1 00:00:08,130 --> 00:00:11,250 Speaker 1: Welcome to Fear and Greed - The Week Ahead. I'm Sean Aylmer, and 2 00:00:11,250 --> 00:00:14,670 Speaker 1: as always, I'm joined by economist Stephen Koukoulas. You'll find 3 00:00:14,670 --> 00:00:17,340 Speaker 1: him at thekouk. com and on Twitter using the handle 4 00:00:17,340 --> 00:00:18,480 Speaker 1: TheKouk. Stephen, good morning. 5 00:00:18,989 --> 00:00:19,830 Speaker 2: Good morning, Sean. 6 00:00:20,430 --> 00:00:24,000 Speaker 1: Exciting week coming up, plenty of data. But before we 7 00:00:24,000 --> 00:00:25,799 Speaker 1: get there, I want to talk about last week, because 8 00:00:25,800 --> 00:00:29,550 Speaker 1: there was actually some pretty interesting information last week around 9 00:00:29,550 --> 00:00:32,820 Speaker 1: wages, around capital spending, and the detail of what the 10 00:00:32,820 --> 00:00:33,900 Speaker 1: reserve bank's thinking. 11 00:00:34,860 --> 00:00:38,550 Speaker 2: Yes. In no particular order, I think what was the 12 00:00:38,550 --> 00:00:41,490 Speaker 2: thing that hit most of the markets in their assessment 13 00:00:41,490 --> 00:00:45,420 Speaker 2: was the, I'll call it, disappointing increase in wages growth. 14 00:00:45,420 --> 00:00:50,129 Speaker 2: Now, we had the 3.3% annual rise in wages in 15 00:00:50,130 --> 00:00:53,760 Speaker 2: the year to the December quarter. The market was looking for 3. 5%, 16 00:00:54,600 --> 00:00:56,610 Speaker 2: and so was the RBA, by the way, so it just 17 00:00:56,610 --> 00:00:59,700 Speaker 2: undershot a little bit. But it does suggest that some 18 00:00:59,700 --> 00:01:04,020 Speaker 2: of the concerns about the wage price inflation spiral perhaps 19 00:01:04,560 --> 00:01:09,240 Speaker 2: not as acute as were being feared. CapEx data pretty 20 00:01:09,240 --> 00:01:12,090 Speaker 2: solid, as we were alluding to last week, that we 21 00:01:12,090 --> 00:01:16,320 Speaker 2: had a 2.2% lift in business investment in the December quarter, 22 00:01:16,709 --> 00:01:21,060 Speaker 2: and the expectations for future investment were sort of up 23 00:01:21,060 --> 00:01:22,830 Speaker 2: base. I wouldn't want to get too carried away and 24 00:01:22,830 --> 00:01:25,500 Speaker 2: say that they were strong, but they're suggesting that business investment will 25 00:01:25,500 --> 00:01:29,550 Speaker 2: still increase over the next financial year, which is good 26 00:01:29,550 --> 00:01:33,330 Speaker 2: news. The minutes of the RBA, well, that shock meeting 27 00:01:34,200 --> 00:01:36,750 Speaker 2: from early in February when they did hike and they 28 00:01:36,750 --> 00:01:38,850 Speaker 2: were all hawkish, yep, they were all hawkish in the 29 00:01:38,850 --> 00:01:42,780 Speaker 2: minutes to no surprises there. They did signal some of 30 00:01:42,780 --> 00:01:46,590 Speaker 2: the hints of slowing in the economy and global inflation 31 00:01:46,590 --> 00:01:50,040 Speaker 2: pressures are coming off, but, and it's a really important but, it was 32 00:01:50,610 --> 00:01:53,700 Speaker 2: not a trajectory for a quick return to the inflation 33 00:01:53,700 --> 00:01:55,230 Speaker 2: target, and that's why they were hawkish. 34 00:01:55,650 --> 00:01:59,160 Speaker 1: Okay. Main event this week, where do we start? Well, 35 00:01:59,160 --> 00:02:01,080 Speaker 1: I suppose the big one is GDP, that's where we 36 00:02:01,080 --> 00:02:01,650 Speaker 1: better start. 