1 00:00:03,930 --> 00:00:07,320 Jennifer Duke: Welcome to the Fear and Greed Daily Interview. I'm Jennifer Duke. 2 00:00:07,380 --> 00:00:11,369 Jennifer Duke: The unemployment rate remained steady at 3.7% yesterday, but there 3 00:00:11,369 --> 00:00:15,089 Jennifer Duke: was an unexpected spike of almost 65,000 people who found 4 00:00:15,089 --> 00:00:17,609 Jennifer Duke: work during August. So I wanted to take a closer 5 00:00:17,609 --> 00:00:19,410 Jennifer Duke: look at this data today and what it means for 6 00:00:19,410 --> 00:00:22,680 Jennifer Duke: businesses looking for staff. And at the same time, earlier 7 00:00:22,680 --> 00:00:25,680 Jennifer Duke: this week, we talked about the latest CommBank Household Spending 8 00:00:25,680 --> 00:00:29,729 Jennifer Duke: Insights Index, which rose 0.7% in August. This index can 9 00:00:29,730 --> 00:00:32,220 Jennifer Duke: actually figure out whether events like the FIFA World Cup 10 00:00:32,400 --> 00:00:35,190 Jennifer Duke: and big movies like Barbie are a driver of household spending, 11 00:00:35,190 --> 00:00:37,740 Jennifer Duke: it's pretty remarkable. To talk to us more about this 12 00:00:37,740 --> 00:00:41,430 Jennifer Duke: data is the Commonwealth Bank's Chief Economist, Stephen Halmarick. Stephen, 13 00:00:41,430 --> 00:00:42,630 Jennifer Duke: welcome back to Fear and Greed. 14 00:00:43,229 --> 00:00:45,180 Stephen Halmarick : Thank you very much. Very good to be with you again. 15 00:00:45,570 --> 00:00:48,120 Jennifer Duke: So first of all, let's start with that jobs data. 16 00:00:48,120 --> 00:00:49,559 Jennifer Duke: Did the results surprise you at all? 17 00:00:50,219 --> 00:00:53,458 Stephen Halmarick : Well, we were forecasting an increase of 40,000 on the month, 18 00:00:53,459 --> 00:00:56,730 Stephen Halmarick : so we thought it'd be a strong number. I think 19 00:00:56,730 --> 00:01:00,120 Stephen Halmarick : the consensus was 25,000, so it certainly was better than that, 20 00:01:00,120 --> 00:01:02,429 Stephen Halmarick : but even a bit better than our forecast. So yeah, 21 00:01:02,429 --> 00:01:05,340 Stephen Halmarick : nearly 65,000 jobs, as you say, a good result. 22 00:01:05,759 --> 00:01:07,649 Jennifer Duke: It's a super strong number, and there was a lift 23 00:01:07,650 --> 00:01:09,870 Jennifer Duke: in the participation rate as well. But a lot of 24 00:01:09,870 --> 00:01:12,390 Jennifer Duke: those who found jobs were part- timers, do you think 25 00:01:12,420 --> 00:01:14,009 Jennifer Duke: that's an early sign of weakness at all? 26 00:01:14,610 --> 00:01:17,370 Stephen Halmarick : Well, when we look at some of the data around 27 00:01:17,370 --> 00:01:21,000 Stephen Halmarick : the labour market, you can see some softening around the edges, 28 00:01:21,000 --> 00:01:24,330 Stephen Halmarick : I'd put it, the number of job ads being posted 29 00:01:24,330 --> 00:01:27,059 Stephen Halmarick : is coming down. It's still quite high, but it's well 30 00:01:27,059 --> 00:01:30,179 Stephen Halmarick : off its highs, and the number of people applying for 31 00:01:30,180 --> 00:01:33,000 Stephen Halmarick : those jobs is on the way back up. And of course, 32 00:01:33,000 --> 00:01:35,669 Stephen Halmarick : we know that the population growth rate through net migration 33 00:01:35,670 --> 00:01:39,899 Stephen Halmarick : is really rocketing higher. So there are some signs around 34 00:01:39,900 --> 00:01:42,330 Stephen Halmarick : the edges of some softening in the labour market. But yeah, 35 00:01:42,330 --> 00:01:43,980 Stephen Halmarick : the August number was quite strong. 36 00:01:44,670 --> 00:01:46,740 Jennifer Duke: And how did that align with what the Reserve Bank 37 00:01:46,740 --> 00:01:48,840 Jennifer Duke: was probably expecting? And what do you think it means 38 00:01:48,840 --> 00:01:49,650 Jennifer Duke: for interest rates? 