1 00:00:05,430 --> 00:00:08,520 Adam Lang: Welcome to Fear & Greed, the week ahead. I'm Adam Lang. And on 2 00:00:08,520 --> 00:00:12,660 Adam Lang: Monday mornings we're joined by economist, Stephen Koukoulas. You'll find 3 00:00:12,660 --> 00:00:15,869 Adam Lang: him at thekouk. com and on X using the handle 4 00:00:15,900 --> 00:00:18,300 Adam Lang: TheKouk. Stephen, very good morning to you. 5 00:00:19,049 --> 00:00:20,430 Stephen Koukoulas: And a very good morning. I think I had too 6 00:00:20,430 --> 00:00:24,060 Stephen Koukoulas: many chocolate Easter eggs over the weekend, but hey, I'll 7 00:00:24,060 --> 00:00:24,540 Stephen Koukoulas: get over it. 8 00:00:25,440 --> 00:00:29,010 Adam Lang: Stephen, before we get to what's coming up this week, 9 00:00:29,070 --> 00:00:30,780 Adam Lang: let's have a quick chat about last week. It was 10 00:00:30,780 --> 00:00:33,388 Adam Lang: a short week, but there was still plenty of data. 11 00:00:33,719 --> 00:00:37,409 Adam Lang: We had monthly inflation, retail sales, job vacancies. How did 12 00:00:37,409 --> 00:00:37,920 Adam Lang: you see it? 13 00:00:38,729 --> 00:00:41,729 Stephen Koukoulas: Yeah, they were all erring on the side of weakness, 14 00:00:41,760 --> 00:00:44,280 Stephen Koukoulas: I think it's fair to say, or confirming that inflation 15 00:00:44,280 --> 00:00:46,679 Stephen Koukoulas: is under control. If we go back a couple of 16 00:00:46,679 --> 00:00:49,409 Stephen Koukoulas: weeks, we had that blow away labor force number, which 17 00:00:49,409 --> 00:00:51,899 Stephen Koukoulas: I think on reflection now, no one believes. You had 18 00:00:51,900 --> 00:00:55,380 Stephen Koukoulas: 116,000 jobs in one month, I think. We'll wait and 19 00:00:55,380 --> 00:00:57,360 Stephen Koukoulas: see for the next month, but that was the odd 20 00:00:57,360 --> 00:00:57,840 Stephen Koukoulas: one out. 21 00:00:57,870 --> 00:00:58,740 Adam Lang: It was incredible. 22 00:00:59,070 --> 00:01:01,470 Stephen Koukoulas: It was incredible. It was weird. And I think the 23 00:01:01,470 --> 00:01:05,610 Stephen Koukoulas: ABS might have their seasonal factors wrong, but, and this 24 00:01:05,610 --> 00:01:08,789 Stephen Koukoulas: is the but, all through last week we had confirmation 25 00:01:08,789 --> 00:01:13,560 Stephen Koukoulas: that inflation's continuing to weaken, 3. 4% in annual terms. 26 00:01:13,560 --> 00:01:15,780 Stephen Koukoulas: But if you look at the last six months, it's 27 00:01:15,780 --> 00:01:18,840 Stephen Koukoulas: only increasing, this is inflation, at an annualized pace, a 28 00:01:18,840 --> 00:01:23,340 Stephen Koukoulas: little over 2%. So that deceleration in inflation that we've 29 00:01:23,340 --> 00:01:27,119 Stephen Koukoulas: been hoping to see is still coming through. You then 30 00:01:27,120 --> 00:01:30,149 Stephen Koukoulas: throw in the job vacancies numbers. You got minus 6% 31 00:01:30,719 --> 00:01:34,530 Stephen Koukoulas: in the three months to February, down about 25% over 32 00:01:34,530 --> 00:01:37,410 Stephen Koukoulas: the last 18 months. That is a clear signal. That 33 00:01:37,410 --> 00:01:41,309 Stephen Koukoulas: sort of growth rate, that deceleration is something you only 34 00:01:41,309 --> 00:01:45,509 Stephen Koukoulas: see when the economy's really slowing, so confirming that maybe 35 00:01:45,509 --> 00:01:48,089 Stephen Koukoulas: that labor force number will be quickly unwound in the 36 00:01:48,090 --> 00:01:51,210 Stephen Koukoulas: next couple of months. And even retail sales, up 0. 37 00:01:51,210 --> 00:01:54,930 Stephen Koukoulas: 3 in February, but as the statistician noted, the only 38 00:01:54,930 --> 00:01:58,830 Stephen Koukoulas: growth was people buying sequined clothes at Taylor Swift concerts. 