1 00:00:08,010 --> 00:00:11,009 Jennifer Duke: Welcome to Fear & Greed, The Week Ahead. I'm Jennifer Duke 2 00:00:11,010 --> 00:00:14,099 Jennifer Duke: and I'm joined by economist Stephen Koukoulas. You'll find him 3 00:00:14,099 --> 00:00:16,739 Jennifer Duke: at the thekouk. com. That's T- H- E- K- O- U- K. 4 00:00:16,889 --> 00:00:20,370 Jennifer Duke: com. And on X using the handle the TheKouk. Stephen, good morning. 5 00:00:21,150 --> 00:00:22,080 Stephen Koukoulas: Very good morning, Jen. 6 00:00:22,560 --> 00:00:25,200 Jennifer Duke: So firstly, last week, take us through it, there was 7 00:00:25,200 --> 00:00:28,889 Jennifer Duke: an awful lot happening. Labor force was the big numbers 8 00:00:28,889 --> 00:00:30,869 Jennifer Duke: that were out. Can you talk us through that data? 9 00:00:31,440 --> 00:00:34,289 Stephen Koukoulas: Yeah, the labor force numbers were solid, I think it's 10 00:00:34,289 --> 00:00:36,690 Stephen Koukoulas: fair to say. Now, we do know, and anyone who's 11 00:00:36,690 --> 00:00:40,168 Stephen Koukoulas: looked at the Bureau of Statistics monthly labor force data 12 00:00:40,170 --> 00:00:43,140 Stephen Koukoulas: know that they are extremely volatile month- to- month. So 13 00:00:43,979 --> 00:00:47,098 Stephen Koukoulas: having had a small fall in employment the previous month, 14 00:00:47,098 --> 00:00:49,979 Stephen Koukoulas: everybody was anticipating a bounce back and they certainly got 15 00:00:49,979 --> 00:00:54,630 Stephen Koukoulas: that, plus 65,000 jobs, which was a good rebound. So 16 00:00:55,230 --> 00:00:58,560 Stephen Koukoulas: averaging a little over 30, 000 per month, which is good. 17 00:00:59,010 --> 00:01:02,220 Stephen Koukoulas: But given the size of the Australian economy, it's interesting, 18 00:01:02,309 --> 00:01:04,469 Stephen Koukoulas: and my friends at CBA did some interesting work on 19 00:01:04,469 --> 00:01:08,039 Stephen Koukoulas: this, that we need to generate roughly 30,000 jobs per 20 00:01:08,039 --> 00:01:11,430 Stephen Koukoulas: month, coincidentally, to keep the unemployment rate steady, such is 21 00:01:11,430 --> 00:01:14,069 Stephen Koukoulas: the growth in the population in Australia. So that meant 22 00:01:14,069 --> 00:01:17,940 Stephen Koukoulas: that the unemployment rate was steady at 3. 7%. So, 23 00:01:18,510 --> 00:01:21,929 Stephen Koukoulas: a number that was not inconsistent with the economy slowing 24 00:01:21,929 --> 00:01:25,740 Stephen Koukoulas: down, but certainly a little bit of relief that some 25 00:01:25,740 --> 00:01:29,399 Stephen Koukoulas: of the chatter about per capita GDP recessions and hard 26 00:01:29,400 --> 00:01:32,550 Stephen Koukoulas: landings for the economy are probably not coming through just 27 00:01:32,550 --> 00:01:35,970 Stephen Koukoulas: yet. Firms are still hiring at a solid pace, I 28 00:01:35,970 --> 00:01:38,520 Stephen Koukoulas: think it's fair to say. Even though the economy is slowing 29 00:01:38,520 --> 00:01:41,789 Stephen Koukoulas: down, the unemployment rate is no longer falling. It's starting 30 00:01:41,789 --> 00:01:45,719 Stephen Koukoulas: to inch up at this stage. But of course, everybody's 31 00:01:45,719 --> 00:01:49,410 Stephen Koukoulas: watching closely that growth slow down, the rise in the 32 00:01:49,439 --> 00:01:52,170 Stephen Koukoulas: unemployment rate sort of scenario, that's still probably going to 33 00:01:52,170 --> 00:01:54,000 Stephen Koukoulas: be unfolding over the next six to 12 months. 