1 00:00:07,890 --> 00:00:10,469 Sean Aylmer: Welcome to FEAR & GREED- The Week Ahead. I'm Sean Aylmer, 2 00:00:10,500 --> 00:00:12,660 Sean Aylmer: and as always at this time on a Monday morning, 3 00:00:12,660 --> 00:00:16,049 Sean Aylmer: I'm joined by economist, Stephen Koukoulas. You'll find him at thekouk. 4 00:00:16,049 --> 00:00:19,079 Sean Aylmer: com, T- H- E- K- O- U- K. com, and 5 00:00:19,079 --> 00:00:22,500 Sean Aylmer: on X using the handle, The Kouk. Stephen, good morning. 6 00:00:23,190 --> 00:00:24,239 Stephen Koukoulas: Good morning, Sean. 7 00:00:25,050 --> 00:00:28,650 Sean Aylmer: Now tell me what's it like to be an economist 8 00:00:29,099 --> 00:00:31,469 Sean Aylmer: on the first Tuesday of the month and not have 9 00:00:31,469 --> 00:00:34,589 Sean Aylmer: a Reserve Bank board meeting to listen to, to get 10 00:00:34,590 --> 00:00:37,440 Sean Aylmer: excited about? That was the first one last week wasn't it? 11 00:00:37,979 --> 00:00:41,400 Stephen Koukoulas: It was the first one of this new timetable for 12 00:00:41,490 --> 00:00:45,389 Stephen Koukoulas: RBA meetings, and it was very odd. It was very 13 00:00:45,389 --> 00:00:49,380 Stephen Koukoulas: strange. So first Tuesday, 2: 30 Eastern Time is normally 14 00:00:49,380 --> 00:00:52,409 Stephen Koukoulas: when the RBA would put out their statement, but alas, 15 00:00:52,469 --> 00:00:54,149 Stephen Koukoulas: there was nothing. So what we've got to do is 16 00:00:54,150 --> 00:00:58,680 Stephen Koukoulas: wait till next week on the 19th of March, 2: 30 PM 17 00:00:58,920 --> 00:01:00,720 Stephen Koukoulas: and this is where we've still got to get used 18 00:01:00,720 --> 00:01:02,789 Stephen Koukoulas: to this new change too, that'll not only be the 19 00:01:02,790 --> 00:01:07,020 Stephen Koukoulas: decision on interest rates, but there will be a major 20 00:01:07,049 --> 00:01:10,199 Stephen Koukoulas: update on the economy, the RBA governor will give a 21 00:01:10,199 --> 00:01:13,290 Stephen Koukoulas: press conference. So that's all the stuff that we've got to look 22 00:01:13,290 --> 00:01:16,200 Stephen Koukoulas: forward to next week, but we'll preview that next week, 23 00:01:16,200 --> 00:01:16,619 Stephen Koukoulas: I'm sure. 24 00:01:17,069 --> 00:01:21,089 Sean Aylmer: We will, indeed. Last week, GDP was the big one. 25 00:01:21,090 --> 00:01:22,289 Sean Aylmer: What do you make of it? I mean, it's sort 26 00:01:22,289 --> 00:01:24,719 Sean Aylmer: of a sluggish economy at the moment, but not the 27 00:01:24,719 --> 00:01:25,859 Sean Aylmer: worst possible thing. 28 00:01:26,490 --> 00:01:28,740 Stephen Koukoulas: Yeah, it's one of those ones, it's bad, but it's 29 00:01:28,740 --> 00:01:31,410 Stephen Koukoulas: not horrible. I know that might sound a funny nuance, 30 00:01:31,410 --> 00:01:34,770 Stephen Koukoulas: but we've clearly had the economy slowing down under the 31 00:01:34,770 --> 00:01:38,039 Stephen Koukoulas: weight of interest rate hikes, under the weight of a slowing global economy. We 32 00:01:38,039 --> 00:01:40,980 Stephen Koukoulas: shouldn't forget that, particularly China, which is going through a 33 00:01:40,980 --> 00:01:45,840 Stephen Koukoulas: period of genuine deflation and weakness. So our GDP number 0. 