1 00:00:05,309 --> 00:00:08,250 Sean Aylmer: Welcome to Fear & Greed - The Week Ahead. I'm Sean Aylmer, and as 2 00:00:08,250 --> 00:00:11,639 Sean Aylmer: always, I'm joined by Economist Stephen Koukoulas. You'll find him 3 00:00:11,639 --> 00:00:14,340 Sean Aylmer: at thekouk. com T- H- E- K- O- U- K 4 00:00:15,059 --> 00:00:17,370 Sean Aylmer: and on X using the handle TheKouk. Stephen, good morning. 5 00:00:17,699 --> 00:00:18,629 Stephen Koukoulas: Good morning, Sean. 6 00:00:19,140 --> 00:00:22,470 Sean Aylmer: You are in the midst of just a fiesta of 7 00:00:22,470 --> 00:00:23,670 Sean Aylmer: economic information. 8 00:00:23,880 --> 00:00:24,238 Stephen Koukoulas: Yeah. 9 00:00:24,450 --> 00:00:27,179 Sean Aylmer: Starting last week, the Reserve Bank Board. What do you 10 00:00:27,179 --> 00:00:27,870 Sean Aylmer: make of all that? 11 00:00:28,290 --> 00:00:32,339 Stephen Koukoulas: Yeah, it's a deluge of economic and market news. How 12 00:00:32,340 --> 00:00:36,539 Stephen Koukoulas: good's that? Look, the RBA came out and look, Michele 13 00:00:36,539 --> 00:00:39,809 Stephen Koukoulas: Bullock, a massive tick to her and I know she's 14 00:00:39,810 --> 00:00:40,890 Stephen Koukoulas: been in the job for, what is it, eight or 15 00:00:40,890 --> 00:00:43,860 Stephen Koukoulas: nine months now? But first of all for what she 16 00:00:43,860 --> 00:00:46,170 Stephen Koukoulas: did, but also how she handled the press conference. How 17 00:00:46,170 --> 00:00:51,809 Stephen Koukoulas: she's explaining the issues that the board and the RBA 18 00:00:51,809 --> 00:00:55,170 Stephen Koukoulas: itself are confronting. But obviously rates on hold. And while 19 00:00:55,170 --> 00:00:57,600 Stephen Koukoulas: there was a lot of noise about that inflation number 20 00:00:57,600 --> 00:00:59,820 Stephen Koukoulas: a couple of weeks ago, being a little more elevated, 21 00:00:59,820 --> 00:01:03,300 Stephen Koukoulas: and yes, Ms. Bullock did acknowledge that they'd like inflation 22 00:01:03,300 --> 00:01:06,958 Stephen Koukoulas: to be lower sooner, but at this stage they're detecting 23 00:01:07,049 --> 00:01:10,830 Stephen Koukoulas: the economy slowing down, the labor market, weakening a bit. 24 00:01:11,400 --> 00:01:15,569 Stephen Koukoulas: They're noticing events in the global economy slowing with lower 25 00:01:15,569 --> 00:01:18,900 Stephen Koukoulas: inflation coming through. So they held rates steady and as 26 00:01:18,900 --> 00:01:22,230 Stephen Koukoulas: she said in the previous press conference in March, she's 27 00:01:22,230 --> 00:01:25,709 Stephen Koukoulas: not ruling anything in, not ruling anything out. So the 28 00:01:25,709 --> 00:01:27,569 Stephen Koukoulas: debate is, was the next move up in rates or 29 00:01:27,569 --> 00:01:30,180 Stephen Koukoulas: down in rates. But the market consensus now is flat 30 00:01:30,629 --> 00:01:33,390 Stephen Koukoulas: to down eventually, but later rather than sooner. 31 00:01:34,350 --> 00:01:39,149 Sean Aylmer: She wasn't, and the board weren't quite as aggressive, hawkish 32 00:01:39,150 --> 00:01:42,479 Sean Aylmer: is the economics term, around interest rates. And it just 33 00:01:42,480 --> 00:01:46,199 Sean Aylmer: sounds like they just know that inflation is not going 34 00:01:46,199 --> 00:01:47,699 Sean Aylmer: to be a linear progression lower. 