39 00:01:50,640 --> 00:01:52,919 Stephen Halmarick : Well, I think that's another data set the Reserve Bank's 40 00:01:52,920 --> 00:01:55,710 Stephen Halmarick : looking at. We think the interest rates are going to 41 00:01:55,710 --> 00:02:00,749 Stephen Halmarick : remain on hold at 4.1% well into next year. As 42 00:02:00,750 --> 00:02:04,439 Stephen Halmarick : you know, the new governor takes over next week. So 43 00:02:04,440 --> 00:02:06,990 Stephen Halmarick : I think when Michelle Bullock looks at all the data 44 00:02:07,110 --> 00:02:10,050 Stephen Halmarick : available at the October board meeting, we'll see interest rates 45 00:02:10,050 --> 00:02:11,670 Stephen Halmarick : on hold again next month. 46 00:02:12,600 --> 00:02:14,669 Jennifer Duke: And what does it mean for businesses who are looking 47 00:02:14,669 --> 00:02:17,280 Jennifer Duke: for workers? Because there is a big skill shortage at the moment. 48 00:02:17,280 --> 00:02:19,559 Jennifer Duke: Do we think that we're going to see this tight labour market 49 00:02:19,559 --> 00:02:20,669 Jennifer Duke: continue on for a while? 50 00:02:21,660 --> 00:02:25,770 Stephen Halmarick : Well, certainly it is tight as we talked about, but 51 00:02:25,770 --> 00:02:27,660 Stephen Halmarick : there is some signs of softening around the edges. And 52 00:02:27,660 --> 00:02:30,840 Stephen Halmarick : I think for the businesses, the issue there is going 53 00:02:30,840 --> 00:02:34,169 Stephen Halmarick : to be the big increase in net migration. Is that 54 00:02:34,169 --> 00:02:38,370 Stephen Halmarick : going to help with finding available staff, skilled staff in 55 00:02:38,370 --> 00:02:42,209 Stephen Halmarick : areas like health and construction? Which we'll need to build 56 00:02:42,209 --> 00:02:44,940 Stephen Halmarick : all these dwellings that the government is hoping to get done. 57 00:02:45,660 --> 00:02:48,090 Stephen Halmarick : So I think that it's the increase in net migration 58 00:02:48,090 --> 00:02:52,019 Stephen Halmarick : that's going to lead to some more availability of labour 59 00:02:52,020 --> 00:02:52,799 Stephen Halmarick : in the months ahead. 60 00:02:53,758 --> 00:02:55,470 Jennifer Duke: Definitely. How do you think that's going to show up 61 00:02:55,919 --> 00:02:57,690 Jennifer Duke: in the labour force data as we see it? 62 00:02:58,440 --> 00:03:02,070 Stephen Halmarick : So the issue there is to keep the unemployment rate steady, 63 00:03:02,070 --> 00:03:04,620 Stephen Halmarick : it's going to require more and more jobs to be 64 00:03:04,620 --> 00:03:09,599 Stephen Halmarick : created every month. At least 35,000 jobs per month will 65 00:03:09,599 --> 00:03:12,419 Stephen Halmarick : need to be created to keep the unemployment rate steady, given 66 00:03:12,419 --> 00:03:16,079 Stephen Halmarick : the size of the labour forces rising. So we actually 67 00:03:16,079 --> 00:03:20,669 Stephen Halmarick : are forecasting the unemployment rate to move up to 4.2% by the 68 00:03:20,669 --> 00:03:24,210 Stephen Halmarick : end of this year and be around 4.5% the middle 69 00:03:24,210 --> 00:03:27,239 Stephen Halmarick : of next year. That's very much in line with the 70 00:03:27,270 --> 00:03:29,490 Stephen Halmarick : Reserve Bank's own forecasts as well. 71 00:03:29,758 --> 00:03:31,768 Jennifer Duke: Stay with me, Stephen, we'll be back in a minute. 72 00:03:37,830 --> 00:03:40,860 Jennifer Duke: I am speaking to Commonwealth Bank, Chief Economist, Stephen Halmarick. 73 00:03:41,700 --> 00:03:45,119 Jennifer Duke: Earlier this week, property developer Tim Gerner made some comments 74 00:03:45,120 --> 00:03:47,400 Jennifer Duke: about unemployment and he's saying that we need to see 75 00:03:47,400 --> 00:03:51,150 Jennifer Duke: a significant rise in joblessness to change workplace attitudes and 76 00:03:51,150 --> 00:03:53,160 Jennifer Duke: for people to feel lucky, I guess, to be employed 77 00:03:53,160 --> 00:03:54,990 Jennifer Duke: again. Do you agree with him and do we need 78 00:03:54,990 --> 00:03:56,850 Jennifer Duke: to see pain in the economy at the moment? 