39 00:01:58,830 --> 00:02:01,559 Stephen Koukoulas: So Tay Tay, you did help the economy for one 40 00:02:01,559 --> 00:02:03,870 Stephen Koukoulas: month, but you've gone home, so we probably need something 41 00:02:03,870 --> 00:02:04,829 Stephen Koukoulas: else to keep us going. 42 00:02:05,250 --> 00:02:07,529 Adam Lang: Stephen, would you describe this as a little more than 43 00:02:07,530 --> 00:02:08,790 Adam Lang: tapping on the brakes? 44 00:02:09,510 --> 00:02:12,690 Stephen Koukoulas: Look, I think so. And Adam is quite right because 45 00:02:12,690 --> 00:02:15,090 Stephen Koukoulas: you've got to put it in context, even the most 46 00:02:15,090 --> 00:02:17,639 Stephen Koukoulas: recent data that we actually have on GDP, the whole 47 00:02:17,639 --> 00:02:20,939 Stephen Koukoulas: economy, rather than building approvals or retail spending and all 48 00:02:20,940 --> 00:02:22,559 Stephen Koukoulas: these other bits and bobs which go up to make 49 00:02:22,559 --> 00:02:25,889 Stephen Koukoulas: GDP, of course, but what was the December quarter? We 50 00:02:25,889 --> 00:02:30,150 Stephen Koukoulas: know that that was recording growth of just 0.2%, 0. 2. 51 00:02:30,360 --> 00:02:34,140 Stephen Koukoulas: Per capita terms it was minus 0. 3. So those 52 00:02:34,200 --> 00:02:36,750 Stephen Koukoulas: people looking for something of a bit of a recovery, 53 00:02:36,750 --> 00:02:39,389 Stephen Koukoulas: a bit of even a general rebound in the first 54 00:02:39,389 --> 00:02:43,410 Stephen Koukoulas: quarter of 2024 are probably going to be disappointed because 55 00:02:43,410 --> 00:02:46,109 Stephen Koukoulas: we do know that, as we were just saying, retail sales 56 00:02:46,110 --> 00:02:48,810 Stephen Koukoulas: were weak. We know that things like building approvals were 57 00:02:48,810 --> 00:02:51,779 Stephen Koukoulas: also trending down, so we're not building as many houses. 58 00:02:51,780 --> 00:02:55,228 Stephen Koukoulas: We're still getting lots of anecdotes of building construction companies 59 00:02:55,230 --> 00:02:57,599 Stephen Koukoulas: going belly up, which is not a good sign, of 60 00:02:57,599 --> 00:03:01,349 Stephen Koukoulas: course. So the weakness in the economy is still there. 61 00:03:02,460 --> 00:03:05,370 Adam Lang: So Stephen, turning to this week now, we've got a 62 00:03:05,370 --> 00:03:09,150 Adam Lang: number of data sets coming through, house prices, building approvals, 63 00:03:09,150 --> 00:03:13,379 Adam Lang: job ads, international trade, and the RBA board minutes. Give 64 00:03:13,380 --> 00:03:15,119 Adam Lang: us your view, what are you seeing in the week ahead? 65 00:03:15,750 --> 00:03:19,200 Stephen Koukoulas: Yeah, look, again, important stuff. We sort of know that 66 00:03:19,230 --> 00:03:22,050 Stephen Koukoulas: on house prices because CoreLogic publish them on a daily 67 00:03:22,050 --> 00:03:25,440 Stephen Koukoulas: basis, so we'll just get that roundabout number, probably a 68 00:03:25,440 --> 00:03:30,809 Stephen Koukoulas: monthly increase of about 0.5, 0. 6%, which is slower than it 69 00:03:30,809 --> 00:03:33,419 Stephen Koukoulas: was a year ago, but it's still going up. This 70 00:03:33,419 --> 00:03:35,609 Stephen Koukoulas: is the extraordinary thing with all these interest rate hikes, 71 00:03:36,360 --> 00:03:41,040 Stephen Koukoulas: they're being swamped by incredible demand from population, something that 72 00:03:41,040 --> 00:03:42,480 Stephen Koukoulas: we hear a lot about in the media, the very 73 00:03:42,480 --> 00:03:46,080 Stephen Koukoulas: high levels of immigration and not much supply, under building 74 00:03:46,080 --> 00:03:48,630 Stephen