34 00:01:54,720 --> 00:01:57,360 Jennifer Duke: And we also had some NAB business confidence data out 35 00:01:57,360 --> 00:02:00,210 Jennifer Duke: and some consumer sentiment data and they both seem to 36 00:02:00,210 --> 00:02:02,489 Jennifer Duke: be pointing in different directions. Can you talk us through 37 00:02:02,490 --> 00:02:02,850 Jennifer Duke: this a little bit? 38 00:02:02,850 --> 00:02:09,090 Stephen Koukoulas: They're diverse. They're really quite incredible how different they are. Get 39 00:02:09,090 --> 00:02:11,250 Stephen Koukoulas: into the business side first, because the business sector, the 40 00:02:11,250 --> 00:02:16,230 Stephen Koukoulas: consumer confidence were pretty good, that businesses are telling, the 41 00:02:16,320 --> 00:02:19,139 Stephen Koukoulas: respondents to the surveys are telling us that the business 42 00:02:19,139 --> 00:02:22,138 Stephen Koukoulas: sector is doing quite well. While there is a slowdown 43 00:02:22,139 --> 00:02:24,870 Stephen Koukoulas: occurring in the economy that it's not troubling for the 44 00:02:24,870 --> 00:02:29,460 Stephen Koukoulas: business sector. Profitability, sales, forward orders, while they're sort of 45 00:02:30,419 --> 00:02:33,960 Stephen Koukoulas: middling, they're certainly not all that week. They're consistent with 46 00:02:33,960 --> 00:02:37,138 Stephen Koukoulas: the economy continuing to grow. And as we saw recently 47 00:02:37,139 --> 00:02:39,809 Stephen Koukoulas: with the CapEx numbers, the business investment numbers that came 48 00:02:39,809 --> 00:02:42,539 Stephen Koukoulas: out a couple of weeks ago, the business sector is 49 00:02:42,540 --> 00:02:45,780 Stephen Koukoulas: still investing and that's a good thing. It's one reason 50 00:02:45,780 --> 00:02:48,960 Stephen Koukoulas: why we're very unlikely to have a nasty recession in 51 00:02:48,960 --> 00:02:51,300 Stephen Koukoulas: the economy anytime soon. So that was the business sector 52 00:02:51,480 --> 00:02:56,099 Stephen Koukoulas: doing pretty well. Consumers, on the other hand, whoa dear, 53 00:02:56,099 --> 00:03:00,119 Stephen Koukoulas: we are gloomy. Us consumers, everybody listening and you and 54 00:03:00,119 --> 00:03:03,120 Stephen Koukoulas: me and everybody else, we're feeling really pessimistic. And I 55 00:03:03,120 --> 00:03:05,850 Stephen Koukoulas: guess it's this cost of living pressure, which is still 56 00:03:05,850 --> 00:03:08,550 Stephen Koukoulas: there. We've still got wages growth increasing by less than 57 00:03:08,550 --> 00:03:11,610 Stephen Koukoulas: the rate of inflation, so real wages falling. Obviously, even 58 00:03:11,610 --> 00:03:13,439 Stephen Koukoulas: though interest rates have been held steady for the last 59 00:03:13,440 --> 00:03:17,250 Stephen Koukoulas: three months, there's still the pressure on budgets from people 60 00:03:17,250 --> 00:03:21,000 Stephen Koukoulas: with mortgages, particularly big mortgages. And I think just recently 61 00:03:21,419 --> 00:03:24,240 Stephen Koukoulas: this spike in petrol prices, which of course is a 62 00:03:24,570 --> 00:03:27,030 Stephen Koukoulas: very high profile issue, you can walk down the street, 63 00:03:27,030 --> 00:03:28,590 Stephen Koukoulas: you can drive down the street and you can see $2. 20, $2. 64 00:03:29,340 --> 00:03:33,059 Stephen Koukoulas: 30 for a liter of petrol, my goodness. And I 65 00:03:33,059 --> 00:03:35,369 Stephen Koukoulas: think that just sort of feeds into the negative psychology 66 00:03:35,369 --> 00:03:38,280 Stephen Koukoulas: of consumers. We do know that when consumers are feeling 67 00:03:38,280 --> 00:03:42,450 Stephen Koukoulas: gloomy they tend to hunker down and limit their spending 68 00:03:42,450 --> 00:03:45,179 Stephen Koukoulas: and that was showing up in the broad household consumption 69 00:03:45,179 --> 00:03:48,180 Stephen Koukoulas: numbers. So, a very mixed picture between the business sector 70 00:03:48,389 --> 00:03:52,439 Stephen Koukoulas: doing pretty well, doing reasonably and us consumers really gloomy. 71 00:03:53,219 --> 00:03:55,199 Jennifer Duke: So that was a lot of data last week. So 72 00:03:55,199 --> 00:03:58,200 Jennifer Duke: What's coming up this week? We've got some stuff happening at 73 00:03:58,200 --> 00:03:59,880 Jennifer Duke: the RBA, nothing high profile. 