trim demean we've got

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Speaker 2: to about seven percent. That was that cost of living crisis. Yeah,

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Speaker 2: and it was a genuine massive problem for the Reserve Bank,

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Speaker 2: end for its consumers are for business away. Through the

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Speaker 2: course of last year, the inflation rate was hovering that

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Speaker 2: I'll use the trim de meaning again because of electricity subsidies,

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Speaker 2: petrol prices, they're all volatile, tobacco taxes, all this sort

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Speaker 2: of stuff is distorting the headline figure. So the RBA

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Speaker 2: prefer the trim to mean, which takes out those volatile items.

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Speaker 2: And through last year it was hovering in the low

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Speaker 2: threes three point four, three point two, three point three,

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Speaker 2: and it wasn't coming back to target as quickly as

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Speaker 2: the RBA wished. It would then lo and behold in

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Speaker 2: the December quarter last year, the March quarter this year,

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Speaker 2: and again the June quarter numbers which just came out

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Speaker 2: ten or twelve days ago. We've had that inflation rate

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Speaker 2: go from to two point nine to two point seven.

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Speaker 2: And if you look at the run rate, this is

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Speaker 2: the other thing that the Reserve Bank do because remember

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Speaker 2: that an annual figure in the year to the June quarter.

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Speaker 2: The latest numbers that we've got include what inflation was

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Speaker 2: in the September quarter, and so it's a little bit

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Speaker 2: like when you move a quarter, you drop the last

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Speaker 2: one out and you move forward. You drop one out,

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Speaker 2: move forward, and next time we're getting a one dropping

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Speaker 2: out of the year on year run rate. And my

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Speaker 2: friends at Westpact, justin Smirk, who's sort of one of

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Speaker 2: the inflation gurus if you like, on analyzing inflation, he

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Speaker 2: put out a very preliminary forecast for the September quarter

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Speaker 2: on the trims mean he's got a point point six,

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Speaker 2: I think, he said, and that drives the annual thinking

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Speaker 2: to two point four. So if the RBA has got

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Speaker 2: a similar run rate coming through, you headed off at

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Speaker 2: the pass. It's one of these ones where you preemptively

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Speaker 2: move and it's look a certain as night for those days.

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Speaker 2: Inflation rate's still coming down. Yes, as we sit here,

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Speaker 2: now it's not at the midpoint of the target. But

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Speaker 2: even if you sit here and just twiddle your thumbs,

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Speaker 2: it will be when the ABS released the September quarter

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Speaker 2: data in three months time.

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Speaker 1: Okay, so the answer is probably they will cut rates

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Speaker 1: when they meet tomorrow, right, probably hardly probably, of course,

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Speaker 1: the Reserve Bank's got two goals, keeping it on prices

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Speaker 1: full employment. Now, in a case of bad timing, shall

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Speaker 1: we say they make this announcement tomorrow, then on Wednesday

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Speaker 1: we have wages figures. On Thursday we have labor force figures.

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Speaker 1: Will the Reserve Bank know those figures before they deliberate?

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Speaker 2: This is one thing that a few people have picked

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Speaker 2: up on is the timing of this board meeting because

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Speaker 2: the announcements made on Tuesday afternoon, and then on Wednesday

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Speaker 2: we get the all important wage price in next numbers,

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Speaker 2: and then on Thursday we get the next labor force

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Speaker 2: the next unemployment number, and it's you know, they, as

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Speaker 2: far as I understand that they do not have access

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Speaker 2: to those numbers. They're highly confidential from the Independent Bureau Statistics.

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Speaker 2: They don't leak them or preb them to anybody, including

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Speaker 2: the Reserve Bank. So the Board meeting today Monday, when

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Speaker 2: they sort of mull over the sort of intricacies of

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Speaker 2: the modeling and the forecasts and the outlook and all

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Speaker 2: these other things, will not include those two critical indicators

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Speaker 2: of the labor markets. So if only they had the

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Speaker 2: board meeting next week, they could have incorporated the next

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Speaker 2: wage number, the next unemployment number, and.

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Speaker 1: JOm Michelle Bullet could ring I'm not sure Dave Grewin

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Speaker 1: is the head of ABS and say, Dave, come on,

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Speaker 1: we're the Reserve Bank years ago. Come on, can't we

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Speaker 1: get together.

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Speaker 2: Yeah, I don't know how those things work. And a

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Speaker 2: last I'm not privy to it. She should, they'd be,

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Speaker 2: in fact, nothing wrong. Quite frankly, there'd be nothing wrong.

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Speaker 2: Obviously they wouldn't have to disclose it. It's a bit

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Speaker 2: like why, yeah, the Federal Treasury Secretary is on the

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Speaker 2: RBA board. Some people sort of say, oh, it's a

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Speaker 2: bit politicization of the board and all those other things.

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Speaker 2: I differ a little bit because again, even though the

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Speaker 2: Secretary of the Treasury, whoever that is at the moment,

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Speaker 2: so it's Jenny Wilkinson at the minute, is the representative

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Speaker 2: on the board. She can sort of say to the

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Speaker 2: board without disclosing what's in the budget. For example, so

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Speaker 2: when the budget is a hot topic and you know

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Speaker 2: they're looking at tax changes or electricity subsidies or something

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Speaker 2: like that, she can sort of say, nudge, nug twink, week,

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Speaker 2: you know, we shouldn't worry about a stimulatory budget or

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Speaker 2: we've got because it will be so having that what

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Speaker 2: do we call it, I call it inside doledgeuse that

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Speaker 2: sounds a bit sort of dodgy, but having like an

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Speaker 2: insight into what's happening is really important for the RBA

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Speaker 2: deliberations because it would be funny. And this is one

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Speaker 2: scenario which I'm reading later this week. They cut twenty

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Speaker 2: five and Michelle Bullock says, look, that's it. We're going

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Speaker 2: to take a pause for a while. Then the next

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Speaker 2: day we get a really low wages number. In the

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Speaker 2: day for that, we not only get a four point three,

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Speaker 2: you get a four point four, and then the market well,

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Speaker 2: well you should have gone again, so you've got another

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Speaker 2: Then seven weeks of well they cut again, will they again?

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Speaker 2: And all this silly deliberation and speculation that goes on.

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Speaker 1: Well, I'm sure all these people know each other. In fact,

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Speaker 1: I know they do because David grew in ahead of Abs,

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Speaker 1: Jenny Wilkinson, Head of Treasury, Michelle Bullock Reserve Bank. They're

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Speaker 1: all at the Reserve Bank together in the nineties. I

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Speaker 1: know that for a fact because I was there there you, Stephen,

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Speaker 1: enjoy your week.

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Speaker 2: It'll be an absolute blockbuster. Thank you, Sean.

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Speaker 1: That was economist Stephen cookulis better known as the Cookie.

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Speaker 1: You can find him at the cook dot com and

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Speaker 1: follow him on x using to handle the Cook. I'm

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Speaker 1: Chanelma and this is Fearing, dury Q and Da