1 00:00:05,880 --> 00:00:08,000 Speaker 1: Welcome to Fear and Greed Q and A, where we 2 00:00:08,039 --> 00:00:11,559 Speaker 1: ask and answer questions about business, investing, economics, politics and more. 3 00:00:11,600 --> 00:00:14,640 Speaker 1: I'm Michael Thompson, and every Monday morning we're joined by 4 00:00:14,640 --> 00:00:17,720 Speaker 1: economist Stephen Cocolis to look at the weak Ahead. You'll 5 00:00:17,720 --> 00:00:19,759 Speaker 1: find him at the kook dot com. That's t h 6 00:00:19,800 --> 00:00:22,680 Speaker 1: e k o uk dot com and on X using 7 00:00:22,760 --> 00:00:24,800 Speaker 1: the handles the cook Stephen, Good morning. 8 00:00:24,760 --> 00:00:27,520 Speaker 2: Good morning, Michael. Little apologies in advance. I'm fighting a 9 00:00:27,520 --> 00:00:30,319 Speaker 2: bit of the man flu here, but I'll keep soldiering on. 10 00:00:30,400 --> 00:00:31,680 Speaker 2: As they say, oh good luck. 11 00:00:31,760 --> 00:00:35,880 Speaker 1: We are heading into summer, cold and flu season should 12 00:00:35,920 --> 00:00:36,919 Speaker 1: be well behind us. 13 00:00:36,920 --> 00:00:39,000 Speaker 2: But it is like, let's. 14 00:00:38,800 --> 00:00:43,200 Speaker 1: Say, a lagging indicator. Perfect. Now, look, I do want 15 00:00:43,200 --> 00:00:44,839 Speaker 1: to look at the weak ahead because there are a 16 00:00:44,920 --> 00:00:48,839 Speaker 1: few things happening this week. But last week, if we 17 00:00:48,840 --> 00:00:52,239 Speaker 1: can just revisit some comments that were made by the 18 00:00:52,280 --> 00:00:58,000 Speaker 1: Reserve Banks Chief economist Sarah Hunter delivered. She made a 19 00:00:58,000 --> 00:01:00,520 Speaker 1: speech it was a really a fire sight chat, really 20 00:01:00,560 --> 00:01:05,959 Speaker 1: wasn't it, and was talking about the fact that the 21 00:01:06,080 --> 00:01:10,080 Speaker 1: RBA is pretty confident that they're close to getting inflation 22 00:01:10,240 --> 00:01:14,080 Speaker 1: back under control. Right, so not quite declaring victory, but 23 00:01:14,360 --> 00:01:18,360 Speaker 1: pretty close. Too, and essentially saying that they're getting close 24 00:01:18,400 --> 00:01:22,360 Speaker 1: to achieving that duel mandate, the dual target of a 25 00:01:22,400 --> 00:01:30,480 Speaker 1: strong jobs market and inflation under control. Are we there? 26 00:01:30,840 --> 00:01:35,440 Speaker 1: Are we close? How far off that? And how hard 27 00:01:35,480 --> 00:01:37,080 Speaker 1: is it to keep it there once we get there? 28 00:01:37,400 --> 00:01:41,039 Speaker 2: Well, the momentum on all of the indicators to that 29 00:01:41,640 --> 00:01:44,440 Speaker 2: end point of well, yeah, the goldilocks, because we do 30 00:01:44,600 --> 00:01:47,880 Speaker 2: know this is the RBA's forecasts, and the forecast from 31 00:01:47,920 --> 00:01:50,600 Speaker 2: a lot of the market economists is that inflation will 32 00:01:50,600 --> 00:01:52,680 Speaker 2: be about two and a half percent over the next 33 00:01:52,720 --> 00:01:56,560 Speaker 2: couple of years, So we can tick that box. We 34 00:01:56,640 --> 00:01:58,600 Speaker 2: had the labor force numbers last week too, just by 35 00:01:58,640 --> 00:02:00,360 Speaker 2: the way, we can touch on them a bit later. 36 00:02:00,400 --> 00:02:03,279 Speaker 2: But the unemployment rate is still four point two percent, 37 00:02:03,320 --> 00:02:05,480 Speaker 2: four point two, four point three. It's been bouncing around 38 00:02:05,520 --> 00:02:08,720 Speaker 2: there for a few months, and on most measures, that 39 00:02:08,840 --> 00:02:12,440 Speaker 2: is fantastic. If we can get through this current economic 40 00:02:12,480 --> 00:02:15,560 Speaker 2: cycle with the unemployment rate peaking at a level below 41 00:02:15,639 --> 00:02:19,359 Speaker 2: four and a half percent, that is a really good outcome. 