35 00:01:48,420 --> 00:01:50,820 Stephen Koukoulas: And she did note too that things like petrol prices, 36 00:01:50,820 --> 00:01:53,160 Stephen Koukoulas: again, anybody who's got a car or drives past the 37 00:01:53,160 --> 00:01:55,350 Stephen Koukoulas: petrol station can see that the price of petrol has 38 00:01:55,350 --> 00:01:56,910 Stephen Koukoulas: gone up in the last few weeks, and she did 39 00:01:56,910 --> 00:02:00,270 Stephen Koukoulas: note that that will impact on the June quarter inflation numbers 40 00:02:00,270 --> 00:02:02,969 Stephen Koukoulas: when we get them. But as we've discussed, and as 41 00:02:02,969 --> 00:02:06,870 Stephen Koukoulas: the RBA knows, they could hike rates 10 times and it would have 42 00:02:06,870 --> 00:02:10,200 Stephen Koukoulas: no impact on the petrol price. It's a globally determined 43 00:02:10,260 --> 00:02:13,680 Stephen Koukoulas: price with a whole range of influences, supply and demand, 44 00:02:13,680 --> 00:02:17,250 Stephen Koukoulas: and of course geopolitical tensions too. So that's why they 45 00:02:17,250 --> 00:02:21,210 Stephen Koukoulas: trim or get to an underlying measure of inflation. So 46 00:02:21,719 --> 00:02:24,119 Stephen Koukoulas: as they put in their statement on monetary policy, the 47 00:02:24,119 --> 00:02:29,340 Stephen Koukoulas: quarterly run rates of forecasts out to 2026, they're a 48 00:02:29,340 --> 00:02:31,889 Stephen Koukoulas: little elevated for the remainder of 2024. But once we 49 00:02:31,889 --> 00:02:36,360 Stephen Koukoulas: get into 2025 and 2026, the RBA is forecasting inflation to be back to 50 00:02:36,480 --> 00:02:40,050 Stephen Koukoulas: the target. And importantly, with interest rates where they are. 51 00:02:40,529 --> 00:02:42,660 Sean Aylmer: Okay, so let's hope that's the case, it does get 52 00:02:42,660 --> 00:02:45,330 Sean Aylmer: back into that target range. Now the other factor or 53 00:02:45,330 --> 00:02:47,340 Sean Aylmer: another big factor playing into all this, of course, is 54 00:02:47,340 --> 00:02:49,590 Sean Aylmer: the federal budget. And whether that'll be inflationary or not, 55 00:02:49,590 --> 00:02:51,839 Sean Aylmer: we find out a lot more about that tomorrow night, Stephen. 56 00:02:52,230 --> 00:02:55,530 Stephen Koukoulas: Tomorrow night, Jim Chalmers, the Treasurer, delivers his third budget. 57 00:02:56,849 --> 00:02:59,820 Stephen Koukoulas: And it is big news. There's been the usual thing 58 00:02:59,820 --> 00:03:03,300 Stephen Koukoulas: that's been the staple of politics in the last decade or 59 00:03:03,300 --> 00:03:06,750 Stephen Koukoulas: two. Lots of little bits and pieces leaked out before 60 00:03:07,380 --> 00:03:10,800 Stephen Koukoulas: the budget night. So for us economists, it's partly what 61 00:03:10,800 --> 00:03:12,179 Stephen Koukoulas: the measures are. What are they going to be doing 62 00:03:12,179 --> 00:03:15,389 Stephen Koukoulas: with tax policy, areas of spending and the like. But 63 00:03:15,389 --> 00:03:18,089 Stephen Koukoulas: it's that macro effect, that's going to be important