2 34 00:01:45,840 --> 00:01:49,440 Stephen Koukoulas: for the quarter was one of the weakest ones that 35 00:01:49,440 --> 00:01:52,080 Stephen Koukoulas: we've seen outside the pandemic time, which of course had 36 00:01:52,080 --> 00:01:55,170 Stephen Koukoulas: a whole lot of strange economic data. But we know 37 00:01:55,170 --> 00:01:59,400 Stephen Koukoulas: that the Australian economy on average should be growing at 38 00:01:59,400 --> 00:02:02,880 Stephen Koukoulas: around about 0. 7 per quarter. So if we were 39 00:02:02,880 --> 00:02:06,479 Stephen Koukoulas: to wave our economists magic wand and say, " What's the 40 00:02:06,480 --> 00:02:08,880 Stephen Koukoulas: ideal growth rate for Australia?" So if we got 0. 41 00:02:08,880 --> 00:02:11,730 Stephen Koukoulas: 7 quarterly GDP quarter in, quarter out, we'd be doing 42 00:02:11,730 --> 00:02:14,370 Stephen Koukoulas: pretty well. It's not too hot, not too cold. So 43 00:02:14,370 --> 00:02:18,780 Stephen Koukoulas: the last 3 quarters have been 0.5, 0. 3, and now 0. 2%. 44 00:02:19,590 --> 00:02:22,349 Stephen Koukoulas: So we've been growing below trend for the best part 45 00:02:22,350 --> 00:02:26,430 Stephen Koukoulas: of the year, and so those GDP numbers confirmed what 46 00:02:26,430 --> 00:02:29,399 Stephen Koukoulas: we're feeling from the consumer sentiment, the business confidence numbers 47 00:02:29,580 --> 00:02:32,819 Stephen Koukoulas: that the economy's weak. And when the economy's weak, guess 48 00:02:32,820 --> 00:02:35,249 Stephen Koukoulas: what happens to unemployment? It's trending up, which is what 49 00:02:35,250 --> 00:02:38,879 Stephen Koukoulas: we've been seeing. And importantly, inflation is trending down, which 50 00:02:38,880 --> 00:02:41,250 Stephen Koukoulas: is one of the reasons why the RBA implemented type 51 00:02:41,250 --> 00:02:44,670 Stephen Koukoulas: monetary policy, slow the economy down, get inflation down. So 52 00:02:45,419 --> 00:02:47,760 Stephen Koukoulas: we're doing this transition through the economy right now. 53 00:02:48,660 --> 00:02:52,019 Sean Aylmer: So it's all sort of working and economics is working, 54 00:02:52,020 --> 00:02:55,169 Sean Aylmer: I suppose. When do you think the Reserve Bank will 55 00:02:55,169 --> 00:02:58,229 Sean Aylmer: start thinking about cutting interest rates? Because that is the 56 00:02:58,230 --> 00:02:59,219 Sean Aylmer: big debate at the moment. 57 00:03:00,059 --> 00:03:02,820 Stephen Koukoulas: Oh, and that debate only hotted up with those soggy 58 00:03:02,820 --> 00:03:08,429 Stephen Koukoulas: GDP numbers last week. And look, as everyone knows, there's 59 00:03:08,429 --> 00:03:12,239 Stephen Koukoulas: 101 or maybe more than 101 moving parts to the interest rate question. 60 00:03:12,630 --> 00:03:16,289 Stephen Koukoulas: I think that when the RBA do meet next week, 61 00:03:16,859 --> 00:03:19,110 Stephen Koukoulas: they'll be moving away from, " Oh, we might have to 62 00:03:19,110 --> 00:03:22,500 Stephen Koukoulas: hike interest rates more to a neutral, to slightly opening 63 00:03:22,500 --> 00:03:25,680 Stephen Koukoulas: the door for a rate cutting scenario." But at this 64 00:03:25,680 --> 00:03:28,800 Stephen Koukoulas: stage, around the middle of the year, we'll probably have 65 00:03:28,800 --> 00:03:33,419 Stephen Koukoulas: enough information that the economy continues to be sluggish, with 66 00:03:33,419 --> 00:03:37,050 Stephen Koukoulas: the unemployment rates heading to 4. 