1 00:00:08,720 --> 00:00:11,710 Sean Aylmer: Welcome to Fear and Greed, the week ahead. We're back this week, as 2 00:00:11,710 --> 00:00:15,270 Sean Aylmer: always, with economist Stephen Koukoulas. You'll find him at TheKouk. 3 00:00:15,270 --> 00:00:18,579 Sean Aylmer: com and on Twitter using the handle, TheKouk, T- H- E- K- O- U- 4 00:00:18,579 --> 00:00:21,169 Sean Aylmer: K. Stephen, I have some good news for you. My 5 00:00:21,170 --> 00:00:23,540 Sean Aylmer: brother has just returned from living overseas for about 10 6 00:00:23,540 --> 00:00:26,210 Sean Aylmer: years. And of course, I forced him onto Fear and 7 00:00:26,210 --> 00:00:29,040 Sean Aylmer: Greed. Do you know his favorite part of the show, 8 00:00:29,040 --> 00:00:29,441 Sean Aylmer: the whole week? 9 00:00:29,441 --> 00:00:29,442 Stephen Koukoulas: No, I don't. 10 00:00:29,441 --> 00:00:29,760 Sean Aylmer: It's the Kouk. 11 00:00:31,370 --> 00:00:31,800 Stephen Koukoulas: Oh. 12 00:00:31,800 --> 00:00:32,089 Sean Aylmer: It's the Kouk. 13 00:00:32,090 --> 00:00:33,101 Stephen Koukoulas: There you go. 14 00:00:33,101 --> 00:00:35,529 Sean Aylmer: He said, "What is Stephen Kouk really like?" 15 00:00:35,909 --> 00:00:36,120 Stephen Koukoulas: Yes? 16 00:00:36,120 --> 00:00:38,440 Sean Aylmer: I said, " He's a lovely fellow. Knows what he's talking about." He goes, " 17 00:00:38,930 --> 00:00:39,760 Sean Aylmer: I really like the Kouk." 18 00:00:40,400 --> 00:00:43,620 Stephen Koukoulas: Well, that's very flattering. So, thank him. The check is in the mail. 19 00:00:43,870 --> 00:00:49,529 Sean Aylmer: Oh, exactly. Exactly. Talking about money coming into people's pockets. 20 00:00:49,740 --> 00:00:52,290 Sean Aylmer: Wages. Oh, that was an awful segue, I got to 21 00:00:52,290 --> 00:00:55,010 Sean Aylmer: say. But anyway, we'll use it. The main data out 22 00:00:55,020 --> 00:00:56,620 Sean Aylmer: last week, we've got such a big week coming up. 23 00:00:56,620 --> 00:00:58,220 Sean Aylmer: I want to get onto that quickly. But, before we 24 00:00:58,220 --> 00:01:01,330 Sean Aylmer: get there, the wages data last week, it was kind 25 00:01:01,330 --> 00:01:03,660 Sean Aylmer: of about as expected. What's it mean for interest rates? 26 00:01:03,660 --> 00:01:05,810 Stephen Koukoulas: Yeah. Kind of as expected. We had the wage price 27 00:01:05,810 --> 00:01:10,100 Stephen Koukoulas: index, which rose by 2.3% in annual terms. So, broadly 28 00:01:10,100 --> 00:01:12,590 Stephen Koukoulas: as expected, but not showing that pickup that you would 29 00:01:12,590 --> 00:01:15,750 Stephen Koukoulas: like to see, given how tight the labor market seems 30 00:01:15,750 --> 00:01:18,179 Stephen Koukoulas: to be. The anecdotes of skill shortages and the like. 31 00:01:18,730 --> 00:01:21,840 Stephen Koukoulas: The average weekly earnings were also out towards the end 32 00:01:21,840 --> 00:01:24,149 Stephen Koukoulas: of last week, and they showed that again, a similar 33 00:01:24,150 --> 00:01:27,600 Stephen Koukoulas: thing on a constant hour basis, the annual increase was 34 00:01:27,600 --> 00:01:30,759 Stephen Koukoulas: only around about that 2. 25%. But, there was an 35 00:01:30,760 --> 00:01:35,430 Stephen Koukoulas: interesting sideline in the numbers, given the total earnings were 36 00:01:35,430 --> 00:01:38,990 Stephen Koukoulas: up 3. 