1 00:00:08,070 --> 00:00:10,260 Sean Aylmer: Welcome to Fear and Greed - The Week Ahead. I'm Sean 2 00:00:10,289 --> 00:00:14,218 Sean Aylmer: Aylmer and, as always, I'm joined by economist Stephen Koukoulas. 3 00:00:14,219 --> 00:00:16,590 Sean Aylmer: You'll find him at thekouk. com and on Twitter using -- 4 00:00:16,949 --> 00:00:20,610 Sean Aylmer: not Twitter, X -- on X, using the handle TheKouk. Stephen, 5 00:00:20,820 --> 00:00:22,110 Sean Aylmer: X user, good morning. 6 00:00:22,530 --> 00:00:23,700 Stephen Kokoulas: Top of the morning to you, Sean. 7 00:00:24,570 --> 00:00:27,900 Sean Aylmer: Now, massive week coming up. Before we get into that, 8 00:00:27,990 --> 00:00:29,789 Sean Aylmer: there wasn't a lot of data out last week, but 9 00:00:29,790 --> 00:00:34,049 Sean Aylmer: the Intergenerational Report came out. Jim Chalmers released it earlier 10 00:00:34,049 --> 00:00:36,659 Sean Aylmer: than we expected, really. We don't expect them every couple 11 00:00:36,659 --> 00:00:38,790 Sean Aylmer: of years where Jim Chalmers wants to keep it top 12 00:00:38,790 --> 00:00:42,479 Sean Aylmer: of mind. I suppose the elevator pitch on that one, 13 00:00:42,479 --> 00:00:43,980 Sean Aylmer: before we get into this week, Stephen. 14 00:00:45,000 --> 00:00:49,649 Stephen Kokoulas: It's a useful discipline on governments, and first the voters, 15 00:00:49,860 --> 00:00:53,039 Stephen Kokoulas: electorate and people to understand what's happening in some of 16 00:00:53,039 --> 00:00:55,140 Stephen Kokoulas: these long run structural issues of the economy. And I 17 00:00:55,140 --> 00:00:58,590 Stephen Kokoulas: don't get bogged down in the forecast, the GDP in 2050, because 18 00:00:58,590 --> 00:01:03,150 Stephen Kokoulas: who knows? Don't even know what it's going to be in 2023, to be honest. But it's more to 19 00:01:03,150 --> 00:01:05,340 Stephen Kokoulas: say that we do know a few things. We've got 20 00:01:05,340 --> 00:01:07,589 Stephen Kokoulas: an aging population. We're all living longer, and that's a 21 00:01:07,590 --> 00:01:11,129 Stephen Kokoulas: good thing. We know that old people tend to cost 22 00:01:11,129 --> 00:01:14,369 Stephen Kokoulas: more than young people to look after with healthcare and 23 00:01:14,370 --> 00:01:17,580 Stephen Kokoulas: pensions and these sorts of things. And that we know 24 00:01:17,580 --> 00:01:19,319 Stephen Kokoulas: that there's a couple of other structural issues going on 25 00:01:19,319 --> 00:01:22,980 Stephen Kokoulas: in the economy. The disability insurance scheme, defense spending's going to 26 00:01:22,980 --> 00:01:25,860 Stephen Kokoulas: be probably more elevated in the next couple of decades than 27 00:01:25,950 --> 00:01:28,680 Stephen Kokoulas: the prior couple of decades. And when we put all 28 00:01:28,680 --> 00:01:31,500 Stephen Kokoulas: these into the great big melting pot called the Intergenerational 29 00:01:31,500 --> 00:01:34,200 Stephen Kokoulas: Report, what it shows is that in the next 20, 30, 40 30 00:01:34,200 --> 00:01:36,959 Stephen Kokoulas: years there's pressures on the budget. We've got to do 31 00:01:36,959 --> 00:01:40,860 Stephen Kokoulas: perhaps some more about superannuation policy. And even though it 32 00:01:40,860 --> 00:01:45,539 Stephen Kokoulas: didn't speak its ugly word, tax is something that was 33 00:01:45,539 --> 00:01:48,510 Stephen Kokoulas: not really included. And tax reform is something that, look, 34 00:01:48,510 --> 00:01:50,880 Stephen Kokoulas: it'll come around one day or other. But if we'd 35 00:01:50,880 --> 00:01:55,500 Stephen Kokoulas: have this hugely expensive strain on the budget over many 36 00:01:55,500 --> 00:02:01,350 Stephen Kokoulas: decades, someone's got to pay a bit more tax to fund it. 37 00:02:01,350 --> 00:02:03,210 Sean Aylmer: Okay. We can talk about that for the next 40 years, Stephen. 38 00:02:03,210 --> 00:02:03,300 Stephen Kokoulas: Yes. 39 00:02:04,049 --> 00:02:07,710 Sean Aylmer: Now, let's get into the next few days. Plenty going 40 00:02:07,710 --> 00:02:12,120 Sean Aylmer: on. Let's start with economic indicators. The big one this 41 00:02:12,120 --> 00:02:16,708 Sean Aylmer: week, at least in terms of economic indicator, monthly inflation. 