74 00:04:00,120 --> 00:04:04,920 Stephen Koukoulas: Well, we've got a new RBA governor who started today. So congratulations to Michelle Bullock She's 75 00:04:04,920 --> 00:04:07,889 Stephen Koukoulas: the new governor taking over from Dr. Philip Lowe. She's 76 00:04:07,889 --> 00:04:10,859 Stephen Koukoulas: got a seven- year term. She's taking over at a 77 00:04:10,859 --> 00:04:13,560 Stephen Koukoulas: time, as we've been discussing, that inflation is coming down 78 00:04:13,560 --> 00:04:17,430 Stephen Koukoulas: a bit, unemployment's flat to up and the economy's weak 79 00:04:17,430 --> 00:04:19,529 Stephen Koukoulas: and there's already 400 points of rate hikes in the 80 00:04:19,529 --> 00:04:22,770 Stephen Koukoulas: cycle. So it'll be fascinating just to see over several 81 00:04:22,770 --> 00:04:25,349 Stephen Koukoulas: months, it won't happen overnight, but over several months how 82 00:04:26,190 --> 00:04:29,730 Stephen Koukoulas: the modus operandi, if you like of the RBA will change 83 00:04:29,730 --> 00:04:32,520 Stephen Koukoulas: under her watch in terms of communications, in terms of 84 00:04:32,520 --> 00:04:36,750 Stephen Koukoulas: guidance, in terms of the revamping of the RBA forecasting 85 00:04:36,750 --> 00:04:39,419 Stephen Koukoulas: process. So that's one big bit of news, which probably 86 00:04:39,420 --> 00:04:41,910 Stephen Koukoulas: doesn't impact anybody today or tomorrow, but it'll be something 87 00:04:41,910 --> 00:04:44,339 Stephen Koukoulas: to watch. What we do have is that tomorrow we 88 00:04:44,339 --> 00:04:48,089 Stephen Koukoulas: get the RBA minutes of their September board meeting. Obviously 89 00:04:48,089 --> 00:04:51,060 Stephen Koukoulas: they held rates steady for the third straight month. Always 90 00:04:51,060 --> 00:04:54,390 Stephen Koukoulas: interesting to see why they held them steady, what were 91 00:04:54,390 --> 00:04:56,760 Stephen Koukoulas: the factors that forced them not to hike or not 92 00:04:56,760 --> 00:04:58,259 Stephen Koukoulas: to cut and these sorts of things. So we'll be 93 00:04:58,260 --> 00:05:01,740 Stephen Koukoulas: watching that pretty closely just to see what the RBA 94 00:05:01,740 --> 00:05:05,160 Stephen Koukoulas: is thinking. The other news, of course, is global, it's 95 00:05:05,160 --> 00:05:08,700 Stephen Koukoulas: from the US where the FOMC meets later this week. 96 00:05:08,700 --> 00:05:11,159 Stephen Koukoulas: There's a... Well, there's a bit of a discussion, does 97 00:05:11,160 --> 00:05:14,160 Stephen Koukoulas: the Fed have to hike rates anymore? The broad consensus 98 00:05:14,160 --> 00:05:18,240 Stephen Koukoulas: is that probably, probably on hold, that there's a lot 99 00:05:18,240 --> 00:05:20,159 Stephen Koukoulas: of rate hikes in the system in the US. We've 100 00:05:20,160 --> 00:05:23,819 Stephen Koukoulas: got the US economy still starting to ease off a 101 00:05:23,820 --> 00:05:27,060 Stephen Koukoulas: little bit. Not much, it's been quite resilient. But for 102 00:05:27,060 --> 00:05:29,670 Stephen Koukoulas: the Fed, for the US interest rate cycle, it's probably 103 00:05:29,670 --> 00:05:31,800 Stephen Koukoulas: on hold and rates are at this very high level. 104 00:05:32,428 --> 00:05:35,279 Jennifer Duke: Definitely. And just quickly, on the spring housing market, we're 105 00:05:35,279 --> 00:05:38,190 Jennifer Duke: a few weeks in now, what are you noticing that's 106 00:05:38,190 --> 00:05:40,080 Jennifer Duke: going on and what do you think we can expect? 