8% in annual terms. Now, a lot of 37 00:01:38,990 --> 00:01:41,890 Stephen Koukoulas: people discount that number because it is impacted by the 38 00:01:41,890 --> 00:01:44,280 Stephen Koukoulas: number of hours that people work, and whether people get 39 00:01:44,280 --> 00:01:47,289 Stephen Koukoulas: promotions and these sorts of things. So, as a pure 40 00:01:47,290 --> 00:01:50,230 Stephen Koukoulas: measure of labor costs, it's got some flaws, as well. 41 00:01:50,230 --> 00:01:53,340 Stephen Koukoulas: But, it does appear that firms are wanting their staff 42 00:01:53,340 --> 00:01:57,900 Stephen Koukoulas: to work more hours. They're paying them bonuses. And they're giving them promotions 43 00:01:57,900 --> 00:02:02,010 Stephen Koukoulas: to retain them. So, the wages numbers are moderate. There 44 00:02:02,010 --> 00:02:04,350 Stephen Koukoulas: is a slight evidence of the pick up, but the 45 00:02:04,350 --> 00:02:07,190 Stephen Koukoulas: wages bill of many companies is probably going up. 46 00:02:07,200 --> 00:02:10,450 Sean Aylmer: So, what's it mean for interest rates, all that? 47 00:02:10,660 --> 00:02:15,309 Stephen Koukoulas: Yeah. For now, and I think with what's going on in the geopolitical space 48 00:02:15,310 --> 00:02:18,059 Stephen Koukoulas: around the world, and of course that's a rapidly moving 49 00:02:18,060 --> 00:02:21,269 Stephen Koukoulas: feast. It probably means that the RBA is on hold 50 00:02:21,270 --> 00:02:24,669 Stephen Koukoulas: for the next little while. The next couple of big 51 00:02:24,669 --> 00:02:27,230 Stephen Koukoulas: things for it will be what happens to the labor 52 00:02:27,230 --> 00:02:29,550 Stephen Koukoulas: market, the unemployment data in a couple of weeks time, 53 00:02:29,550 --> 00:02:31,220 Stephen Koukoulas: and then the CPI at the end of April. So, 54 00:02:31,220 --> 00:02:33,839 Stephen Koukoulas: they're well into the future. But, for here and now, 55 00:02:33,889 --> 00:02:38,020 Stephen Koukoulas: they're on hold. They'll be saying that the wages side 56 00:02:38,020 --> 00:02:42,570 Stephen Koukoulas: is still relatively well contained, and they want to see 57 00:02:42,650 --> 00:02:45,579 Stephen Koukoulas: what happens to the labor market, whether we can get 58 00:02:45,580 --> 00:02:48,300 Stephen Koukoulas: a sub 4% unemployment rate locked in, whether we do 59 00:02:48,300 --> 00:02:51,160 Stephen Koukoulas: see... The next wages report haven't been in three months 60 00:02:51,160 --> 00:02:54,160 Stephen Koukoulas: time, confirming that there's been any up- tick in wage pressures. 61 00:02:54,470 --> 00:02:56,620 Sean Aylmer: Okay. Now, we will find out a little bit more about 62 00:02:56,620 --> 00:02:59,260 Sean Aylmer: what the reserve bank thinks because, well, it's a huge 63 00:02:59,260 --> 00:03:02,880 Sean Aylmer: week coming up. Starting tomorrow, really, in terms of the really 64 00:03:03,050 --> 00:03:05,640 Sean Aylmer: big news announcements with the reserve bank board meeting. 65 00:03:05,930 --> 00:03:07,880 Stephen Koukoulas: Yeah, no change there, as I was just alluding to. I think 66 00:03:07,880 --> 00:03:10,790 Stephen Koukoulas: we've not seen enough to make it change its view. 67 00:03:11,090 --> 00:03:14,550 Stephen Koukoulas: Now, they might flag a little bit more about their 68 00:03:14,550 --> 00:03:18,300 Stephen Koukoulas: concerns, or their attitudes on inflation. I don't think they've 69 00:03:18,320 --> 00:03:20,669 Stephen Koukoulas: changed since they put out the quarterly statement on monetary 70 00:03:20,669 --> 00:03:23,380 Stephen Koukoulas: policy a few weeks ago. But, I think they might 71 00:03:23,380 --> 00:03:25,910 Stephen Koukoulas: just flag this issue because the pressure is on the 72 00:03:25,940 --> 00:03:28,120 Stephen Koukoulas: Fed to hike, on the Bank of England to hike. 73 00:03:28,530 --> 00:03:31,600 Stephen Koukoulas: Last week, we saw the RBNZ across the Tasman hiking 74 00:03:31,600 --> 00:03:34,460 Stephen Koukoulas: again, and sounding very hawkish. So, a lot of its 75 00:03:34,800 --> 00:03:37,610 Stephen Koukoulas: competitors, if you like, are hiking, or are about to. 76 00:03:37,610 --> 00:03:39,850 Stephen Koukoulas: And I think that's an important thing that Dr. Lowe 77 00:03:39,850 --> 00:03:42,100 Stephen Koukoulas: has spoken about in the past. What's happening in the global 78 00:03:42,100 --> 00:03:44,640 Stephen Koukoulas: economy is important for us, and for them, at the 79 00:03:44,640 --> 00:03:48,410 Stephen Koukoulas: RBA. So, I think they'll canvas that view about, well, 80 00:03:48,410 --> 00:03:50,140 Stephen Koukoulas: when do we need to get rid of this 0. 81 00:03:50,140 --> 00:03:54,670 Stephen Koukoulas: 1% cash rate? Is it imminent? Well, probably no. Is 82 00:03:54,670 --> 00:03:57,530 Stephen Koukoulas: it likely in the second half of the year? Well, probably yes. 83 00:03:57,950 --> 00:04:01,850 Sean Aylmer: So, the big data point week is GDP. Wednesday? 84 00:04:02,220 --> 00:04:05,440 Stephen Koukoulas: Wednesday's GDP, it's for the December quarter, it's going to be 85 00:04:05,440 --> 00:04:08,260 Stephen Koukoulas: a corker, I think. It's going to be a really 86 00:04:08,260 --> 00:04:10,690 Stephen Koukoulas: strong result. Now, a couple of reasons for that. One 87 00:04:10,690 --> 00:04:15,270 Stephen Koukoulas: is, that we had the -1.9% GDP in the September quarter. 88 00:04:15,270 --> 00:04:18,690 Stephen Koukoulas: So, the previous quarter, as most of the Eastern states 89 00:04:18,690 --> 00:04:21,640 Stephen Koukoulas: were locked down, when Omicron was coming along. 90 00:04:21,870 --> 00:04:24,210 Sean Aylmer: And jump in there, Stephen. Remember, it wasn't that long ago that 91 00:04:24,210 --> 00:04:27,089 Sean Aylmer: we were worried about another technical recession, at least, because 92 00:04:28,060 --> 00:04:30,640 Sean Aylmer: the December quarter may actually go backwards after September. 93 00:04:30,830 --> 00:04:33,419 Stephen Koukoulas: Not a chance. I will swim across Sydney Harbor if 94 00:04:33,420 --> 00:04:35,250 Stephen Koukoulas: we have a negative result. Whoops, I said that out loud. 95 00:04:35,250 --> 00:04:35,279 Sean Aylmer: Yes. 96 00:04:37,150 --> 00:04:39,270 Stephen Koukoulas: It's going to be a strong number. We know retail 97 00:04:39,270 --> 00:04:42,430 Stephen Koukoulas: sales. We know CapEx numbers. We know the net export 98 00:04:42,430 --> 00:04:45,000 Stephen Koukoulas: numbers. We've got a fair handle on what's happening. And 99 00:04:45,000 --> 00:04:46,970 Stephen Koukoulas: it's likely that we're actually going to see GDP near 100 00:04:46,970 --> 00:04:51,240 Stephen Koukoulas: 2.5% for the quarter, + 2. 5. So, given that we 101 00:04:51,240 --> 00:04:54,029 Stephen Koukoulas: know a lot of the building blocks already, it's likely 102 00:04:54,029 --> 00:04:56,770 Stephen Koukoulas: to be just confirming that that dip in the September 103 00:04:56,770 --> 00:04:59,480 Stephen Koukoulas: quarter... And as you quite rightly said, the fear of 104 00:04:59,480 --> 00:05:02,710 Stephen Koukoulas: another recession is probably passing, and pass by quickly. But 105 00:05:02,910 --> 00:05:06,150 Stephen Koukoulas: nonetheless, it'll be welcome news, I daresay, for the RBA 106 00:05:06,150 --> 00:05:08,529 Stephen Koukoulas: and the markets, as well, that the economy has bounced 107 00:05:08,529 --> 00:05:10,360 Stephen Koukoulas: back in that fourth quarter of 2021. 