42 00:02:17,250 --> 00:02:20,638 Stephen Kokoulas: Monthly inflation on Wednesday, yes. And of course, inflation, inflation, 43 00:02:20,639 --> 00:02:24,059 Stephen Kokoulas: inflation. The three top priorities of the Reserve Bank and 44 00:02:24,059 --> 00:02:26,970 Stephen Kokoulas: the government and just the business sector more generally. Cost 45 00:02:26,970 --> 00:02:31,138 Stephen Kokoulas: of living pressures. And we've had that monthly inflation indicator 46 00:02:31,169 --> 00:02:35,669 Stephen Kokoulas: decelerating from a peak of 8.4% in December. Came in 47 00:02:35,700 --> 00:02:39,178 Stephen Kokoulas: around about 5.5% in June. We get the July figures 48 00:02:39,419 --> 00:02:42,210 Stephen Kokoulas: on Wednesday, as I mentioned. The market's looking for another 49 00:02:42,270 --> 00:02:46,530 Stephen Kokoulas: little dip towards 5%. These jumping petrol prices probably won't 50 00:02:46,530 --> 00:02:48,330 Stephen Kokoulas: impact us until we get the August numbers in a 51 00:02:48,330 --> 00:02:51,150 Stephen Kokoulas: month's time. But we're, again, looking for clues that the 52 00:02:51,150 --> 00:02:54,899 Stephen Kokoulas: broad or the underlying inflation pressures are decelerating. I think 53 00:02:54,900 --> 00:02:57,689 Stephen Kokoulas: we'll see them, things like airfare coming down. But we'll 54 00:02:57,690 --> 00:03:00,930 Stephen Kokoulas: also have the July, the one July increase in power 55 00:03:00,930 --> 00:03:04,560 Stephen Kokoulas: prices. So there's, like most economic indicators, many, many moving 56 00:03:04,560 --> 00:03:07,050 Stephen Kokoulas: parts. But we'd just love to see the Reserve Bank will be 57 00:03:07,050 --> 00:03:11,160 Stephen Kokoulas: banking on getting just another step lower in this inflation rate. 58 00:03:12,000 --> 00:03:15,179 Sean Aylmer: And we've also got retail trade and building approval data 59 00:03:15,179 --> 00:03:17,488 Sean Aylmer: this week. Both very important parts of the economy. 60 00:03:18,029 --> 00:03:20,910 Stephen Kokoulas: They are indeed, and the retail trade numbers out later 61 00:03:20,910 --> 00:03:23,669 Stephen Kokoulas: today, Monday. So we're going to be seeing whether we, 62 00:03:23,669 --> 00:03:26,340 Stephen Kokoulas: consumers, are still hunkering down. They have been weak for 63 00:03:26,639 --> 00:03:28,530 Stephen Kokoulas: the best part of seven or eight months now, that 64 00:03:28,710 --> 00:03:30,839 Stephen Kokoulas: we're responding to cost of living, as we just mentioned. 65 00:03:31,169 --> 00:03:33,599 Stephen Kokoulas: We're responding to the interest rate hikes that have been 66 00:03:33,599 --> 00:03:36,570 Stephen Kokoulas: delivered over the last 18 months or so. So retail 67 00:03:36,570 --> 00:03:39,210 Stephen Kokoulas: spending has been weak. And again, the banks who look 68 00:03:39,210 --> 00:03:43,020 Stephen Kokoulas: at their credit card and Epos transfer numbers are suggesting 69 00:03:43,290 --> 00:03:46,169 Stephen Kokoulas: that retail spending has continued to soften. So we're likely 70 00:03:46,170 --> 00:03:49,200 Stephen Kokoulas: to see a flat to slightly negative result for July. 71 00:03:49,650 --> 00:03:52,109 Stephen Kokoulas: Building approvals, gee, they're choppy. They're all over the place. 72 00:03:52,109 --> 00:03:54,749 Stephen Kokoulas: And I guess it's the precursor to the 1. 2 73 00:03:54,750 --> 00:03:56,880 Stephen Kokoulas: million dwellings over five years. You've got to get a 74 00:03:56,880 --> 00:04:00,960 Stephen Kokoulas: building approval first before you get a dwelling completion. That 75 00:04:00,960 --> 00:04:03,660 Stephen Kokoulas: doesn't kick until July 2024. But we want to see 76 00:04:03,660 --> 00:04:05,550 Stephen Kokoulas: building approvals starting to move a little bit higher. We 77 00:04:05,550 --> 00:04:07,080 Stephen Kokoulas: need more houses, as simple as that. 78 00:04:08,160 --> 00:04:10,800 Sean Aylmer: Houses. We've got house prices this week too, don't we? 79 00:04:11,129 --> 00:04:13,500 Stephen Kokoulas: We do indeed. Our friends at CoreLogic on Friday put 80 00:04:13,500 --> 00:04:16,890 Stephen Kokoulas: out their monthly number for August. We know from the 81 00:04:16,890 --> 