Koukoulas: of property. So they're going to be continuing to grow. 75 00:03:48,690 --> 00:03:52,379 Stephen Koukoulas: The thing that I would like to emphasize about the 76 00:03:52,379 --> 00:03:56,430 Stephen Koukoulas: house price cycle right now is the divergence. So for 77 00:03:56,430 --> 00:03:59,700 Stephen Koukoulas: example, you're probably going to get cities like Hobart and 78 00:03:59,700 --> 00:04:03,900 Stephen Koukoulas: Melbourne with basically zero growth over the last year, whereas 79 00:04:03,900 --> 00:04:09,239 Stephen Koukoulas: Perth and Adelaide will be plus 15 to 20%. And 80 00:04:09,239 --> 00:04:11,699 Stephen Koukoulas: I think Adelaide's even going to be a more expensive city than Melbourne 81 00:04:11,699 --> 00:04:15,090 Stephen Koukoulas: soon, which people who live in Adelaide would probably justify 82 00:04:15,090 --> 00:04:18,988 Stephen Koukoulas: it. But it is amazing. This divergence from city to 83 00:04:18,990 --> 00:04:21,599 Stephen Koukoulas: city is going to be highlighted in these numbers that 84 00:04:21,599 --> 00:04:25,500 Stephen Koukoulas: come out on the house price side. Other data, you 85 00:04:25,500 --> 00:04:31,080 Stephen Koukoulas: have building approvals. Gosh, we've had this conversation for years 86 00:04:31,080 --> 00:04:34,470 Stephen Koukoulas: now that we're not building enough houses, and I'm afraid 87 00:04:34,470 --> 00:04:37,409 Stephen Koukoulas: these building approvals and numbers will confirm that yet again. 88 00:04:37,650 --> 00:04:40,710 Stephen Koukoulas: Some small increase in building approvals expected, but we are 89 00:04:40,710 --> 00:04:46,199 Stephen Koukoulas: really falling short by a good 25% on the number 90 00:04:46,199 --> 00:04:48,599 Stephen Koukoulas: of new housing starts that we need to house all 91 00:04:48,600 --> 00:04:51,779 Stephen Koukoulas: these people coming in. So that'll be another bit of 92 00:04:51,779 --> 00:04:54,750 Stephen Koukoulas: a soggy number. And then international trade, one thing that 93 00:04:54,750 --> 00:04:57,270 Stephen Koukoulas: we are doing well. We're exporting our pants off. People 94 00:04:57,270 --> 00:04:59,670 Stephen Koukoulas: are still buying all the, Chinese in particular, buying our 95 00:04:59,670 --> 00:05:03,029 Stephen Koukoulas: iron ore and our LNG and all that sort of 96 00:05:03,029 --> 00:05:06,210 Stephen Koukoulas: stuff. So we're probably going to be running a really chunky 97 00:05:06,360 --> 00:05:09,839 Stephen Koukoulas: international trade surplus. So on the data, that's that score. 98 00:05:10,080 --> 00:05:13,260 Stephen Koukoulas: RBA minutes, that's the minute where Michele Bullock, the RBA 99 00:05:13,260 --> 00:05:18,450 Stephen Koukoulas: governor, changed her rhetoric. Rather than saying, " Oh, we've got 100 00:05:18,450 --> 00:05:21,119 Stephen Koukoulas: a bias to tighten interest rates," she said, " I cannot 101 00:05:21,120 --> 00:05:23,910 Stephen Koukoulas: rule anything in or out when it comes to interest 102 00:05:23,910 --> 00:05:26,520 Stephen Koukoulas: rate settings." So it'll be interesting to see what sort 103 00:05:26,520 --> 00:05:29,488 Stephen Koukoulas: of emphasis they're putting on that slowdown that we were 104 00:05:29,490 --> 00:05:33,359 Stephen Koukoulas: just discussing, that deceleration in inflation that's clearly happening. So 105 00:05:33,690 --> 00:05:35,428 Stephen Koukoulas: we'll be looking at the minutes, not for any great 106 00:05:35,428 --> 00:05:38,400 Stephen Koukoulas: insights as are they about to cut interest rates that 107 00:05:38,400 --> 00:05:43,169 Stephen Koukoulas: is, but what's their thinking on these myriad of issues 108 00:05:43,170 --> 00:05:44,370 Stephen Koukoulas: that are confronting the economy? 