42 00:02:19,760 --> 00:02:21,640 Speaker 2: And then you throw in their economic growth and that 43 00:02:21,760 --> 00:02:24,679 Speaker 2: is sort of still the I don't know the problematic 44 00:02:24,720 --> 00:02:27,560 Speaker 2: issue out there. Because we had the reasonable GDP numbers 45 00:02:27,560 --> 00:02:29,720 Speaker 2: of what was that a few weeks ago, one point 46 00:02:29,720 --> 00:02:33,320 Speaker 2: eight percent annual GDP. Now the consensus in the RBA 47 00:02:33,360 --> 00:02:37,399 Speaker 2: are forecasting two percent, maybe a fraction more. So if 48 00:02:37,440 --> 00:02:41,400 Speaker 2: this comes to pass, then that will be great. It's 49 00:02:41,440 --> 00:02:43,640 Speaker 2: important to remember that that doesn't mean that interest rates 50 00:02:43,639 --> 00:02:45,760 Speaker 2: don't change and they'll ever move again because we've hit 51 00:02:45,800 --> 00:02:50,520 Speaker 2: this nirvana. But those forecasts are predicated on a couple 52 00:02:50,560 --> 00:02:52,880 Speaker 2: more rate cuts to lock in that stronger growth and 53 00:02:52,960 --> 00:02:56,800 Speaker 2: that job creation. And we are of course, I've been 54 00:02:56,840 --> 00:03:00,080 Speaker 2: around for a long time, Michael, I'm alert to shocks 55 00:03:00,440 --> 00:03:03,040 Speaker 2: that happen, and that could be in the form of 56 00:03:03,160 --> 00:03:06,360 Speaker 2: Trump tariffs, which is still lurking somewhere in the mix. 57 00:03:06,760 --> 00:03:10,120 Speaker 2: Could be US budget position, which is there. It could 58 00:03:10,120 --> 00:03:13,960 Speaker 2: be something domestically. It could be a house price bubble 59 00:03:14,240 --> 00:03:16,600 Speaker 2: sort of reflating, and of course the bank and others 60 00:03:16,639 --> 00:03:18,680 Speaker 2: would have to react to that. So look at the 61 00:03:18,720 --> 00:03:22,160 Speaker 2: moment work, we're sort of closed and of course you'll 62 00:03:22,200 --> 00:03:24,679 Speaker 2: never achieve it completely to every decimal point on the 63 00:03:24,680 --> 00:03:27,480 Speaker 2: economic indicators. But if we can get the economy growing 64 00:03:27,520 --> 00:03:31,320 Speaker 2: for a couple of years, we're unemployment, slow inflations on target, 65 00:03:31,560 --> 00:03:32,720 Speaker 2: that is pretty good. 66 00:03:33,200 --> 00:03:37,800 Speaker 1: How big is the risk though, of perhaps over correcting 67 00:03:38,080 --> 00:03:42,360 Speaker 1: or over stimulating, because obviously we talk about interest rates 68 00:03:42,400 --> 00:03:46,640 Speaker 1: being a blunt instrument for this, there isn't a lot 69 00:03:46,680 --> 00:03:49,440 Speaker 1: of kind of room to move within that. Is there 70 00:03:49,480 --> 00:03:51,560 Speaker 1: a chance then they're just going just that little bit 71 00:03:51,600 --> 00:03:54,120 Speaker 1: too far and in doing so you just heat things 72 00:03:54,200 --> 00:03:55,040 Speaker 1: up a bit too much. 73 00:03:55,400 --> 00:03:57,320 Speaker 2: Yeah, you're quite right there, blood on the downside and 74 00:03:57,360 --> 00:04:00,120 Speaker 2: the upside because you change interest rates. And this is 75 00:04:00,120 --> 00:04:02,880 Speaker 2: a debate that we sometimes have that you know, perhaps 76 00:04:03,000 --> 00:04:06,480 Speaker 2: with the West Australian economy, for example, really