to 64 00:03:18,209 --> 00:03:21,060 Stephen Koukoulas: us macro economists. Is there going to be more stimulus 65 00:03:21,060 --> 00:03:23,610 Stephen Koukoulas: there that's going to be making the RBA's inflation target 66 00:03:23,610 --> 00:03:25,770 Stephen Koukoulas: a little harder to achieve or is it going to 67 00:03:25,770 --> 00:03:27,959 Stephen Koukoulas: have some spending measures? Yep, there's going to be some 68 00:03:27,960 --> 00:03:29,639 Stephen Koukoulas: there. They're in government. They want to put out a 69 00:03:29,639 --> 00:03:33,059 Stephen Koukoulas: few sweeteners and the like. That will be offset by 70 00:03:33,059 --> 00:03:37,230 Stephen Koukoulas: savings elsewhere. So that's the big question. And so we'll 71 00:03:37,230 --> 00:03:41,700 Stephen Koukoulas: be looking at the treasury forecasts for growth, for unemployment, 72 00:03:41,700 --> 00:03:44,760 Stephen Koukoulas: for inflation, see how they stack up against the RBA 73 00:03:45,120 --> 00:03:47,849 Stephen Koukoulas: forecast for the same variables. And we'll be looking at 74 00:03:48,120 --> 00:03:50,790 Stephen Koukoulas: what sort of is the, I don't know, the overall 75 00:03:50,790 --> 00:03:55,830 Stephen Koukoulas: effect of federal government fiscal policy on the economy at 76 00:03:55,830 --> 00:03:58,290 Stephen Koukoulas: a time when, as we were just saying, inflation has 77 00:03:58,290 --> 00:04:00,690 Stephen Koukoulas: been coming down. We hope it keeps coming down, but 78 00:04:00,690 --> 00:04:03,450 Stephen Koukoulas: if you get the government putting a whole bunch of 79 00:04:03,450 --> 00:04:06,179 Stephen Koukoulas: cash into the economy, it does make the task of 80 00:04:06,179 --> 00:04:09,509 Stephen Koukoulas: getting inflation lower quickly, a little bit harder. So we'll 81 00:04:09,509 --> 00:04:11,910 Stephen Koukoulas: be looking at that and hopefully as The Treasurer is 82 00:04:11,910 --> 00:04:13,680 Stephen Koukoulas: saying, it'll be sort of more of a neutral thing. 83 00:04:13,680 --> 00:04:16,800 Stephen Koukoulas: There'll be some handouts, but they'll be offset by some 84 00:04:17,520 --> 00:04:18,450 Stephen Koukoulas: tightenings elsewhere in the budget. 85 00:04:18,810 --> 00:04:20,130 Sean Aylmer: So it's probably not going to be one of those 86 00:04:20,130 --> 00:04:22,320 Sean Aylmer: budgets where there's lots of money for everyone, if that's 87 00:04:22,320 --> 00:04:22,770 Sean Aylmer: the case. 88 00:04:23,428 --> 00:04:25,859 Stephen Koukoulas: Look, I think that's true, and if you've been listening 89 00:04:25,860 --> 00:04:27,570 Stephen Koukoulas: to Jim Chalmers for the last few weeks, in fact 90 00:04:27,570 --> 00:04:30,750 Stephen Koukoulas: the last few months, he knows. He'd be like ... He'd 91 00:04:30,750 --> 00:04:32,700 Stephen Koukoulas: love to go to the election, which is due in a 92 00:04:32,700 --> 00:04:35,099 Stephen Koukoulas: roughly 12 months time, with a couple of interest rate 93 00:04:35,100 --> 00:04:39,000 Stephen Koukoulas: cuts. Even though the RBA is independent and they're the ones that set monetary 94 00:04:39,000 --> 00:04:41,849 Stephen Koukoulas: policy and the like, I'm sure there's a spinoff in 95 00:04:41,849 --> 00:04:44,279 Stephen Koukoulas: favor of the incumbent government whenever the interest rates are 96 00:04:44,279 --> 00:04:46,619 Stephen Koukoulas: coming down. So he knows that if he can keep 97 00:04:46,619 --> 00:04:50,460 Stephen Koukoulas: a relatively tight rein on the budget settings on tomorrow 98 00:04:50,460 --> 00:04:53,790 Stephen Koukoulas: night, that he'll be able to say, " Look, we've come 99 00:04:53,790 --> 00:04:57,659 Stephen Koukoulas: through this inflation problem. We've got, hopefully, wages picking up 100 00:04:57,660 --> 00:05:01,500 Stephen Koukoulas: when inflation is still coming down, real wages are increasing 101 00:05:01,620 --> 00:05:03,870 Stephen Koukoulas: and some interest rate cuts are coming through. Aren't we 102 00:05:03,870 --> 00:05:06,839 Stephen Koukoulas: great economic managers?" That's what his rhetoric will be. That's 103 00:05:06,839 --> 00:05:09,930 Stephen Koukoulas: what he's hoping to go to the election campaign next year. 104 00:05:10,680 --> 00:05:12,360 Sean Aylmer: Okay, the budget will get the headlines, but some other 105 00:05:12,360 --> 00:05:15,479 Sean Aylmer: pretty important bits of information, economic information, out this week. 106 00:05:15,540 --> 00:05:19,650 Sean Aylmer: National Australia Bank survey, wages, labor force. In fact, I 107 00:05:19,650 --> 00:05:22,799 Sean Aylmer: think off- air you called it a quadrilla of exciting 108 00:05:22,799 --> 00:05:25,200 Sean Aylmer: information this week. Budget, NAB, wages, labor force. 109 00:05:25,201 --> 00:05:25,202 Stephen Koukoulas: Yeah. The quadi. 110 00:05:25,202 --> 00:05:25,562 Sean Aylmer: The quadi. 111 00:05:27,480 --> 00:05:29,099 Stephen Koukoulas: Yeah. Oh gosh. I'd love to get that quadi right 112 00:05:29,100 --> 00:05:34,169 Stephen Koukoulas: too. Not that I ever do. Look, NAB survey, I'll run through these quite quickly. 113 00:05:34,200 --> 00:05:36,479 Stephen Koukoulas: NAB survey, as we've discussed, I know it's your favorite 114 00:05:36,480 --> 00:05:41,159 Stephen Koukoulas: economic indicator, is both business confidence and business conditions, but 115 00:05:41,459 --> 00:05:44,580 Stephen Koukoulas: they also ask questions about are they hiring more people, 116 00:05:44,820 --> 00:05:48,240 Stephen Koukoulas: are they putting up their selling prices, these sorts of 117 00:05:48,240 --> 00:05:50,490 Stephen Koukoulas: things. So it's a bit of an inflation, a labor 118 00:05:50,490 --> 00:05:53,549 Stephen Koukoulas: market, a broad economic indicator. So that's why it's such 119 00:05:53,550 --> 00:05:55,859 Stephen Koukoulas: a good indicator. But as you mentioned, we've also got 120 00:05:55,860 --> 00:05:58,770 Stephen Koukoulas: the labor force numbers. We know the statisticians had a 121 00:05:58,770 --> 00:06:02,190 Stephen Koukoulas: lot of trouble seasonally adjusting the ups and downs in 122 00:06:02,190 --> 00:06:04,890 Stephen Koukoulas: employment and the unemployment rate. So that comes out on 123 00:06:04,890 --> 00:06:09,120 Stephen Koukoulas: Thursday. So we'll see just how weak the labor market 124 00:06:09,120 --> 00:06:12,539 Stephen Koukoulas: is relative to the softer economic conditions. So I think 125 