109 00:05:44,730 --> 00:05:47,580 Adam Lang: So Stephen, just on China, we've seen some words coming 110 00:05:47,580 --> 00:05:52,919 Adam Lang: out of the country about supporting growth and 5% being 111 00:05:52,920 --> 00:05:55,680 Adam Lang: a target. How are you seeing that as a factor here? 112 00:05:56,130 --> 00:06:00,868 Stephen Koukoulas: Really important. On China, I always end up being an 113 00:06:00,870 --> 00:06:04,830 Stephen Koukoulas: optimist. When there are, and things like we're saying now, 114 00:06:04,830 --> 00:06:09,539 Stephen Koukoulas: the CapEx overhang, the oversupply of dwellings, the over investment 115 00:06:09,540 --> 00:06:14,488 Stephen Koukoulas: that's been evident for some years now, they're still dominant 116 00:06:14,490 --> 00:06:19,500 Stephen Koukoulas: problems. The non- bank sector's under some financial stress too. 117 00:06:20,100 --> 00:06:22,320 Stephen Koukoulas: But whenever I see those things and think, oh jeez, 118 00:06:22,529 --> 00:06:24,599 Stephen Koukoulas: if this is the time that China's going to have 119 00:06:24,600 --> 00:06:28,529 Stephen Koukoulas: its hard landing, that'd be huge news for Australia, of 120 00:06:28,529 --> 00:06:31,110 Stephen Koukoulas: course, because they take a third of our exports and 121 00:06:31,740 --> 00:06:33,630 Stephen Koukoulas: pay us a very, very high price for a lot 122 00:06:33,630 --> 00:06:35,189 Stephen Koukoulas: of our commodities that we just dig out of the 123 00:06:35,190 --> 00:06:38,909 Stephen Koukoulas: ground. But then I see, as you alluded to, the 124 00:06:39,810 --> 00:06:43,770 Stephen Koukoulas: Central Bank, the government without the hassle, dare I say, 125 00:06:43,770 --> 00:06:45,990 Stephen Koukoulas: be a bit cynical for a minute, without an opposition 126 00:06:45,990 --> 00:06:49,439 Stephen Koukoulas: party, without a Senate, without elections to face, they just 127 00:06:49,440 --> 00:06:52,469 Stephen Koukoulas: implement policies to grow their economy. They don't send things 128 00:06:52,469 --> 00:06:55,800 Stephen Koukoulas: off to the Chinese Productivity Commission or whatever. They want 129 00:06:55,800 --> 00:06:58,740 Stephen Koukoulas: to grow the economy. So when there's a problem, they 130 00:06:58,860 --> 00:07:02,760 Stephen Koukoulas: fix it. They get the economy growing. And that gives 131 00:07:02,760 --> 00:07:06,420 Stephen Koukoulas: me optimism that while there's still some pretty significant problems 132 00:07:06,690 --> 00:07:09,779 Stephen Koukoulas: structurally in the Chinese economy, I think they're going to 133 00:07:09,780 --> 00:07:12,959 Stephen Koukoulas: overcome them through this, as you said, this stimulus that 134 00:07:12,990 --> 00:07:15,120 Stephen Koukoulas: we've seen. We've already seen the Chinese cut interest rates. 135 00:07:15,270 --> 00:07:17,640 Stephen Koukoulas: That's the interesting thing that they've been confronting too. So 136 00:07:17,940 --> 00:07:20,940 Stephen Koukoulas: on China, I'm cautious, but at the end of the 137 00:07:20,940 --> 00:07:23,249 Stephen Koukoulas: day, I end up being upbeat. 138 00:07:23,670 --> 00:07:26,850 Adam Lang: That's fantastic perspective. Stephen, have a great week. 139 00:07:27,360 --> 00:07:28,470 Stephen Koukoulas: Thank you, Adam. You too. 140 00:07:28,949 --> 00:07:31,380 Adam Lang: That was a economist, Stephen Koukoulas, better known as The 141 00:07:31,380 --> 00:07:34,230 Adam Lang: Kouk. You can find him at thekouk. com and follow 142 00:07:34,230 --> 00:07:37,350 Adam Lang: him on X using the handle TheKouk. I'm Adam Lang 143 00:07:37,380 --> 00:07:39,270 Adam Lang: and this is Fear & Greed, the week ahead.