108 00:05:10,730 --> 00:05:12,779 Sean Aylmer: Now, part of that, of course, is company profits and 109 00:05:12,779 --> 00:05:15,409 Sean Aylmer: those types of things, but retail sales for January comes 110 00:05:15,410 --> 00:05:18,270 Sean Aylmer: out, as well. Because that's a period, obviously, beyond the 111 00:05:18,270 --> 00:05:21,270 Sean Aylmer: GDP figures. So, what do you think they'll show? 112 00:05:21,570 --> 00:05:24,979 Stephen Koukoulas: Look, they're a curious one because that was not lockdowns 113 00:05:24,980 --> 00:05:27,650 Stephen Koukoulas: as such, but there were lots of anecdotes that people 114 00:05:27,650 --> 00:05:30,159 Stephen Koukoulas: were staying at home as the Omicron issue, and we 115 00:05:30,160 --> 00:05:33,670 Stephen Koukoulas: couldn't get the rapid antigen tests as freely as we 116 00:05:33,670 --> 00:05:36,870 Stephen Koukoulas: would like. So, there's evidence that people tended to stick 117 00:05:36,870 --> 00:05:40,710 Stephen Koukoulas: at home. However, there's also the counter to that. Lots of people 118 00:05:40,710 --> 00:05:44,070 Stephen Koukoulas: were going on long overdue holidays within Australia. And when you do 119 00:05:44,070 --> 00:05:45,779 Stephen Koukoulas: that, you spend money, and you spend it in the 120 00:05:45,779 --> 00:05:48,290 Stephen Koukoulas: retail sector. So, I think on balance, and from some 121 00:05:48,290 --> 00:05:51,779 Stephen Koukoulas: of the card data that the big banks produce, January 122 00:05:51,779 --> 00:05:53,839 Stephen Koukoulas: looks as if it could be an increase of around 123 00:05:53,839 --> 00:05:57,060 Stephen Koukoulas: about 1% in the month, which is not a bad result. 124 00:05:57,060 --> 00:06:00,820 Stephen Koukoulas: And again, continuing that momentum for decent economic growth as 125 00:06:01,440 --> 00:06:01,960 Stephen Koukoulas: 2022 kicks off. 126 00:06:01,960 --> 00:06:04,520 Sean Aylmer: Yeah. There's a few data points around the housing sector, 127 00:06:04,880 --> 00:06:06,760 Sean Aylmer: housing finance, building approvals, this week. 128 00:06:06,950 --> 00:06:09,480 Stephen Koukoulas: Yes. And again, building approvals is probably down. This is 129 00:06:09,740 --> 00:06:13,529 Stephen Koukoulas: the hangover of the bring forward of construction and approvals 130 00:06:13,529 --> 00:06:16,339 Stephen Koukoulas: into 2021, from some of the stimulus measures from the 131 00:06:16,339 --> 00:06:18,950 Stephen Koukoulas: Federal government and the State governments a year or so 132 00:06:18,960 --> 00:06:22,029 Stephen Koukoulas: ago, when the economy was in much more fragile nature. 133 00:06:22,029 --> 00:06:24,599 Stephen Koukoulas: So, building approvals is probably trending down. Still at a 134 00:06:24,600 --> 00:06:26,260 Stephen Koukoulas: decent level. So, we're still building quite a lot of 135 00:06:26,330 --> 00:06:29,849 Stephen Koukoulas: houses out there, and apartments. But nonetheless, we had a 136 00:06:29,850 --> 00:06:33,140 Stephen Koukoulas: bit of a front loading of those into 2021. So, 137 00:06:33,140 --> 00:06:36,700 Stephen Koukoulas: probably down three or 4%. Housing finance, on the other 138 00:06:36,700 --> 00:06:40,330 Stephen Koukoulas: hand, probably up. Yes, we do know that house prices 139 00:06:40,330 --> 00:06:44,190 Stephen Koukoulas: are strong. People are borrowing. First time buyers, probably just 140 00:06:44,190 --> 00:06:46,650 Stephen Koukoulas: edging back a little bit from some of the price 141 00:06:46,650 --> 00:06:49,979 Stephen Koukoulas: shock. Houses are expensive. And investors are coming back. So, 142 00:06:49,980 --> 00:06:52,230 Stephen Koukoulas: we're probably going to see that split being talked about later 143 00:06:52,740 --> 00:06:55,850 Stephen Koukoulas: this week that, investor demand is still pretty strong, and 144 00:06:55,850 --> 00:06:59,099 Stephen Koukoulas: first home buyers are potentially being squeezed out again. 