00:04:19,620 Stephen Kokoulas: high frequency data that we're probably going to be getting 82 00:04:19,620 --> 00:04:24,539 Stephen Kokoulas: another increase, somewhere close to 1% month- on- month. Sydney, 83 00:04:24,839 --> 00:04:28,738 Stephen Kokoulas: Brisbane doing better. Melbourne and Perth, sort of middle of 84 00:04:28,740 --> 00:04:31,678 Stephen Kokoulas: the pack and other cities middle of the pack. But 1% month- on- 85 00:04:31,680 --> 00:04:34,680 Stephen Kokoulas: month increase will be... I think that's the sixth month 86 00:04:34,680 --> 00:04:36,599 Stephen Kokoulas: in a row that we've had a rise. And from 87 00:04:36,600 --> 00:04:38,970 Stephen Kokoulas: that low point that we saw in February, house prices 88 00:04:38,970 --> 00:04:42,329 Stephen Kokoulas: are up over 5%. So even with interest rates going 89 00:04:42,330 --> 00:04:45,660 Stephen Kokoulas: up, the good old supply and demand. Lots of population 90 00:04:45,660 --> 00:04:49,199 Stephen Kokoulas: from immigration and foreign students coming here. Not enough supply 91 00:04:49,230 --> 00:04:52,500 Stephen Kokoulas: because housing construction's been pretty weak. Prices go up. I 92 00:04:52,500 --> 00:04:53,729 Stephen Kokoulas: love economics when it works. 93 00:04:55,650 --> 00:04:59,700 Sean Aylmer: Talking about economics, and economists specifically, Michele Bullock, she's speaking 94 00:04:59,700 --> 00:05:01,859 Sean Aylmer: this week, the deputy governor, soon to be governor of 95 00:05:01,860 --> 00:05:05,309 Sean Aylmer: the Reserve Bank. The topic, though, is on the environment. 96 00:05:05,309 --> 00:05:06,209 Sean Aylmer: Am I right in saying that? 97 00:05:06,690 --> 00:05:09,630 Stephen Kokoulas: Yes. And how that's going to impact the economy. Again, 98 00:05:09,630 --> 00:05:11,400 Stephen Kokoulas: that was one of the issues in the Intergenerational Report, 99 00:05:11,400 --> 00:05:15,330 Stephen Kokoulas: if we just backtrack a moment. We know that dealing with 100 00:05:15,420 --> 00:05:18,719 Stephen Kokoulas: the climate, global warming, the move to renewables, again, have 101 00:05:18,719 --> 00:05:21,749 Stephen Kokoulas: really big implications for the structure of our economy. So 102 00:05:22,170 --> 00:05:24,510 Stephen Kokoulas: the Reserve Bank, since Guy Debelle, who was deputy governor 103 00:05:24,510 --> 00:05:26,789 Stephen Kokoulas: previously, he left around about a year ago. He was 104 00:05:27,180 --> 00:05:31,080 Stephen Kokoulas: really hot on the topic, pardon the pun, on climate 105 00:05:31,080 --> 00:05:33,150 Stephen Kokoulas: change. So it'll be interesting to see what Michele Bullock's 106 00:05:33,150 --> 00:05:35,730 Stephen Kokoulas: got to say on the topic, but it clearly is 107 00:05:35,730 --> 00:05:40,738 Stephen Kokoulas: something that will impact economic activity, impact inflation pressures. And 108 00:05:40,740 --> 00:05:43,440 Stephen Kokoulas: again, from a slightly longer run perspective, it has impact 109 00:05:43,440 --> 00:05:47,039 Stephen Kokoulas: on... Places are too hot to live, then do we 110 00:05:47,040 --> 00:05:49,919 Stephen Kokoulas: get this situation where people will gravitate to the cooler 111 00:05:49,920 --> 00:05:53,070 Stephen Kokoulas: areas? Tasmania might be popular in the long run since 112 00:05:53,070 --> 00:05:55,678 Stephen Kokoulas: it's nice and cool. Who knows? But we'll see what 113 00:05:55,678 --> 00:05:57,779 Stephen Kokoulas: she says and it'll be a really important marker in 114 00:05:57,779 --> 00:06:01,289 Stephen Kokoulas: the ground for her as she assumes the governorship in 115 00:06:01,290 --> 00:06:02,040 Stephen Kokoulas: a few weeks' time. 116 00:06:02,670 --> 00:06:03,990 Sean Aylmer: Stephen, enjoy your week. 117 00:06:04,410 --> 00:06:05,640 Stephen Kokoulas: Thank you, Sean. I will for Sean. 118 00:06:06,300 --> 00:06:08,849 Sean Aylmer: That was economist Stephen Koukoulas, better known as The Kouk. 119 00:06:08,849 --> 00:06:11,159 Sean Aylmer: You can find him at thekouk. com and follow him 120 00:06:11,160 --> 00:06:14,428 Sean Aylmer: on Twitter using the handle TheKouk. I'm Sean Aylmer, and this is 121 00:06:14,428 --> 00:06:15,630 Sean Aylmer: Fear and Greed - The Week Ahead.