going booming, 77 00:04:06,520 --> 00:04:09,880 Speaker 2: house prices booming, and they like they don't need interestraight cuts, 78 00:04:10,000 --> 00:04:13,840 Speaker 2: but if you're in Victoria or Tazzy, you probably do 79 00:04:13,920 --> 00:04:15,720 Speaker 2: need the right cut more urgently. But of course we've 80 00:04:15,720 --> 00:04:17,640 Speaker 2: only got up one interestrate for the whole country. So 81 00:04:18,040 --> 00:04:20,920 Speaker 2: this is where the RBA is a lot more sober 82 00:04:21,000 --> 00:04:23,719 Speaker 2: than most of us. They tend to sit tight on 83 00:04:23,800 --> 00:04:25,680 Speaker 2: interest rates for a longer period in the market. The 84 00:04:25,760 --> 00:04:28,560 Speaker 2: market wants rate changes all the time. They love that volatility, 85 00:04:28,560 --> 00:04:30,920 Speaker 2: they love something to talk about. But the RBA are 86 00:04:30,960 --> 00:04:33,080 Speaker 2: quite happy to sit there and say, look, we're doing okay, 87 00:04:33,800 --> 00:04:37,000 Speaker 2: Yes we think we might have to cut eventually, but 88 00:04:37,120 --> 00:04:41,080 Speaker 2: we need to see the evidence come through to justify that. 89 00:04:41,120 --> 00:04:43,640 Speaker 2: But the moment, they're sitting tight. So the RBA meet 90 00:04:43,839 --> 00:04:47,919 Speaker 2: well next on the thirtieth of September, So next week, 91 00:04:49,040 --> 00:04:50,480 Speaker 2: no one's thinking they're going to move. I don't think 92 00:04:50,480 --> 00:04:53,440 Speaker 2: they're going to move. And they've got this opportunity to 93 00:04:53,440 --> 00:04:56,720 Speaker 2: sort of spell out the Sarah Hunter thesis a little 94 00:04:56,720 --> 00:04:59,479 Speaker 2: bit more, and I hope they do that. Look, we 95 00:04:59,520 --> 00:05:01,480 Speaker 2: can't declar their victory on the economy because we never 96 00:05:01,480 --> 00:05:03,240 Speaker 2: had a clear victory on the economy. It's like you 97 00:05:03,320 --> 00:05:05,720 Speaker 2: never finished painting the Sydney Harbor Bridge. You finished and 98 00:05:05,720 --> 00:05:08,160 Speaker 2: you've got to start again. You kind of keep adjusting, 99 00:05:08,680 --> 00:05:10,720 Speaker 2: and their cracks emerge or something happens that you've got 100 00:05:10,720 --> 00:05:13,560 Speaker 2: to you've got to react to. But if we can 101 00:05:13,600 --> 00:05:16,599 Speaker 2: get through this period and the RBA is cautious and 102 00:05:16,640 --> 00:05:18,640 Speaker 2: they tweak rates down a bit, they don't overdo it, 103 00:05:18,680 --> 00:05:20,599 Speaker 2: they don't underdo it, that we could be in for 104 00:05:20,640 --> 00:05:23,280 Speaker 2: a you know, a decent twenty twenty six in terms 105 00:05:23,279 --> 00:05:23,960 Speaker 2: of the economy. 106 00:05:24,120 --> 00:05:26,200 Speaker 1: All right, So in the end, it's essentially trying to 107 00:05:26,200 --> 00:05:30,279 Speaker 1: get those fundamentals in place, and those two basic kind 108 00:05:30,279 --> 00:05:34,120 Speaker 1: of the twin planks in line, so that then they 109 00:05:34,120 --> 00:05:36,279 Speaker 1: are in a good position to deal with any shocks 110 00:05:36,480 --> 00:05:37,880 Speaker 1: and other things that do come up. 111 00:05:38,000 --> 00:05:40,279 Speaker 2: Yes, and that they can react quickly. And again we 112 00:05:40,400 --> 00:05:42,520 Speaker 2: saw that during the global financial crisis. What was that 113 00:05:42,560 --> 00:05:46,640 Speaker 2: fifteen sixteen years ago? Now, goodness me and the pandemic. Yeah, 114 00:05:47,000 --> 00:05:48,800 Speaker 2: they were cutting