145 00:06:59,690 --> 00:07:01,610 Sean Aylmer: Just a quick one, international trade. And I bring this 146 00:07:01,610 --> 00:07:04,930 Sean Aylmer: one up because last week Rio announced its biggest ever 147 00:07:05,180 --> 00:07:08,690 Sean Aylmer: profit. In fact, the largest corporate profit in Australian dollars, 148 00:07:08,900 --> 00:07:11,130 Sean Aylmer: ever. And the biggest ever dividend paid out. Now, of 149 00:07:11,130 --> 00:07:13,750 Sean Aylmer: course, that was for the six months to December. And that's 150 00:07:13,750 --> 00:07:16,040 Sean Aylmer: when oil prices were high and they were doing so 151 00:07:16,040 --> 00:07:19,210 Sean Aylmer: well. What's happened in that sector, though, more recently? 152 00:07:19,710 --> 00:07:23,280 Stephen Koukoulas: Look, it's been choppy. The oil price, which did come 153 00:07:23,280 --> 00:07:25,310 Stephen Koukoulas: off a little bit towards the end of last year 154 00:07:25,310 --> 00:07:29,320 Stephen Koukoulas: has been reasonable... It's been very resilient. We are trading 155 00:07:29,320 --> 00:07:32,960 Stephen Koukoulas: in that 125 to 135 U. S. Dollars a ton. 156 00:07:33,220 --> 00:07:35,679 Stephen Koukoulas: It did dip below $ 100 a ton at the end 157 00:07:35,680 --> 00:07:39,040 Stephen Koukoulas: of last year. So, it's rebounded quite nicely. So, given 158 00:07:39,040 --> 00:07:41,310 Stephen Koukoulas: that that's a dominant part of our export market, of 159 00:07:41,310 --> 00:07:44,820 Stephen Koukoulas: course, those trade numbers should be yet another decent surplus 160 00:07:44,820 --> 00:07:47,190 Stephen Koukoulas: of the order of seven to $ 8 billion for the 161 00:07:47,190 --> 00:07:50,040 Stephen Koukoulas: month. We probably do have a bit of import strength 162 00:07:50,040 --> 00:07:53,210 Stephen Koukoulas: coming through, too. This domestic economy with a focus on 163 00:07:53,210 --> 00:07:55,970 Stephen Koukoulas: a lot of machinery and equipment imports, because business investments 164 00:07:55,970 --> 00:07:58,150 Stephen Koukoulas: are looking a little bit better. We're trying to buy 165 00:07:58,150 --> 00:08:00,410 Stephen Koukoulas: cars, the shortage of them, of course, because of all 166 00:08:00,410 --> 00:08:02,330 Stephen Koukoulas: these supply chain problems. But, there's probably going to be 167 00:08:02,330 --> 00:08:04,380 Stephen Koukoulas: a bit of a bit of a rebound in import 168 00:08:04,380 --> 00:08:07,310 Stephen Koukoulas: levels. So therefore, that might just take some of the 169 00:08:07,310 --> 00:08:10,000 Stephen Koukoulas: gloss off what's probably going to be another strong month 170 00:08:10,000 --> 00:08:14,970 Stephen Koukoulas: for export. So, bottom line, another super international trade surplus 171 00:08:14,970 --> 00:08:17,220 Stephen Koukoulas: of seven, eight, $ 9 billion. A big one. 172 00:08:17,490 --> 00:08:19,010 Sean Aylmer: Busy week, Stephen. Enjoy it. 173 00:08:19,240 --> 00:08:20,570 Stephen Koukoulas: I will. I'm looking forward to it. I'll get my 174 00:08:20,570 --> 00:08:23,240 Stephen Koukoulas: head down, and I'll get typing on my computer. Have 175 00:08:23,240 --> 00:08:23,700 Stephen Koukoulas: no fear. 176 00:08:24,030 --> 00:08:27,010 Sean Aylmer: That was economist Stephen Koukoulas, better known as The Kouk. You can 177 00:08:27,010 --> 00:08:29,160 Sean Aylmer: find him at TheKouk. com and follow him on Twitter 178 00:08:29,160 --> 00:08:32,090 Sean Aylmer: using the handle, TheKouk. I'm Sean Aylmer, and this is 179 00:08:32,090 --> 00:08:33,470 Sean Aylmer: Fear and Greed, the week ahead.