1 00:00:05,460 --> 00:00:08,460 Sean Aylmer: Welcome to Fear and Greed: The Week Ahead. I'm Sean Aylmer, and as 2 00:00:08,460 --> 00:00:11,849 Sean Aylmer: always, I'm joined by economist Stephen Koukoulas. You'll find him 3 00:00:11,849 --> 00:00:14,460 Sean Aylmer: at thekouk. com, T- H- E- K- O- U- K . 4 00:00:14,639 --> 00:00:19,290 Sean Aylmer: com, and on X using the handle TheKouk. Stephen, good morning. 5 00:00:19,620 --> 00:00:22,079 Stephen Koukoulas: And a very good morning. I had a lovely quiet 6 00:00:22,079 --> 00:00:24,270 Stephen Koukoulas: weekend after the hustle of last week. 7 00:00:24,660 --> 00:00:28,740 Sean Aylmer: Yes. What a crazy week. I mean, in the end, 8 00:00:28,830 --> 00:00:31,889 Sean Aylmer: the budget was kind of almost secondary to some of 9 00:00:31,889 --> 00:00:33,899 Sean Aylmer: those other market moves later in the week. 10 00:00:34,529 --> 00:00:37,080 Stephen Koukoulas: It was. And yeah, we had our budget chat the 11 00:00:37,080 --> 00:00:39,420 Stephen Koukoulas: day after the budget, which I hope everybody listened to. 12 00:00:39,420 --> 00:00:43,199 Stephen Koukoulas: But the interesting thing that after that, we had the 13 00:00:43,290 --> 00:00:47,398 Stephen Koukoulas: wage price index relief here in Australia, which confirmed that 14 00:00:47,429 --> 00:00:50,940 Stephen Koukoulas: wages growth is past its peak. It's sort of one 15 00:00:50,940 --> 00:00:53,668 Stephen Koukoulas: of those Goldilocks. Not too hot, not too cold, but 16 00:00:53,670 --> 00:00:55,860 Stephen Koukoulas: just right. So the number's 0. 8 for the quarter 17 00:00:55,860 --> 00:00:59,220 Stephen Koukoulas: on quarter. We then had the labor market numbers in 18 00:00:59,220 --> 00:01:02,549 Stephen Koukoulas: Australia, with the unemployment rate ticking up to 4. 1% 19 00:01:02,580 --> 00:01:06,690 Stephen Koukoulas: again, and in the US we had information that inflation 20 00:01:06,929 --> 00:01:09,030 Stephen Koukoulas: was no worse than expected. I don't think we could 21 00:01:09,030 --> 00:01:10,770 Stephen Koukoulas: put our hand on our heart and say that your 22 00:01:10,770 --> 00:01:13,860 Stephen Koukoulas: inflation is rapidly (inaudible) to the Fed's target range, 23 00:01:13,860 --> 00:01:18,210 Stephen Koukoulas: but that mix of lower US inflation than was feared, 24 00:01:18,959 --> 00:01:21,990 Stephen Koukoulas: a softening in wages growth, albeit still at an okay 25 00:01:21,990 --> 00:01:24,659 Stephen Koukoulas: level, and that uptick in the unemployment rate sort of 26 00:01:24,660 --> 00:01:28,049 Stephen Koukoulas: dominated whatever was in the budget. So we had the 27 00:01:28,049 --> 00:01:32,400 Stephen Koukoulas: markets moving, gyrating, stock markets doing very well, bond markets 28 00:01:32,400 --> 00:01:34,470 Stephen Koukoulas: rallying. So it was a wonderful week. 29 00:01:34,800 --> 00:01:37,500 Sean Aylmer: It was. I mean, at the end of last week, 30 00:01:37,500 --> 00:01:41,969 Sean Aylmer: I was thinking about the idea where, well, the trend 31 00:01:41,969 --> 00:01:45,268 Sean Aylmer: is your friend in economics, but the noise, looking through 32 00:01:45,270 --> 00:01:48,720 Sean Aylmer: the noise, and particularly in the US inflation figures, there's 33 00:01:48,720 --> 00:01:52,080 Sean Aylmer: been so much noise about that, yet one number seems 34 00:01:52,080 --> 00:01:55,470 Sean Aylmer: to get people refocused on something. It's kind of, I 35 00:01:55,470 --> 00:01:58,200 Sean Aylmer: don't know, some sort of lesson for people watching this 36 00:01:58,200 --> 00:02:02,070 Sean Aylmer: stuff. One number does not make a summer or something 37 00:02:02,070 --> 00:02:03,390 Sean Aylmer: like that, or a spring, I think it is. 38 00:02:03,660 --> 00:02:06,959 Stephen Koukoulas: Or even a winter or an autumn. But I think 39 00:02:06,959 --> 00:02:10,350 Stephen Koukoulas: that's the nature of the beast right now, because we've 40 00:02:10,350 --> 00:02:12,720 Stephen Koukoulas: had a lot of rate hikes anywhere. We've hiked, what, 41 00:02:12,720 --> 00:02:15,330 Stephen Koukoulas: 550 points or something since the low point two and 42 00:02:15,330 --> 00:02:19,200 Stephen Koukoulas: a bit years ago, and the economy's been remarkably resilient, 43 00:02:19,200 --> 00:02:22,079 Stephen Koukoulas: more resilient than I think just about everyone thought. There's 44 00:02:22,079 --> 00:02:25,020 Stephen Koukoulas: a bit of a slowdown in growth occurring, inflation is 45 00:02:25,020 --> 00:02:28,078 Stephen Koukoulas: down, but it's still not at the target. So the 46 00:02:28,080 --> 00:02:31,320 Stephen Koukoulas: markets are putting a huge weight on this inflation number. 47 00:02:31,320 --> 00:02:33,929 Stephen Koukoulas: So we get the non- farm payrolls. We get, oh, the retail sales in 48 00:02:34,740 --> 00:02:36,179 Stephen Koukoulas: the US were weak, by the way. So that was sort 49 00:02:36,179 --> 00:02:39,869 Stephen Koukoulas: of confirming the slowdown story. But that inflation number, people 50 00:02:39,870 --> 00:02:43,020 Stephen Koukoulas: want to see inflation fall, because that will be the 51 00:02:43,020 --> 00:02:48,300 Stephen Koukoulas: trigger for US rate cuts, which will be the trigger to validate where the stock 52 00:02:48,300 --> 00:02:51,360 Stephen Koukoulas: markets have gone over this last few weeks. And so, 53 00:02:51,360 --> 00:02:55,079 Stephen Koukoulas: that's why that inflation use is elevated to a status 54 00:02:55,080 --> 00:02:59,070 Stephen Koukoulas: that's probably a little over- exaggerating, just how important it 55 00:02:59,070 --> 00:03:01,049 Stephen Koukoulas: is. Sure it's important, but gee, the rest of the 56 00:03:01,050 --> 00:03:01,980 Stephen Koukoulas: economy is too. 57 00:03:02,490 --> 00:03:05,190 Sean Aylmer: Yeah, I won't talk about this week, the Reserve Bank 58 00:03:05,190 --> 00:03:07,530 Sean Aylmer: minutes, but just very quick on the budget last week, 59 00:03:07,530 --> 00:03:10,320 Sean Aylmer: now that you've had four or five days to actually 60 00:03:10,320 --> 00:03:14,669 Sean Aylmer: let it all settle in. It's slightly inflationary budget, would 61 00:03:14,669 --> 00:03:15,030 Sean Aylmer: you say? 62 00:03:15,540 --> 00:03:17,729 Stephen Koukoulas: Yeah, look, it is. Now, they've had a chance to, 63 00:03:17,940 --> 00:03:19,680 Stephen Koukoulas: rather than the knee- jerk reaction, which I'm always a 64 00:03:19,800 --> 00:03:21,900 Stephen Koukoulas: bit scared of, because there's a lot of information there 65 00:03:21,900 --> 00:03:24,540 Stephen Koukoulas: that's really hard to digest in an hour or two. 66 00:03:24,840 --> 00:03:27,690 Stephen Koukoulas: But look, they have moved to a mildly stimulatory, I 67 00:03:27,690 --> 00:03:30,179 Stephen Koukoulas: think it's fair to say. Look, they're not doing this 68 00:03:30,179 --> 00:03:33,869 Stephen Koukoulas: crazy sort of fiscal stimulus that would obviously be a 69 00:03:33,870 --> 00:03:38,010 Stephen Koukoulas: concern to the RBA, but with their measures on electricity 70 00:03:38,010 --> 00:03:40,650 Stephen Koukoulas: and rent subsidies, some of the other spending measures that 71 00:03:40,650 --> 00:03:43,290 Stephen Koukoulas: are out there, including that one more in the forward 72 00:03:43,290 --> 00:03:47,639 Stephen Koukoulas: estimates like the Made in Australia campaign, they're adding a 73 00:03:47,639 --> 00:03:49,739 Stephen Koukoulas: little bit to economic growth. And so, when you examine 74 00:03:50,040 --> 00:03:55,350 Stephen Koukoulas: the contribution of fiscal policy settings to economic growth over 75 00:03:55,920 --> 00:03:58,770 Stephen Koukoulas: the next financial year, '24- '25, which starts in, what, four 76 00:03:58,770 --> 00:04:01,290 Stephen Koukoulas: weeks? Five or six weeks. It's got a plus sign 77 00:04:01,290 --> 00:04:02,880 Stephen Koukoulas: in front of it. There's no doubt about that. So 78 00:04:02,880 --> 00:04:05,910 Stephen Koukoulas: that we had two budget surpluses, which were restrictive. We 79 00:04:05,910 --> 00:04:08,219 Stephen Koukoulas: are moving to a budget deficit next financial year, which 80 00:04:08,219 --> 00:04:12,600 Stephen Koukoulas: will be mildly stimulatory. The budget deficit is 1% of GDP. You know, the 81 00:04:12,600 --> 00:04:15,000 Stephen Koukoulas: hard end why say you should have been tighter, but 82 00:04:15,000 --> 00:04:16,320 Stephen Koukoulas: at the end of the day, they've got a few 83 00:04:16,320 --> 00:04:18,780 Stephen Koukoulas: political issues to generate there too. 84 00:04:19,290 --> 00:04:22,589 Sean Aylmer: Very true. This week, much, much quieter. Basically the Reserve 85 00:04:22,589 --> 00:04:24,508 Sean Aylmer: Bank board minutes, that's about the only thing. 86 00:04:25,049 --> 00:04:27,808 Stephen Koukoulas: Yeah, local data's sparse. There's nothing there, which is a 87 00:04:27,809 --> 00:04:31,800 Stephen Koukoulas: lovely reprieve in a sense. Yeah. RBA minutes out tomorrow, 88 00:04:32,850 --> 00:04:35,580 Stephen Koukoulas: and that was the board meeting that as Michelle Bullock, 89 00:04:35,580 --> 00:04:39,630 Stephen Koukoulas: the RBA governor alluded to, they did give some consideration 90 00:04:39,630 --> 00:04:41,909 Stephen Koukoulas: to hiking rates. That was the board meeting that happened 91 00:04:42,270 --> 00:04:45,540 Stephen Koukoulas: just after that high- ish CPI result for the March 92 00:04:45,599 --> 00:04:48,479 Stephen Koukoulas: quarter. I think those minutes will sort of articulate some of 93 00:04:48,539 --> 00:04:51,630 Stephen Koukoulas: the bits and bobs surrounding that. But dare I say 94 00:04:51,630 --> 00:04:54,089 Stephen Koukoulas: it, they're sort of out of date with these hard 95 00:04:54,089 --> 00:04:57,359 Stephen Koukoulas: numbers on wages, on employment, and even to some extent 96 00:04:57,360 --> 00:04:58,530 Stephen Koukoulas: what was included in the budget. 97 00:04:59,130 --> 00:05:00,210 Sean Aylmer: Stephen, enjoy your week. 98 00:05:00,540 --> 00:05:03,270 Stephen Koukoulas: I will. Much quieter one, so hooray. 99 00:05:03,330 --> 00:05:06,569 Sean Aylmer: Fantastic. That was Economist Stephen Koukoulas, better known as The 100 00:05:06,570 --> 00:05:08,880 Sean Aylmer: Kouk. You can find him at thekouk. com and follow 101 00:05:08,880 --> 00:05:11,970 Sean Aylmer: him on X, using the handle of TheKouk. I'm Sean Aylmer, 102 00:05:11,970 --> 00:05:13,740 Sean Aylmer: and this is Fear and Greed: The Week Ahead.