1 00:00:05,370 --> 00:00:07,350 Sean Aylmer: Welcome to Fear and Greed - The Week Ahead. I'm Sean 2 00:00:07,350 --> 00:00:10,770 Sean Aylmer: Aylmer, and as always, I'm joined by economist Stephen Koukoulas. 3 00:00:10,770 --> 00:00:13,529 Sean Aylmer: You'll find him at thekouk. com T- H- E- K- O- U- K. 4 00:00:13,710 --> 00:00:17,489 Sean Aylmer: com and on X using the handle TheKouk. Stephen, good 5 00:00:17,489 --> 00:00:19,829 Sean Aylmer: morning. Are you still using X? I mean, I thought 6 00:00:19,829 --> 00:00:22,560 Sean Aylmer: we'd all dumped X after last week's efforts from Mr. Musk. 7 00:00:22,980 --> 00:00:26,788 Stephen Koukoulas: I'm still using it, but with reluctance and look, it's 8 00:00:26,790 --> 00:00:30,450 Stephen Koukoulas: useful and I tend to use it more for information 9 00:00:30,719 --> 00:00:32,880 Stephen Koukoulas: rather than distribution of my views. I still do that 10 00:00:32,880 --> 00:00:36,000 Stephen Koukoulas: a bit, but look, I follow some really interesting people, 11 00:00:36,000 --> 00:00:41,610 Stephen Koukoulas: interesting news outlets, interesting sport, interesting wine producers, and I 12 00:00:41,610 --> 00:00:44,519 Stephen Koukoulas: use it as an information source at this stage, but 13 00:00:44,519 --> 00:00:46,800 Stephen Koukoulas: fair enough. Messy, messy, messy. 14 00:00:47,098 --> 00:00:49,499 Sean Aylmer: Very messy. Look, we need to talk about last week's 15 00:00:49,500 --> 00:00:52,199 Sean Aylmer: CPI before we get on to this week. What a number. 16 00:00:52,799 --> 00:00:55,440 Stephen Koukoulas: Oh my goodness. I'm still reeling from that actually, because 17 00:00:55,440 --> 00:00:58,920 Stephen Koukoulas: it was, look in one way, it was only 0. 18 00:00:59,430 --> 00:01:04,320 Stephen Koukoulas: 2 outside expectations. Above expectations. The March quarter inflation rate 19 00:01:04,740 --> 00:01:09,509 Stephen Koukoulas: was 1. 0% for the quarter, 3. 6 annual. The 20 00:01:09,569 --> 00:01:12,690 Stephen Koukoulas: underlying figure was 4%, so a couple of tenths above 21 00:01:12,690 --> 00:01:16,020 Stephen Koukoulas: average. And just by the way, when the December quarter 22 00:01:16,020 --> 00:01:18,060 Stephen Koukoulas: numbers came out three months ago, they were 0. 2 23 00:01:18,060 --> 00:01:22,500 Stephen Koukoulas: below expectations. So there's swings and roundabouts on these things. 24 00:01:22,500 --> 00:01:26,460 Stephen Koukoulas: But we do know that things like education services, that 25 00:01:26,580 --> 00:01:29,339 Stephen Koukoulas: mainly school fees and those sorts of things, we know 26 00:01:29,340 --> 00:01:34,319 Stephen Koukoulas: that dwelling rent were the two super- duper strong indicators 27 00:01:34,319 --> 00:01:39,389 Stephen Koukoulas: that I think caught most forecasters off guard. And it 28 00:01:39,389 --> 00:01:43,139 Stephen Koukoulas: confirmed that inflation, while it's still coming down, we've gone 29 00:01:43,139 --> 00:01:46,469 Stephen Koukoulas: from, I'll use the headline figures, from 7. 8% at 30 00:01:46,469 --> 00:01:52,080 Stephen Koukoulas: the end of 2022 to 4.1% at the end of 2023, 31 00:01:52,080 --> 00:01:55,050 Stephen Koukoulas: and now 3.6% in the March quarter 2024. So it is coming down, 32 00:01:55,230 --> 00:01:58,800 Stephen Koukoulas: but the $ 64 billion question, if you like, is it 33 00:01:58,800 --> 00:02:01,440 Stephen Koukoulas: coming down fast enough? Is it still going to come 34 00:02:01,440 --> 00:02:05,580 Stephen Koukoulas: down with monetary policy both here and in around the 35 00:02:05,580 --> 00:02:09,060 Stephen Koukoulas: world, without more interest rate adjustments? And the market's really 36 00:02:09,060 --> 00:02:12,059 Stephen Koukoulas: having a rethink about that outlook for monetary policy. 37 00:02:12,450 --> 00:02:14,790 Sean Aylmer: Yeah, I mean, the idea of a September rate cut 38 00:02:14,910 --> 00:02:18,029 Sean Aylmer: kind of is off the agenda now, because I'm sure 39 00:02:18,030 --> 00:02:21,298 Sean Aylmer: the Reserve bank will need a couple of decent CPI 40 00:02:21,299 --> 00:02:22,679 Sean Aylmer: numbers before doing anything. 