greats, they're printing money. They did a 115 00:05:48,800 --> 00:05:51,520 Speaker 2: whole lot of things which helped support the economy. Ten 116 00:05:51,560 --> 00:05:54,360 Speaker 2: out of ten, well done, RBA and that. But they 117 00:05:54,360 --> 00:05:56,680 Speaker 2: were sort of extreme shocks. What's a bit more subtle 118 00:05:56,760 --> 00:06:00,520 Speaker 2: is when you get a you get a small but 119 00:06:00,600 --> 00:06:04,240 Speaker 2: then significant impact on the economy from something. You know, 120 00:06:04,279 --> 00:06:06,320 Speaker 2: an oil shock used to be the one that caused 121 00:06:06,320 --> 00:06:09,000 Speaker 2: people some concern where the oil price sort of went 122 00:06:09,080 --> 00:06:11,520 Speaker 2: up or down. That created a lot of tension. The 123 00:06:11,560 --> 00:06:13,520 Speaker 2: one that is still lurking, as I mentioned before, and 124 00:06:13,600 --> 00:06:16,440 Speaker 2: Trump tariffs. They haven't gone away. Your markets have been 125 00:06:16,480 --> 00:06:20,400 Speaker 2: remarkably resilient to the threat of tariffs. But there's something 126 00:06:20,480 --> 00:06:22,719 Speaker 2: still brewing there that I fear it might blow up 127 00:06:22,760 --> 00:06:23,719 Speaker 2: at some stage. 128 00:06:24,160 --> 00:06:26,720 Speaker 1: Okay, last week you mentioned that we did have the 129 00:06:26,800 --> 00:06:29,760 Speaker 1: labor force data come out unemployment steady at four point 130 00:06:29,839 --> 00:06:33,320 Speaker 1: two percent, but there was a loss of jobs within 131 00:06:33,400 --> 00:06:35,520 Speaker 1: that is the market is weakening a little bit. 132 00:06:35,839 --> 00:06:37,480 Speaker 2: Yeah, and a lot of that was full time employment 133 00:06:37,560 --> 00:06:40,080 Speaker 2: was down, so the hours worked in the economy was down, 134 00:06:40,080 --> 00:06:43,600 Speaker 2: and that's usually a sign that activity in the economy 135 00:06:43,640 --> 00:06:45,000 Speaker 2: is not quite as strong as you would like it 136 00:06:45,040 --> 00:06:47,080 Speaker 2: to be. You know, bosses don't say to their stuff, look, 137 00:06:47,120 --> 00:06:48,320 Speaker 2: I don't need you this week, or I only need 138 00:06:48,360 --> 00:06:50,960 Speaker 2: you to do ten hours, not twenty hours, and I'm 139 00:06:51,000 --> 00:06:53,279 Speaker 2: not going to hire anybody because I don't have that 140 00:06:53,360 --> 00:06:57,520 Speaker 2: business case to do so. So it's consistent with the economy. Again, 141 00:06:57,839 --> 00:07:00,320 Speaker 2: they're not catastrophic un employment numbers by any You have 142 00:07:00,320 --> 00:07:02,600 Speaker 2: four point two percent undployed rapecers. We mentioned. It's good. 143 00:07:03,040 --> 00:07:05,440 Speaker 2: We did lose some jobs though, and that I think 144 00:07:05,560 --> 00:07:08,800 Speaker 2: is why we are still thinking the markets, thinking that 145 00:07:08,839 --> 00:07:10,800 Speaker 2: there's still a couple of rate cuts to come. And 146 00:07:10,920 --> 00:07:12,920 Speaker 2: as you mentioned, sort of Sarah Hunter, fine tuning the 147 00:07:12,960 --> 00:07:16,520 Speaker 2: economy a little bit if inflation's on track. But then 148 00:07:16,560 --> 00:07:19,560 Speaker 2: you just start to get a few of these indicators 149 00:07:19,600 --> 00:07:23,640 Speaker 2: on the labor market, job vacancies, the employment, number hours 150 00:07:23,760 --> 00:07:27,760 Speaker 2: worked just fading, not crashing, just fading. Right, we must 151 00:07:27,800 --> 00:07:30,200 Speaker 2: give a twenty five point cut just to keep a 152 00:07:30,280 --> 00:07:32,720 Speaker 2: bit of a boost under the economy. 