79 00:03:57,480 --> 00:04:00,240 Stephen Halmarick : No, I would not agree with that assessment. I think 80 00:04:01,020 --> 00:04:03,750 Stephen Halmarick : if we can get the soft landing the Reserve Bank 81 00:04:03,750 --> 00:04:08,219 Stephen Halmarick : is looking for, inflation is already decelerating, but it needs 82 00:04:08,219 --> 00:04:12,390 Stephen Halmarick : to decelerate more. It peaked at 7.8% in the December quarter 83 00:04:12,420 --> 00:04:16,230 Stephen Halmarick : last year's now 6% in the June quarter, so inflation 84 00:04:16,230 --> 00:04:20,130 Stephen Halmarick : is decelerating. And as Phil Lowe, the outgoing Reserve Bank 85 00:04:20,130 --> 00:04:23,010 Stephen Halmarick : governor said in his final speech, if we can get 86 00:04:23,010 --> 00:04:26,609 Stephen Halmarick : inflation back to target range by we think around the 87 00:04:26,610 --> 00:04:30,479 Stephen Halmarick : middle of next year without the unemployment rate increasing too 88 00:04:30,480 --> 00:04:33,810 Stephen Halmarick : much, that would be a very good outcome. So I don't 89 00:04:33,810 --> 00:04:38,070 Stephen Halmarick : agree with the characterisation that we need to see "pain" 90 00:04:38,070 --> 00:04:39,599 Stephen Halmarick : to achieve those outcomes. 91 00:04:40,080 --> 00:04:41,880 Jennifer Duke: I think lots of workers will be very pleased to 92 00:04:41,880 --> 00:04:46,139 Jennifer Duke: hear that. So looking at the Housing Spending Insights Index 93 00:04:46,139 --> 00:04:49,109 Jennifer Duke: right now, because this has just come out from CommBank, 94 00:04:49,109 --> 00:04:51,479 Jennifer Duke: so for anyone who missed our chat last time, why 95 00:04:51,480 --> 00:04:53,490 Jennifer Duke: is household spending so important in the economy? 96 00:04:54,330 --> 00:04:57,719 Stephen Halmarick : Well, household spending is about 50% of the economy, so 97 00:04:57,719 --> 00:05:01,678 Stephen Halmarick : it's really a key driver and the data that we 98 00:05:01,678 --> 00:05:05,189 Stephen Halmarick : have available to us, the household spending insights covers around 99 00:05:05,219 --> 00:05:10,560 Stephen Halmarick : 30% of all consumer spending in the economy and is 100 00:05:10,560 --> 00:05:14,549 Stephen Halmarick : data from around 7 million households. So it's a very large data 101 00:05:14,550 --> 00:05:17,759 Stephen Halmarick : set that we can produce very quickly. I recently just 102 00:05:17,759 --> 00:05:20,940 Stephen Halmarick : published the August numbers. And we think it gives us 103 00:05:20,940 --> 00:05:24,359 Stephen Halmarick : great insights into what's happening in the economy more broadly, 104 00:05:24,359 --> 00:05:25,650 Stephen Halmarick : especially consumer spending. 105 00:05:26,130 --> 00:05:28,170 Jennifer Duke: So what were people spending on in August? 106 00:05:28,830 --> 00:05:32,010 Stephen Halmarick : Well, so the total index, the Household Spending Insights Index 107 00:05:32,010 --> 00:05:36,750 Stephen Halmarick : was up 0.7% in the month of August, that's 2.3% in 108 00:05:37,139 --> 00:05:39,719 Stephen Halmarick : the year to August. So on the month, the biggest 109 00:05:39,719 --> 00:05:43,290 Stephen Halmarick : increase in spending up 2.8%, was education. 110 00:05:43,920 --> 00:05:44,160 Jennifer Duke: Gosh. 111 00:05:44,160 --> 00:05:47,310 Stephen Halmarick : And we can see that was really foreign students spending 112 00:05:47,310 --> 00:05:51,540 Stephen Halmarick : money at Australian universities, so quite a significant increase in 113 00:05:51,540 --> 00:05:56,310 Stephen Halmarick : that. So semester two starting and foreign students arriving and 114 00:05:56,639 --> 00:06:00,899 Stephen Halmarick : beginning to spend money. The second- largest increase was transport, that 115 00:06:01,080 --> 00:06:05,669 Stephen Halmarick : was up 2.1% in the month. And that's driven by the 116 00:06:05,670 --> 00:06:08,190 Stephen Halmarick : higher price of petrol. So the biggest increase was at 117 00:06:08,190 --> 00:06:11,039 Stephen Halmarick : service stations. And we know the price of petrol was 118 00:06:11,040 --> 00:06:14,130 Stephen Halmarick : up 9% in the month of August and looks like 119 00:06:14,130 --> 00:06:17,188 Stephen Halmarick : it's going to be up more in September. So that 120 00:06:17,190 --> 00:06:20,550 Stephen Halmarick : increase in transport spending, I'm not too sure you classify 121 00:06:20,550 --> 00:06:23,550 Stephen Halmarick : that as a good increase, it's just the price of 122 00:06:23,550 --> 00:06:25,560 Stephen Halmarick : petrol's higher and we're having to pay the higher price. 