41 00:02:23,609 --> 00:02:26,730 Stephen Koukoulas: I think that's true now. If this number had even 42 00:02:26,730 --> 00:02:30,780 Stephen Koukoulas: come in on expectations and the annual headline figure was 43 00:02:30,780 --> 00:02:36,389 Stephen Koukoulas: 3.4% and the trimmed mean, the underlying measure was 3. 7 or 3. 44 00:02:36,660 --> 00:02:39,360 Stephen Koukoulas: 8, there or thereabouts, I think they would've been able 45 00:02:39,360 --> 00:02:42,059 Stephen Koukoulas: to look at perhaps the next one. And if we've 46 00:02:42,059 --> 00:02:45,270 Stephen Koukoulas: got another lowish number and the unemployment rate was edging 47 00:02:45,270 --> 00:02:47,460 Stephen Koukoulas: high, they could have moved. But I think now, the 48 00:02:47,460 --> 00:02:51,210 Stephen Koukoulas: onus is really on this inability, I suppose, of the 49 00:02:51,210 --> 00:02:53,069 Stephen Koukoulas: inflation rate to tick lower. And then when we look 50 00:02:53,070 --> 00:02:55,349 Stephen Koukoulas: at things that we can see here and now, here 51 00:02:55,349 --> 00:02:57,059 Stephen Koukoulas: we are, what the end of April, or near the 52 00:02:57,059 --> 00:03:01,590 Stephen Koukoulas: end of April? and you've got oil prices elevated compared 53 00:03:01,590 --> 00:03:04,440 Stephen Koukoulas: with where they were three months ago. Other commodity prices 54 00:03:04,440 --> 00:03:07,230 Stephen Koukoulas: are up, not down. They're the sort of things that 55 00:03:07,650 --> 00:03:09,120 Stephen Koukoulas: I think, as we mentioned, a week or two back, 56 00:03:09,120 --> 00:03:13,529 Stephen Koukoulas: that do feed in to inflation around the world. So 57 00:03:13,530 --> 00:03:17,489 Stephen Koukoulas: that commodity cycle is something that's just another little spanner 58 00:03:17,490 --> 00:03:19,739 Stephen Koukoulas: in the works of getting this inflation rate back to target. 59 00:03:21,120 --> 00:03:24,360 Sean Aylmer: So I would imagine then, every partial indicator from here 60 00:03:24,360 --> 00:03:27,030 Sean Aylmer: on in becomes even more important. They're always important, I 61 00:03:27,030 --> 00:03:29,460 Sean Aylmer: know that. But just because we had that surprise last 62 00:03:29,460 --> 00:03:32,879 Sean Aylmer: week, things like retail trade and building approvals and lending 63 00:03:32,880 --> 00:03:35,309 Sean Aylmer: data, which we've all got this week, they're going to 64 00:03:35,309 --> 00:03:36,450 Sean Aylmer: be pretty closely watched. 65 00:03:36,810 --> 00:03:40,020 Stephen Koukoulas: Yeah, look, you're spot on. This week's data flow are 66 00:03:40,530 --> 00:03:43,680 Stephen Koukoulas: more of these, what we call, partial indicators. Partial indicators 67 00:03:43,680 --> 00:03:46,740 Stephen Koukoulas: of where the economy's going. And therefore I think they're 68 00:03:46,740 --> 00:03:49,530 Stephen Koukoulas: all for the month of March. So we've got retail 69 00:03:49,530 --> 00:03:51,839 Stephen Koukoulas: spending, as you said. And retail spending has been very 70 00:03:51,839 --> 00:03:53,969 Stephen Koukoulas: choppy month- on- month for the last four or five 71 00:03:53,969 --> 00:03:57,600 Stephen Koukoulas: months around that Black Friday sales in October, and Christmas 72 00:03:57,600 --> 00:03:59,730 Stephen Koukoulas: and New Year, they've been very, very choppy. But I 73 00:03:59,730 --> 00:04:02,700 Stephen Koukoulas: think if we believe the consumer sentiment numbers, that it's 74 00:04:02,700 --> 00:04:05,429 Stephen Koukoulas: going to be another soggy result. So about flat in 75 00:04:05,429 --> 00:04:09,120 Stephen Koukoulas: nominal terms, which is weak given the population growth. Building 76 00:04:09,120 --> 00:04:12,389 Stephen Koukoulas: approvals, they've been horrendous the last couple of months. I 77 00:04:12,389 --> 00:04:14,340 Stephen Koukoulas: wouldn't be surprised if we've got a bit of a 78 00:04:14,340 --> 00:04:17,279 Stephen Koukoulas: statistical rebound. All it takes is for a couple of 79 00:04:17,279 --> 00:04:20,010 Stephen Koukoulas: big apartment blocks to be approved