107 00:05:40,650 --> 00:05:43,890 Stephen Koukoulas: Really good question because everybody loves housing and it is 108 00:05:43,890 --> 00:05:46,860 Stephen Koukoulas: an important economic variable for policy makers and the like, 109 00:05:46,860 --> 00:05:50,639 Stephen Koukoulas: but we have seen a big increase in the number 110 00:05:50,639 --> 00:05:53,040 Stephen Koukoulas: of listings. One of the issues that I think was evident in 111 00:05:53,370 --> 00:05:56,758 Stephen Koukoulas: the first part of 2023 was that there were not 112 00:05:56,759 --> 00:05:59,489 Stephen Koukoulas: many people listing their house for sale. So not only 113 00:05:59,490 --> 00:06:03,330 Stephen Koukoulas: was construction relatively weak, but people were sort of hunkering 114 00:06:03,330 --> 00:06:05,430 Stephen Koukoulas: down. They were sitting at home not selling their house, 115 00:06:05,430 --> 00:06:09,150 Stephen Koukoulas: happy to sit on their properties. And the absence of 116 00:06:09,150 --> 00:06:12,299 Stephen Koukoulas: new listings was one reason why we had this lift 117 00:06:12,300 --> 00:06:14,459 Stephen Koukoulas: in house prices that not many people were thinking about 118 00:06:14,969 --> 00:06:18,449 Stephen Koukoulas: at the start of the year. So that's now being addressed. It's speculative 119 00:06:18,449 --> 00:06:20,279 Stephen Koukoulas: at this stage, of course. We need more data. Like 120 00:06:20,279 --> 00:06:22,409 Stephen Koukoulas: all economists, I want more data before I can be 121 00:06:22,410 --> 00:06:25,650 Stephen Koukoulas: sure about these views. But this rebound in house prices 122 00:06:25,650 --> 00:06:28,139 Stephen Koukoulas: that we're seeing pretty much across all capital cities is 123 00:06:28,139 --> 00:06:30,809 Stephen Koukoulas: probably getting people out of the woodwork, that they're seeing 124 00:06:30,809 --> 00:06:36,178 Stephen Koukoulas: prices increasing, that their plans to either downsize or move 125 00:06:36,180 --> 00:06:39,360 Stephen Koukoulas: interstate or move to the tree change, sea change type 126 00:06:39,360 --> 00:06:41,850 Stephen Koukoulas: phenomenon are probably being enhanced by the fact that they 127 00:06:41,850 --> 00:06:45,569 Stephen Koukoulas: can see the prices going up. Now, of course, in 128 00:06:45,570 --> 00:06:47,520 Stephen Koukoulas: time, that extra supply will probably put a bit of 129 00:06:47,520 --> 00:06:50,459 Stephen Koukoulas: a damper on house prices. So it's one of these 130 00:06:50,460 --> 00:06:53,400 Stephen Koukoulas: wonderful things in the housing market where there's often and 131 00:06:53,400 --> 00:06:55,859 Stephen Koukoulas: always things pushing and pulling prices up and down and 132 00:06:55,860 --> 00:06:59,190 Stephen Koukoulas: down and up. But if we do get this increase 133 00:06:59,190 --> 00:07:01,890 Stephen Koukoulas: in new listings coming through, there's still a bit of 134 00:07:01,890 --> 00:07:04,139 Stephen Koukoulas: financial stress in the consumer side of the economy, as 135 00:07:04,139 --> 00:07:08,039 Stephen Koukoulas: we were just discussing, maybe this increase in house prices 136 00:07:08,040 --> 00:07:09,630 Stephen Koukoulas: that we've seen for the last six or seven months 137 00:07:09,929 --> 00:07:10,950 Stephen Koukoulas: starts to peter out. 138 00:07:11,850 --> 00:07:13,680 Jennifer Duke: Stephen, thank you so much for chatting with us. Have 139 00:07:13,680 --> 00:07:14,250 Jennifer Duke: a great week. 140 00:07:14,910 --> 00:07:16,200 Stephen Koukoulas: You too, Jen. Have a fabulous week. 141 00:07:16,500 --> 00:07:18,990 Jennifer Duke: And that was economist Stephen Koukoulas, better known as The Kouk. 142 00:07:19,380 --> 00:07:21,869 Jennifer Duke: You can find him at thekouk. com and follow him 143 00:07:21,870 --> 00:07:25,200 Jennifer Duke: on X using the handle TheKouk. I'm Jennifer Duke, economics 144 00:07:25,200 --> 00:07:27,900 Jennifer Duke: correspondent at Capital Brief and filling in for Sean Aylmer. 145 00:07:27,900 --> 00:07:29,610 Jennifer Duke: And this is Fear & Greed, The Week Ahead.