37 00:02:02,160 --> 00:02:05,790 Speaker 2: The big one is GDP for the December quarter, and 38 00:02:05,790 --> 00:02:08,220 Speaker 2: we've got quite a few of the building blocks now 39 00:02:08,220 --> 00:02:13,560 Speaker 2: for that. The consensus seems to be around 0. 8% quarter- on- 40 00:02:13,560 --> 00:02:19,139 Speaker 2: quarter increase, annual about 2. 8%. So the economy is still 41 00:02:19,139 --> 00:02:22,560 Speaker 2: growing but not super strong. It marks a bit of 42 00:02:22,560 --> 00:02:25,230 Speaker 2: a deceleration from where we were, say, in the middle 43 00:02:25,230 --> 00:02:29,669 Speaker 2: of 2022. So that's going to be an important number 44 00:02:29,669 --> 00:02:32,639 Speaker 2: that feeds into the assessment of just how the economy 45 00:02:32,940 --> 00:02:37,410 Speaker 2: ended 2022 and whether there's any concerns that it's still 46 00:02:37,410 --> 00:02:41,370 Speaker 2: too strong, or conversely, perhaps it's weakening a little bit 47 00:02:41,370 --> 00:02:44,550 Speaker 2: more than we're all thinking. As always, even though it's 48 00:02:44,550 --> 00:02:47,220 Speaker 2: a bit of a well retrospective view of the economy, 49 00:02:47,280 --> 00:02:50,010 Speaker 2: December quarter data, and here we are... well, it's soon 50 00:02:50,010 --> 00:02:53,220 Speaker 2: to be in March, we've got this particular position where 51 00:02:53,400 --> 00:02:55,200 Speaker 2: we wanted to see where the economy was. 52 00:02:55,710 --> 00:02:59,970 Speaker 1: Okay. So that's where it was. We do have more up- to- 53 00:02:59,970 --> 00:03:04,800 Speaker 1: date information coming out, albeit January, but still just how 54 00:03:04,800 --> 00:03:08,910 Speaker 1: the economy tipped into this year. What I think has 55 00:03:08,910 --> 00:03:13,290 Speaker 1: been interesting from some of the earnings season information is 56 00:03:13,290 --> 00:03:15,600 Speaker 1: that definitely the end of last year was pretty good, 57 00:03:15,840 --> 00:03:18,150 Speaker 1: but there have been a bunch of retailers coming out 58 00:03:18,270 --> 00:03:22,050 Speaker 1: saying 2023 hasn't been so strong. And we do get 59 00:03:22,050 --> 00:03:23,130 Speaker 1: retail sales this week. 60 00:03:23,700 --> 00:03:27,330 Speaker 2: And the retail sales numbers are for January. At the 61 00:03:27,330 --> 00:03:31,320 Speaker 2: end of last year, the November and December numbers were 62 00:03:31,320 --> 00:03:33,389 Speaker 2: a little bit choppy. I think there's still an issue 63 00:03:33,389 --> 00:03:37,290 Speaker 2: about how the Bureau of Statistics seasonally adjust the bring- 64 00:03:37,290 --> 00:03:40,080 Speaker 2: forward with spending into the Black Friday sales, which of 65 00:03:40,080 --> 00:03:44,160 Speaker 2: course fall in November. So November was strong, December was 66 00:03:44,160 --> 00:03:47,580 Speaker 2: weak according to the Bureau of Statistics. That was perhaps 67 00:03:47,580 --> 00:03:50,250 Speaker 2: more of a quirk, so we'll actually get some flesh 68 00:03:50,250 --> 00:03:52,050 Speaker 2: on the bones, if you like, on whether that was 69 00:03:52,050 --> 00:03:56,400 Speaker 2: a genuine slowing and down trending consumer spending with these 70 00:03:56,400 --> 00:03:59,340 Speaker 2: January numbers. But as you alluded to, and as we 71 00:03:59,340 --> 00:04:02,820 Speaker 2: know from indicators like consumer sentiment, which is really, really 72 00:04:02,820 --> 00:04:05,760 Speaker 2: weak, that we are probably going to get some soft 73 00:04:05,760 --> 00:04:09,030 Speaker 2: result. I think the market after the minus 3. 