123 00:06:26,099 --> 00:06:29,309 Stephen Halmarick : But as you alluded to in the introduction, the third- highest 124 00:06:29,309 --> 00:06:34,258 Stephen Halmarick : increase in August was recreation, we're spending up 1. 9% 125 00:06:34,650 --> 00:06:39,210 Stephen Halmarick : on the month. And that was driven by the category 126 00:06:39,420 --> 00:06:43,920 Stephen Halmarick : ticketing agencies, which we can only assume is the FIFA 127 00:06:43,920 --> 00:06:47,428 Stephen Halmarick : Women's World Cup. So lots of people piling onto the 128 00:06:47,428 --> 00:06:50,639 Stephen Halmarick : bandwagon, and it was such a great event and getting 129 00:06:50,639 --> 00:06:53,369 Stephen Halmarick : their tickets perhaps late in the day, but attending games, 130 00:06:53,369 --> 00:06:54,868 Stephen Halmarick : so that was excellent to see. 131 00:06:55,229 --> 00:06:58,620 Jennifer Duke: I think that's probably a very safe assumption. Do you 132 00:06:58,620 --> 00:07:01,260 Jennifer Duke: see any areas where people are pulling back on their 133 00:07:01,260 --> 00:07:02,219 Jennifer Duke: spending over the month? 134 00:07:02,880 --> 00:07:07,050 Stephen Halmarick : So on the month there was actually a decline in utilities, 135 00:07:07,320 --> 00:07:10,770 Stephen Halmarick : which people might find hard to believe. But that's really 136 00:07:10,770 --> 00:07:16,410 Stephen Halmarick : the government subsidies at work in terms of the energy bills. 137 00:07:16,890 --> 00:07:20,400 Stephen Halmarick : And also there's a reduction in spending on water, which 138 00:07:20,400 --> 00:07:24,869 Stephen Halmarick : probably just reflects the weather. But given the forecast of 139 00:07:24,870 --> 00:07:27,089 Stephen Halmarick : a very hot summer, that's probably going to change in 140 00:07:27,089 --> 00:07:29,399 Stephen Halmarick : the near term. It's interesting, if we look at the 141 00:07:29,400 --> 00:07:33,570 Stephen Halmarick : year to August where spending was up 2.3%. We can 142 00:07:33,660 --> 00:07:36,300 Stephen Halmarick : see the biggest declines in spending in the year to 143 00:07:36,300 --> 00:07:42,330 Stephen Halmarick : August were household goods down 3.6% and household services down 8.4%. 144 00:07:44,010 --> 00:07:48,449 Stephen Halmarick : So a clear reduction in spending on those everyday goods. 145 00:07:48,570 --> 00:07:51,810 Stephen Halmarick : Household goods is clothing and footwear and white goods and 146 00:07:51,810 --> 00:07:53,850 Stephen Halmarick : TVs and furniture and things like that. 147 00:07:53,910 --> 00:07:54,451 Jennifer Duke: All the fun stuff. 148 00:07:54,451 --> 00:07:59,729 Stephen Halmarick : Yeah, yeah. Household services includes childcare, which we know is up, 149 00:07:59,910 --> 00:08:06,540 Stephen Halmarick : but other services like cleaning and gardening and trades, so electrical, plumbing, carpentry. 150 00:08:06,990 --> 00:08:09,420 Stephen Halmarick : So it definitely looks like people are having to shift 151 00:08:09,420 --> 00:08:14,130 Stephen Halmarick : their spending behaviour, spending less on household goods and services 152 00:08:14,520 --> 00:08:17,460 Stephen Halmarick : and spending more money on things like insurance. Insurance was 153 00:08:17,460 --> 00:08:19,770 Stephen Halmarick : up 13.5% year to August. 