153 00:07:33,040 --> 00:07:36,160 Speaker 1: Yeah, just to keep them the momentum going. Momentum is 154 00:07:36,160 --> 00:07:37,520 Speaker 1: a very hard word to say. 155 00:07:38,240 --> 00:07:39,600 Speaker 2: It is at this time of the morning. 156 00:07:39,760 --> 00:07:43,080 Speaker 1: I found my kryptonite here to keep the momentum going. 157 00:07:43,160 --> 00:07:45,640 Speaker 1: There we go so smooth through that one. Okay, we 158 00:07:45,720 --> 00:07:48,320 Speaker 1: are now somewhat relatedly looking now to the weak ahead. 159 00:07:48,520 --> 00:07:50,280 Speaker 1: It's where I meant to start seven and a half 160 00:07:50,360 --> 00:07:54,120 Speaker 1: minutes ago, and now we're finally getting there. Monthly inflation 161 00:07:54,440 --> 00:07:58,040 Speaker 1: figures this week, what are you expecting to see a 162 00:07:58,120 --> 00:07:58,840 Speaker 1: bit of a pullback? 163 00:07:58,880 --> 00:08:01,200 Speaker 2: You might recall that the job Lie monthly numbers, which 164 00:08:01,360 --> 00:08:03,720 Speaker 2: came out a month ago surprised on the upside. Both 165 00:08:03,760 --> 00:08:06,520 Speaker 2: the headline figure at two point eight percent and the 166 00:08:06,640 --> 00:08:08,680 Speaker 2: trimmed me at two point seven were higher than I 167 00:08:08,760 --> 00:08:12,360 Speaker 2: think everybody was forecasting. Some of that was due to 168 00:08:12,440 --> 00:08:16,320 Speaker 2: the timing of electricity rebates, and given that they were 169 00:08:16,400 --> 00:08:19,320 Speaker 2: July numbers, there's a bit of a seasonal increase in 170 00:08:19,440 --> 00:08:22,880 Speaker 2: some prices on the first of July. August is expected 171 00:08:22,880 --> 00:08:25,120 Speaker 2: to be a bit weaker, So we've got the annual 172 00:08:25,320 --> 00:08:28,240 Speaker 2: headline figure probably dipping back to about two point six 173 00:08:28,320 --> 00:08:30,640 Speaker 2: two point seven trimmed me at two and a half. 174 00:08:30,840 --> 00:08:35,040 Speaker 2: So aside from the monthly volatility of let us prices, 175 00:08:35,120 --> 00:08:38,559 Speaker 2: petrol prices and these sort of things, inflations at two 176 00:08:38,640 --> 00:08:40,439 Speaker 2: and a half give will take a few tenths. So 177 00:08:40,559 --> 00:08:44,160 Speaker 2: that'll give everybody, including our friends at the RBA, a 178 00:08:44,240 --> 00:08:47,680 Speaker 2: lot of comfort that that inflation issue is well in check. 179 00:08:48,240 --> 00:08:50,679 Speaker 1: Speaking of our friends at the RBA, we will be 180 00:08:50,760 --> 00:08:53,280 Speaker 1: hearing quite a bit from them this week because we've 181 00:08:53,320 --> 00:08:57,400 Speaker 1: got Reserve Bank Governor Michelle Bullock likely also Deputy Governor 182 00:08:57,440 --> 00:09:01,080 Speaker 1: Andrew Houser, Sarah Hunter, who we've talked about all jumping 183 00:09:01,120 --> 00:09:04,000 Speaker 1: into the car together. In my mind, they're all traveling 184 00:09:04,080 --> 00:09:09,320 Speaker 1: together to Canberra to appear before the Standing Committee on Economics. 185 00:09:09,360 --> 00:09:11,480 Speaker 1: It happens twice a year, doesn't it, And so this 186 00:09:11,600 --> 00:09:16,040 Speaker 1: is a It delivers an insight. What what are we 187 00:09:16,120 --> 00:09:19,720 Speaker 1: going to learn there that we don't already know, Particularly 188 00:09:19,840 --> 00:09:25,080 Speaker 1: with so much transparency now with press conferences every RBA meeting. 