9% 74 00:04:09,270 --> 00:04:12,150 Speaker 2: in December is looking for actually a small positive result. 75 00:04:12,390 --> 00:04:15,060 Speaker 2: But that probably will not be enough to change the 76 00:04:15,060 --> 00:04:20,520 Speaker 2: trend towards a general deceleration in the amount of money that you know and I 77 00:04:20,520 --> 00:04:23,640 Speaker 2: and all consumers are spending in the retail sector right now. 78 00:04:24,000 --> 00:04:26,430 Speaker 1: Okay. House prices, so it's the end of the month, 79 00:04:26,430 --> 00:04:29,729 Speaker 1: so we get the CoreLogic house price figures. We also get home 80 00:04:29,730 --> 00:04:34,200 Speaker 1: loan data and building approvals data. What's going on there? Stephen, 81 00:04:34,410 --> 00:04:37,440 Speaker 1: when is the value of my house going to stop falling? 82 00:04:38,010 --> 00:04:41,549 Speaker 2: Sean, I hope you're sitting down because we from the 83 00:04:41,550 --> 00:04:46,470 Speaker 2: high frequency CoreLogic numbers up to now, and we've got 84 00:04:46,470 --> 00:04:48,210 Speaker 2: a day or two to go before we actually get 85 00:04:48,210 --> 00:04:52,140 Speaker 2: the full February numbers, but in Sydney, guess what happened 86 00:04:52,140 --> 00:04:55,950 Speaker 2: in February? Prices stopped falling. They may even edge up 87 00:04:56,130 --> 00:04:59,070 Speaker 2: a smidge. Now, don't get excited about one month number 88 00:04:59,339 --> 00:05:04,860 Speaker 2: with a plus 0.1 or plus 0. 2%. But after eight or nine 89 00:05:04,950 --> 00:05:08,520 Speaker 2: unrelenting months where we were seeing large falls in house 90 00:05:08,520 --> 00:05:11,909 Speaker 2: prices with Sydney being the epicenter of the weakness, it 91 00:05:11,910 --> 00:05:15,599 Speaker 2: could actually spark some discussion about whether we've seen the 92 00:05:15,600 --> 00:05:19,260 Speaker 2: low point in house prices. When we look at the Australia- 93 00:05:19,260 --> 00:05:22,230 Speaker 2: wide numbers, of course, the capital cities and the regional 94 00:05:22,230 --> 00:05:24,510 Speaker 2: areas, it's probably going to be a small fall. And 95 00:05:24,510 --> 00:05:26,580 Speaker 2: by that I mean minus 0. 1 or minus 0. 96 00:05:26,850 --> 00:05:31,080 Speaker 2: 2 only. The reasons for that, well, it's clearly on 97 00:05:31,080 --> 00:05:34,380 Speaker 2: interest rates. I think it boils down to the fact 98 00:05:34,380 --> 00:05:37,380 Speaker 2: that our borders have reopened. Westpac put out a wonderful 99 00:05:37,380 --> 00:05:44,039 Speaker 2: research piece last week showing how immigration was 400, 000 in 100 00:05:44,040 --> 00:05:46,860 Speaker 2: 2022. Those people had to live somewhere. We know the 101 00:05:46,860 --> 00:05:49,919 Speaker 2: rental market's tight, and maybe that's spilling over into house 102 00:05:49,920 --> 00:05:55,140 Speaker 2: purchase. So there's this discussion about whether demand from this 103 00:05:55,140 --> 00:05:58,260 Speaker 2: incredible growth in population is going to be enough to 104 00:05:58,260 --> 00:06:01,620 Speaker 2: offset the higher interest rates and that people are stepping 105 00:06:01,620 --> 00:06:05,099 Speaker 2: back and stepping into the market. Fascinating to see. 106 00:06:05,550 --> 00:06:07,289 Speaker 1: Yeah. One final one, just want to mention, I mean 107 00:06:07,290 --> 00:06:09,630 Speaker 1: it's the monthly number, but it's the monthly inflation figure, 108 00:06:09,630 --> 00:06:14,370 Speaker 1: the CPI figure, which nowadays is incredibly important. Is it 109 00:06:14,370 --> 00:06:17,820 Speaker 1: amazing that such a young number could be so influential 110 00:06:17,820 --> 00:06:18,419 Speaker 1: so soon? 111 00:06:18,690 --> 00:06:22,410 Speaker 2: Well, the three things on everyone's agenda as we kick 112 00:06:22,410 --> 00:06:27,029 Speaker 2: off 2023 is inflation, inflation, and inflation. No, you get that right, you get the 113 00:06:27,029 --> 00:06:29,880 Speaker 2: forecast right or the central banks, it can achieve their 114 00:06:29,880 --> 00:06:32,460 Speaker 2: targets a little more quickly than we're currently thinking then 115 00:06:32,460 --> 00:06:35,580 Speaker 2: I think we can be a little more confident that 116 00:06:35,580 --> 00:06:38,099 Speaker 2: the economy will be on an even keel and things 117 00:06:38,100 --> 00:06:39,779 Speaker 2: like stock markets will be doing a little bit better. 118 00:06:40,560 --> 00:06:42,990 Speaker 2: So hard to forecast the monthly number. I think it's 119 00:06:42,990 --> 00:06:44,369 Speaker 2: one of those ones where we'll just look at it 120 00:06:44,370 --> 00:06:46,950 Speaker 2: rather than try to forecast it. But we do know that 121 00:06:46,950 --> 00:06:49,739 Speaker 2: for the month of December, the annual increase was at 122 00:06:49,860 --> 00:06:54,539 Speaker 2: 8.4%, so that was a super strong increase. Again, that's 123 00:06:54,540 --> 00:06:57,089 Speaker 2: one of the reasons why the RBA flicked the switch 124 00:06:57,089 --> 00:07:00,870 Speaker 2: to hawkishness in February. I think the current consensus is 125 00:07:00,870 --> 00:07:02,429 Speaker 2: that we're going to get a little bit of a 126 00:07:02,430 --> 00:07:06,480 Speaker 2: pullback, perhaps to about 7. 9 or 8% on the 127 00:07:06,480 --> 00:07:10,290 Speaker 2: basis that January last year was a supersized increase of 0. 128 00:07:10,650 --> 00:07:12,690 Speaker 2: 8. So that drops out of your run rate. So 129 00:07:12,690 --> 00:07:16,080 Speaker 2: if we get a 0. 3 or a 0.4, you're going to be edging 130 00:07:16,080 --> 00:07:19,560 Speaker 2: back to 8%. Look, inflation's not leaked, it's not beaten, 131 00:07:20,010 --> 00:07:22,350 Speaker 2: but we want to see the early signs of that 132 00:07:22,350 --> 00:07:23,460 Speaker 2: turning point coming through. 133 00:07:24,030 --> 00:07:27,300 Speaker 1: Stephen, enjoy this very, very big week for you economists 134 00:07:27,300 --> 00:07:27,780 Speaker 1: out there. 135 00:07:27,930 --> 00:07:31,111 Speaker 2: Yes, when too much data isn't enough. I love it. I love it. 136 00:07:31,111 --> 00:07:34,740 Speaker 1: Exactly. That was economist Stephen Koukoulas, better known as the The 137 00:07:34,740 --> 00:07:37,200 Speaker 1: Kouk, T- H- E- K- O- U- K. You can 138 00:07:37,200 --> 00:07:39,930 Speaker 1: find him at thekouk. com, and follow him on Twitter 139 00:07:39,930 --> 00:07:42,810 Speaker 1: using the handle TheKouk. I'm Sean Aylmer, and this is Fear 140 00:07:42,810 --> 00:07:43,770 Speaker 1: and Greed - The Week Ahead.