5%, that the inflation rate is 67 00:03:37,650 --> 00:03:39,630 Stephen Koukoulas: continuing to come down. And of course we'll get the 68 00:03:39,630 --> 00:03:44,760 Stephen Koukoulas: lead from global markets. Last week we had the Fed 69 00:03:44,760 --> 00:03:47,609 Stephen Koukoulas: Chairperson, Jerome Powell chatting about, yes, they're going to cut 70 00:03:47,610 --> 00:03:50,309 Stephen Koukoulas: interest rates, but not yet. While we don't move in 71 00:03:50,309 --> 00:03:52,950 Stephen Koukoulas: lockstep with the US, they're a pretty important part of 72 00:03:53,910 --> 00:03:57,210 Stephen Koukoulas: global markets. Pretty important part of what we do here 73 00:03:57,210 --> 00:04:00,900 Stephen Koukoulas: in Australia too. So the RBA probably looks at their 74 00:04:00,900 --> 00:04:02,640 Stephen Koukoulas: own data. Of course they do. Of course they do. 75 00:04:02,849 --> 00:04:04,799 Stephen Koukoulas: But they'll be having an eagle eye on what's happening 76 00:04:04,800 --> 00:04:08,699 Stephen Koukoulas: in the global economy too, to see when the ECB, the Federal 77 00:04:08,700 --> 00:04:11,309 Stephen Koukoulas: Reserve and others will be starting to trim their interest rates. 78 00:04:11,639 --> 00:04:14,160 Sean Aylmer: That's a great segue into this week because before we 79 00:04:14,160 --> 00:04:16,740 Sean Aylmer: get to the domestic stuff, we do have US inflation 80 00:04:17,220 --> 00:04:19,410 Sean Aylmer: and retail sales figures. Is that right out this week? 81 00:04:19,650 --> 00:04:22,049 Stephen Koukoulas: Yeah. Domestically, we don't have a lot of top tier 82 00:04:22,050 --> 00:04:24,329 Stephen Koukoulas: news, I think it's fair to say. So all eyes 83 00:04:24,330 --> 00:04:26,580 Stephen Koukoulas: locally in a sense will be what's happening in the 84 00:04:26,580 --> 00:04:30,119 Stephen Koukoulas: US and oh gosh, the inflation numbers of consumer price 85 00:04:30,119 --> 00:04:32,520 Stephen Koukoulas: index and the retail sales numbers will be looked at for 86 00:04:32,520 --> 00:04:35,969 Stephen Koukoulas: the growth and inflation story from the US and the 87 00:04:35,970 --> 00:04:39,989 Stephen Koukoulas: US markets. They'll be potentially very volatile. If we get 88 00:04:39,990 --> 00:04:44,850 Stephen Koukoulas: an outlying number or something outside market expectations on inflation 89 00:04:44,910 --> 00:04:47,339 Stephen Koukoulas: and the retail spending numbers, then of course markets will 90 00:04:47,339 --> 00:04:51,690 Stephen Koukoulas: be gyrating because they'll reprice when the rate cutting cycle 91 00:04:51,690 --> 00:04:54,419 Stephen Koukoulas: will start. So we'll be looking at that, and to 92 00:04:54,420 --> 00:04:56,789 Stephen Koukoulas: be fair, hopefully we get okay retail sales. We don't 93 00:04:56,789 --> 00:04:58,770 Stephen Koukoulas: want a recession in the US, but we get that 94 00:04:58,770 --> 00:05:00,750 Stephen Koukoulas: inflation rate continuing to track lower. 95 00:05:01,950 --> 00:05:05,428 Sean Aylmer: And then domestically, not exactly top tier, but the NAB's survey 96 00:05:05,430 --> 00:05:08,130 Sean Aylmer: is interesting. Business conditions and sentiment and given the GDP 97 00:05:08,130 --> 00:05:10,620 Sean Aylmer: last week showed that business investment is still okay, that's 98 00:05:10,620 --> 00:05:13,169 Sean Aylmer: kind of relevant. And then Westpac's consumer sentiment. 