189 00:09:25,840 --> 00:09:28,480 Speaker 2: It's a chance for a different line of question. You know, 190 00:09:28,880 --> 00:09:32,199 Speaker 2: the press conferences after every meeting are good. They're better 191 00:09:32,200 --> 00:09:34,160 Speaker 2: than they were when they started. I think the journals 192 00:09:34,240 --> 00:09:37,679 Speaker 2: have learned not for a gotcha question, but for one 193 00:09:37,720 --> 00:09:40,319 Speaker 2: that really digs into some of the insights, some of 194 00:09:40,360 --> 00:09:42,160 Speaker 2: the research, some of the thinking that the RBA is 195 00:09:42,200 --> 00:09:43,720 Speaker 2: going on with because that's what it's that's what it's 196 00:09:43,800 --> 00:09:47,839 Speaker 2: meant to be. These ones, Oh look, if I'm a 197 00:09:47,920 --> 00:09:50,319 Speaker 2: bit cynical, they tend to have a political edge to it. 198 00:09:50,400 --> 00:09:53,079 Speaker 2: So the Labor Party will ask, all, what do you 199 00:09:53,120 --> 00:09:55,960 Speaker 2: think the economy is doing? Brilliantly? And the Liberal Party 200 00:09:56,000 --> 00:09:57,720 Speaker 2: is say, oh, what about something else? So that there's 201 00:09:57,720 --> 00:09:59,520 Speaker 2: a bit of a political tone to it, which is 202 00:09:59,520 --> 00:10:01,800 Speaker 2: a bit pointing. But at the end of the day, 203 00:10:02,240 --> 00:10:04,679 Speaker 2: Michelle Bullock and her team will be able to sort 204 00:10:04,720 --> 00:10:08,200 Speaker 2: of articulate or more than what we've spoken about, they'll 205 00:10:08,240 --> 00:10:10,120 Speaker 2: be able to release a bit more modeling, I'm assured. 206 00:10:10,160 --> 00:10:13,560 Speaker 2: I'm assuming there'll be more questions about how worried are 207 00:10:13,640 --> 00:10:16,319 Speaker 2: you about the Trump tariffs? Have you modeled what the 208 00:10:16,559 --> 00:10:19,160 Speaker 2: macro effects might be of the climate change policies that 209 00:10:19,160 --> 00:10:21,959 Speaker 2: we're hearing so much about too. Now there might be 210 00:10:22,000 --> 00:10:24,720 Speaker 2: another discussion. All house prices seem to be lifting rapidly, 211 00:10:25,240 --> 00:10:27,199 Speaker 2: is that a concern to you? And if so, what 212 00:10:27,360 --> 00:10:29,600 Speaker 2: you do about it? Given that you don't target house prices, 213 00:10:29,679 --> 00:10:33,480 Speaker 2: So it's really a chance to dig in and delve 214 00:10:33,520 --> 00:10:35,800 Speaker 2: into some of these really key issues, and I hope 215 00:10:35,880 --> 00:10:39,000 Speaker 2: the panel or the committee do dig into those and 216 00:10:39,200 --> 00:10:40,800 Speaker 2: put some of the politics to the side. 217 00:10:40,960 --> 00:10:42,880 Speaker 1: Yeah, that would be nice to see. All Right, I 218 00:10:42,960 --> 00:10:45,240 Speaker 1: think you've stretched that voice as far as you possibly 219 00:10:45,360 --> 00:10:48,439 Speaker 1: can go. And have a button menthol and an e 220 00:10:48,559 --> 00:10:51,920 Speaker 1: lemon tea and some Manuka honey. Yeah, and prepare for 221 00:10:52,040 --> 00:10:54,319 Speaker 1: a big week ahead. Thanks very much, Steven, Thank you. 222 00:10:54,400 --> 00:10:54,679 Speaker 2: Michael. 223 00:10:54,840 --> 00:10:57,360 Speaker 1: That was economist Stephen coucoulis, better known as the Kook. 224 00:10:57,520 --> 00:10:59,679 Speaker 1: You can find him at the kook dot com and 225 00:10:59,720 --> 00:11:02,040 Speaker 1: fillow him on X using the handle of the Cook 226 00:11:02,080 --> 00:11:04,079 Speaker 1: are Michael Thompson And this is Fear and Greed Q 227 00:11:04,240 --> 00:11:04,400 Speaker 1: and a