00:06:12,540 --> 00:06:15,000 Stephen Koukoulas: the market's looking for a pretty flat result and for the 126 00:06:15,000 --> 00:06:18,120 Stephen Koukoulas: unemployment rate to tick up a little bit. And on wages, 127 00:06:18,330 --> 00:06:21,150 Stephen Koukoulas: obviously one of the important parts in the services inflation, 128 00:06:21,150 --> 00:06:24,240 Stephen Koukoulas: that sticky bit of inflation that the RBA governor spoke 129 00:06:24,240 --> 00:06:27,719 Stephen Koukoulas: about last week, look, they're currently at 4. 2% in 130 00:06:27,719 --> 00:06:31,860 Stephen Koukoulas: annual terms with the wage price index increase. Market forecast 131 00:06:31,860 --> 00:06:34,169 Stephen Koukoulas: is expecting a similar sort of result. So the quarterly 132 00:06:34,170 --> 00:06:37,200 Stephen Koukoulas: figure will probably ease back to about 0. 9%, quarter 133 00:06:37,200 --> 00:06:39,420 Stephen Koukoulas: on quarter, but that leaves your annual run rate just 134 00:06:39,420 --> 00:06:42,719 Stephen Koukoulas: to tick above 4%. If that happens, it doesn't add 135 00:06:42,720 --> 00:06:45,330 Stephen Koukoulas: to the debate. So we'll be on the lookout for 136 00:06:45,330 --> 00:06:49,110 Stephen Koukoulas: shock results, for things that people aren't expecting. So a 137 00:06:49,110 --> 00:06:52,049 Stephen Koukoulas: huge week ahead, the quadi is just going to be really 138 00:06:52,049 --> 00:06:55,500 Stephen Koukoulas: a fantastic time to be analyzing the economy. And I 139 00:06:55,500 --> 00:06:57,510 Stephen Koukoulas: know for a fact, that the (inaudible) bank is 140 00:06:57,810 --> 00:07:00,780 Stephen Koukoulas: nervously watching the data just as much as us mere mortals. 141 00:07:01,380 --> 00:07:04,559 Sean Aylmer: We mere mortals. Remember everyone, Stephen and I will be talking 142 00:07:04,559 --> 00:07:08,490 Sean Aylmer: on Wednesday morning after the budget, to get Stephen's take 143 00:07:08,490 --> 00:07:11,459 Sean Aylmer: on it. So certainly Stephen, I hope you get some 144 00:07:11,459 --> 00:07:12,600 Sean Aylmer: sleep the night before. 145 00:07:13,020 --> 00:07:14,610 Stephen Koukoulas: Oh, it'll be a late night. I love it. I'll 146 00:07:14,610 --> 00:07:17,310 Stephen Koukoulas: have my cup of tea here, my green tea, and 147 00:07:17,310 --> 00:07:19,800 Stephen Koukoulas: I'll be analyzing page after page. I got screens going 148 00:07:19,800 --> 00:07:21,480 Stephen Koukoulas: here. I've almost got it ready to set up for 149 00:07:21,480 --> 00:07:23,790 Stephen Koukoulas: the download of the budget papers. Oh, where too much 150 00:07:23,790 --> 00:07:24,809 Stephen Koukoulas: information is never enough. 151 00:07:25,170 --> 00:07:26,730 Sean Aylmer: We will speak to you on Wednesday. 152 00:07:26,969 --> 00:07:27,720 Stephen Koukoulas: See you Wednesday. 153 00:07:28,080 --> 00:07:30,359 Sean Aylmer: That as economist Stephen Koukoulas, better known as The Kouk. 154 00:07:30,359 --> 00:07:32,430 Sean Aylmer: You can find him at thekouk. com and follow him 155 00:07:32,430 --> 00:07:34,800 Sean Aylmer: on X using the handle TheKouk. I'm Sean Aylmer and 156 00:07:34,800 --> 00:07:36,690 Sean Aylmer: this is Fear and Greed the week ahead.