154 00:08:19,950 --> 00:08:20,280 Jennifer Duke: Gosh. 155 00:08:20,280 --> 00:08:26,520 Stephen Halmarick : Education up 14.7%. So shifting away from those big services 156 00:08:26,520 --> 00:08:30,150 Stephen Halmarick : where prices are rising and less and less on household 157 00:08:30,150 --> 00:08:31,410 Stephen Halmarick : goods and household services. 158 00:08:32,010 --> 00:08:34,139 Jennifer Duke: And do you think that trend's going to continue on for 159 00:08:34,139 --> 00:08:34,858 Jennifer Duke: the rest of the year? 160 00:08:36,150 --> 00:08:39,240 Stephen Halmarick : Yeah, I think so. We've still got the lagged effect 161 00:08:39,240 --> 00:08:43,020 Stephen Halmarick : of previous rate hikes that really flow through to variable 162 00:08:43,020 --> 00:08:46,320 Stephen Halmarick : mortgages, but also particularly the fixed rate mortgages. So it 163 00:08:46,320 --> 00:08:49,650 Stephen Halmarick : won't be until early 2024 before the full effect of 164 00:08:49,650 --> 00:08:53,458 Stephen Halmarick : all the rate hikes are in household budgets, even though 165 00:08:53,550 --> 00:08:56,070 Stephen Halmarick : we think the last rate hike was back in June. 166 00:08:56,820 --> 00:08:59,279 Stephen Halmarick : So we do think consumer spending is going to continue to 167 00:08:59,279 --> 00:09:04,468 Stephen Halmarick : slow into 2024, because we know that income growth, nominal 168 00:09:04,470 --> 00:09:08,549 Stephen Halmarick : income growth is not keeping up with higher inflation interest 169 00:09:08,550 --> 00:09:12,900 Stephen Halmarick : costs and taxes. So real household disposable income is going 170 00:09:12,900 --> 00:09:18,358 Stephen Halmarick : backwards. And with both mortgage costs and rent rising, that 171 00:09:18,360 --> 00:09:20,790 Stephen Halmarick : just means less money to spend on everything else. 172 00:09:21,540 --> 00:09:24,929 Jennifer Duke: Definitely. And business confidence has been up quite a bit 173 00:09:24,929 --> 00:09:28,710 Jennifer Duke: lately, I guess, more than most people might expect. Clearly 174 00:09:28,710 --> 00:09:30,899 Jennifer Duke: your data is showing us what's actually happening on the 175 00:09:30,900 --> 00:09:34,289 Jennifer Duke: ground. How do these two data points marry together? And 176 00:09:34,289 --> 00:09:36,539 Jennifer Duke: are you expecting business confidence to start slipping? 177 00:09:38,550 --> 00:09:42,900 Stephen Halmarick : Yeah, business investment has been quite strong. Even the national accounts 178 00:09:42,900 --> 00:09:45,630 Stephen Halmarick : show a pick- up in business investment, and the surveys 179 00:09:45,630 --> 00:09:50,009 Stephen Halmarick : do point towards a continued improvement in business investment, as 180 00:09:50,009 --> 00:09:54,838 Stephen Halmarick : well as government spending, particularly on infrastructure. So we think 181 00:09:54,840 --> 00:09:57,030 Stephen Halmarick : that's going to be a source of growth for the 182 00:09:57,030 --> 00:10:02,280 Stephen Halmarick : economy, private sector and public sector investment, even as consumer 183 00:10:02,280 --> 00:10:06,780 Stephen Halmarick : spending slows. So that's pleasing to see, and we think that'll be 184 00:10:06,780 --> 00:10:08,939 Stephen Halmarick : an offset to that weakness in consumer spending. 185 00:10:09,360 --> 00:10:11,638 Jennifer Duke: Definitely. Stephen, thank you so much for talking to Fear 186 00:10:11,639 --> 00:10:12,120 Jennifer Duke: and Greed. 187 00:10:12,750 --> 00:10:13,650 Stephen Halmarick : My pleasure. Thank you. 188 00:10:14,370 --> 00:10:17,370 Jennifer Duke: And that was Stephen Halmarick, the Commonwealth Bank Chief Economist. 189 00:10:17,670 --> 00:10:20,040 Jennifer Duke: This is the Fear and Greed Daily Interview. Join us 190 00:10:20,040 --> 00:10:22,319 Jennifer Duke: every morning for the full episode of Fear and Greed, 191 00:10:22,380 --> 00:10:26,849 Jennifer Duke: Australia's most popular business podcast. I'm Jennifer Duke, Economics Correspondent 192 00:10:26,849 --> 00:10:29,369 Jennifer Duke: at Capital Brief, and filling in for Sean Aylmer. Have 193 00:10:29,369 --> 00:10:29,728 Jennifer Duke: a great day.