in Brisbane, Sydney, Melbourne 80 00:04:20,010 --> 00:04:21,899 Stephen Koukoulas: or Adelaide or somewhere, and you get a bit of 81 00:04:21,900 --> 00:04:25,890 Stephen Koukoulas: a 5% jump in building approvals. But we need that 82 00:04:26,130 --> 00:04:29,219 Stephen Koukoulas: plus a whole lot more for there to be this 83 00:04:29,219 --> 00:04:32,460 Stephen Koukoulas: correction in building approvals, adding to supply that's so desperately 84 00:04:32,460 --> 00:04:36,390 Stephen Koukoulas: needed. International trade, we're doing okay. We're exporting well. We're 85 00:04:36,390 --> 00:04:38,520 Stephen Koukoulas: going to have another trade surplus there, but nobody looks 86 00:04:38,520 --> 00:04:41,699 Stephen Koukoulas: at that anymore, I'm afraid. The lending numbers with the 87 00:04:41,700 --> 00:04:44,670 Stephen Koukoulas: house price series still ticking up. People are borrowing a 88 00:04:44,670 --> 00:04:46,409 Stephen Koukoulas: bit more to buy their housing, so we should have 89 00:04:46,410 --> 00:04:49,800 Stephen Koukoulas: another modest increase in lending dwellings. 90 00:04:50,100 --> 00:04:52,620 Sean Aylmer: Now we're only two weeks out. Two weeks, one day, 91 00:04:52,800 --> 00:04:54,870 Sean Aylmer: from the budget. You must be excited. 92 00:04:55,410 --> 00:05:01,650 Stephen Koukoulas: Oh, budgets are wonderful. Although in recent years I've been 93 00:05:01,650 --> 00:05:04,500 Stephen Koukoulas: a bit annoyed at various treasuries of all sides of 94 00:05:04,500 --> 00:05:08,159 Stephen Koukoulas: politics. Because they tend to leak the really sexy topics 95 00:05:08,160 --> 00:05:10,020 Stephen Koukoulas: before budget night. So you go in there, think " Oh 96 00:05:10,050 --> 00:05:12,600 Stephen Koukoulas: what's the exciting thing?" And okay, you get the bottom 97 00:05:12,600 --> 00:05:15,118 Stephen Koukoulas: line, budget deficit or surplus, you get a bit more 98 00:05:15,120 --> 00:05:18,149 Stephen Koukoulas: of the economic news. " Oh, they're forecasting inflation at 2. 99 00:05:18,900 --> 00:05:21,450 Stephen Koukoulas: 5 or 3.5," or whatever that number is. That's the thrill. Whereas 100 00:05:21,450 --> 00:05:23,640 Stephen Koukoulas: in the old days, you'd go in there and, " Gosh, 101 00:05:23,969 --> 00:05:27,539 Stephen Koukoulas: you're kidding. Privatize the remainder of the Commonwealth Bank or Telstra, or 102 00:05:28,080 --> 00:05:30,600 Stephen Koukoulas: they did something wacky on the capital gains tax or ..." 103 00:05:31,110 --> 00:05:31,590 Sean Aylmer: Wow. 104 00:05:32,010 --> 00:05:33,569 Stephen Koukoulas: Those were the days. But now they tend to just 105 00:05:33,570 --> 00:05:36,268 Stephen Koukoulas: sort of, I'll say leak, but sort of distribute the 106 00:05:36,270 --> 00:05:39,029 Stephen Koukoulas: information so that when we go into the lockup in 107 00:05:39,029 --> 00:05:41,820 Stephen Koukoulas: Parliament House, you think, " Oh, I already knew that. I 108 00:05:41,820 --> 00:05:44,850 Stephen Koukoulas: read in the paper last week." But nonetheless, it's still 109 00:05:44,850 --> 00:05:48,480 Stephen Koukoulas: an important document. But for both the economy, which is 110 00:05:48,480 --> 00:05:51,809 Stephen Koukoulas: still pretty soggy despite this inflation persistence, and of course 111 00:05:51,809 --> 00:05:53,969 Stephen Koukoulas: with an election about a year away from where we 112 00:05:53,969 --> 00:05:57,389 Stephen Koukoulas: are today politically, so what will the Labor Treasurer Jim 113 00:05:57,389 --> 00:05:58,139 Stephen Koukoulas: Chalmers do? 114 00:05:59,039 --> 00:06:00,180 Sean Aylmer: Mmm. Stephen, enjoy your week. 115 00:06:00,690 --> 00:06:01,440 Stephen Koukoulas: Will do. Thank you. 116 00:06:01,950 --> 00:06:04,620 Sean Aylmer: That was Economist Stephen Koukoulas better known as The Kouk. You can 117 00:06:04,620 --> 00:06:08,190 Sean Aylmer: find him at thekouk. com and follow him on X 118 00:06:08,250 --> 00:06:11,488 Sean Aylmer: using the handle TheKouk. I'm Sean Aylmer and this is 119 00:06:11,490 --> 00:06:12,659 Sean Aylmer: Fear and Greed - The Week Ahead.