99 00:05:13,680 --> 00:05:16,678 Stephen Koukoulas: Yeah, indeed. And then they have a survey, we discussed over many a 100 00:05:16,678 --> 00:05:20,639 Stephen Koukoulas: long day, it's a good survey. It's contemporary, it includes 101 00:05:20,639 --> 00:05:23,190 Stephen Koukoulas: the sort of sentiment of the business sector right up 102 00:05:23,190 --> 00:05:24,839 Stephen Koukoulas: to the last couple of weeks. That's when they do 103 00:05:24,839 --> 00:05:28,409 Stephen Koukoulas: their survey. So we'll know whether businesses have still got 104 00:05:28,650 --> 00:05:31,169 Stephen Koukoulas: relatively upbeat. One of the interesting things about the NAB 105 00:05:31,170 --> 00:05:34,618 Stephen Koukoulas: survey was that it was really quite resilient through to 106 00:05:34,620 --> 00:05:36,599 Stephen Koukoulas: a couple of months ago that the business sector was 107 00:05:36,599 --> 00:05:40,079 Stephen Koukoulas: sort of, unlike consumers, pretty upbeat about the economy. Now, 108 00:05:40,080 --> 00:05:43,169 Stephen Koukoulas: as the economy slowed down, the business sentiments tilted a 109 00:05:43,170 --> 00:05:48,480 Stephen Koukoulas: little bit lower, expectations for employment, for orders, for exports, 110 00:05:48,480 --> 00:05:50,279 Stephen Koukoulas: and these sorts of things have also tilted a little 111 00:05:50,279 --> 00:05:53,460 Stephen Koukoulas: lower. So interesting to see whether that's continued to soften. 112 00:05:53,520 --> 00:05:55,799 Stephen Koukoulas: If it does or if it has, then of course 113 00:05:55,799 --> 00:05:59,249 Stephen Koukoulas: that adds to the rate cutting scenario here in Australia. Consumers, " 114 00:05:59,279 --> 00:06:01,500 Stephen Koukoulas: Oh yeah, we consumers are still under the pump," as 115 00:06:01,500 --> 00:06:05,909 Stephen Koukoulas: the Treasury likes to say. That said, the prospect of 116 00:06:05,910 --> 00:06:08,339 Stephen Koukoulas: tax cuts, the fact that real wages are now increasing 117 00:06:08,339 --> 00:06:11,549 Stephen Koukoulas: a tiny smidge might just be the issue that gives 118 00:06:11,550 --> 00:06:13,888 Stephen Koukoulas: consumers a little bit of a shot in the arm. 119 00:06:14,190 --> 00:06:16,589 Stephen Koukoulas: And the fact that the stock market is hitting record 120 00:06:16,589 --> 00:06:19,380 Stephen Koukoulas: highs and house prices are still going up, the wealth 121 00:06:19,410 --> 00:06:21,988 Stephen Koukoulas: effect is pretty powerful too. So maybe consumer sentiment will 122 00:06:21,990 --> 00:06:24,839 Stephen Koukoulas: be a little bit more positive than it's been for 123 00:06:24,839 --> 00:06:25,710 Stephen Koukoulas: the last few months. 124 00:06:26,099 --> 00:06:27,210 Sean Aylmer: Stephen, enjoy your week. 125 00:06:27,900 --> 00:06:28,439 Stephen Koukoulas: Thank you, Sean. 126 00:06:29,070 --> 00:06:31,379 Sean Aylmer: That was economist, Stephen Koukoulas, better known as The Kouk. 127 00:06:31,380 --> 00:06:33,659 Sean Aylmer: You can find him at thekouk. com and follow him 128 00:06:33,660 --> 00:06:36,509 Sean Aylmer: on X using the handle, The Kouk. I'm Sean Aylmer 129 00:06:36,510 --> 00:06:38,340 Sean Aylmer: and this is FEAR & GREED - The Week Ahead.