1 00:00:08,660 --> 00:00:11,340 Sean Aylmer: Welcome to Fear and Greed - The Week Ahead. This is where 2 00:00:11,340 --> 00:00:13,080 Sean Aylmer: we take a look at the big events, reports and 3 00:00:13,080 --> 00:00:16,010 Sean Aylmer: releases coming up this week that give insight into the economy, 4 00:00:16,340 --> 00:00:18,650 Sean Aylmer: and a look back at what happened last week too. I'm 5 00:00:18,650 --> 00:00:20,560 Sean Aylmer: Sean Aylmer, and every Monday I'm joined for The Week 6 00:00:20,560 --> 00:00:26,909 Sean Aylmer: Ahead by economist Stephen Koukoulas. You'll find him at the thekouk. com, T- H- E- K- O- U- K, thekouk. com, 7 00:00:27,200 --> 00:00:30,760 Sean Aylmer: and on Twitter using the handle @TheKouk. Hello Stephen, how 8 00:00:30,760 --> 00:00:31,040 Sean Aylmer: are you? 9 00:00:31,740 --> 00:00:33,820 Stephen Koukoulas: I'm tired. Getting towards the end of the year, but 10 00:00:33,820 --> 00:00:34,470 Stephen Koukoulas: I'm well. 11 00:00:34,860 --> 00:00:37,519 Sean Aylmer: Good, good. You would've been pretty exhausted by the end 12 00:00:37,520 --> 00:00:40,470 Sean Aylmer: of last week. It was quite the week for the economists. 13 00:00:40,880 --> 00:00:44,019 Stephen Koukoulas: So much information, yeah. The market gyrations too, as we 14 00:00:44,020 --> 00:00:47,990 Stephen Koukoulas: got the news or otherwise of this new variant of 15 00:00:48,060 --> 00:00:51,920 Stephen Koukoulas: the coronavirus coming through, so it was a combination of 16 00:00:51,920 --> 00:00:56,840 Stephen Koukoulas: that market volatility, which was unbelievable. There were huge gyrations 17 00:00:56,840 --> 00:01:00,160 Stephen Koukoulas: in the stock market and bond prices, in the currency markets, 18 00:01:00,160 --> 00:01:03,850 Stephen Koukoulas: and then we had the GDP numbers for the September quarter, 19 00:01:03,850 --> 00:01:06,920 Stephen Koukoulas: which I think surprised just about everybody, that they weren't 20 00:01:07,319 --> 00:01:10,040 Stephen Koukoulas: as bad as feared. It sounds a bit funny when 21 00:01:10,040 --> 00:01:12,300 Stephen Koukoulas: you rejoice at a GDP figure of minus 1. 9%- 22 00:01:12,300 --> 00:01:13,002 Sean Aylmer: Sure (inaudible) . 23 00:01:13,002 --> 00:01:15,810 Stephen Koukoulas: ... in a quarter. It was a big fall in GDP, there's 24 00:01:15,810 --> 00:01:18,839 Stephen Koukoulas: no denying, but given that we know that it was 25 00:01:18,840 --> 00:01:22,650 Stephen Koukoulas: going to be happening, why it occurred, the lockdowns obviously, and 26 00:01:22,650 --> 00:01:24,690 Stephen Koukoulas: the fact that people in New South Wales, Victoria and 27 00:01:24,690 --> 00:01:27,470 Stephen Koukoulas: the ACT couldn't get out and spend much, we were 28 00:01:27,470 --> 00:01:30,649 Stephen Koukoulas: fearing a number a good deal worse, so in a 29 00:01:30,650 --> 00:01:33,990 Stephen Koukoulas: sense, when it came out at minus 1. 9, and 30 00:01:33,990 --> 00:01:36,250 Stephen Koukoulas: given that we know that the economy is already recovering 31 00:01:36,250 --> 00:01:38,310 Stephen Koukoulas: into the December quarter, the one that began on the 1st 32 00:01:38,350 --> 00:01:41,559 Stephen Koukoulas: of October, that it wasn't a bad result. 33 00:01:41,870 --> 00:01:45,640 Sean Aylmer: Yeah. Just seems that people this last lockdown, they've learned 34 00:01:45,640 --> 00:01:47,440 Sean Aylmer: to live with lockdowns a lot better than they did 35 00:01:47,440 --> 00:01:48,160 Sean Aylmer: in 2020. 36 00:01:48,780 --> 00:01:51,690 Stephen Koukoulas: Yes, and I think the vaccination rates are clearly helping and 37 00:01:51,990 --> 00:01:55,150 Stephen Koukoulas: the fact that, well at least in Australia, the consequences 38 00:01:55,150 --> 00:01:57,690 Stephen Koukoulas: of getting the virus aren't quite as bad, whereas in 39 00:01:57,690 --> 00:01:59,680 Stephen Koukoulas: 2020 I think we were all very nervous about what 40 00:01:59,680 --> 00:02:02,230 Stephen Koukoulas: it might mean. I'm not saying it's good, but people 41 00:02:02,230 --> 00:02:04,440 Stephen Koukoulas: are pretty much of the view now that, " Yes, we'll 42 00:02:04,440 --> 00:02:06,510 Stephen Koukoulas: lock down, we'll hold back our spending, and then when 43 00:02:06,510 --> 00:02:09,850 Stephen Koukoulas: the virus is contained and the authorities open up again, 44 00:02:09,889 --> 00:02:12,240 Stephen Koukoulas: we go out and spend." That certainly seems to be 45 00:02:12,240 --> 00:02:15,919 Stephen Koukoulas: the case, so yeah, we're coping with how to deal 46 00:02:15,919 --> 00:02:19,770 Stephen Koukoulas: with little hotspots or little outbreaks of this rotten virus. 47 00:02:20,010 --> 00:02:22,270 Sean Aylmer: House price figures are out last week for November as 48 00:02:22,270 --> 00:02:25,350 Sean Aylmer: well. They're still growing, but slowing in terms of the 49 00:02:25,350 --> 00:02:25,460 Sean Aylmer: growth rate. 50 00:02:25,860 --> 00:02:28,590 Stephen Koukoulas: Yep. The house prices growing but slowing, I think that's 51 00:02:28,590 --> 00:02:31,910 Stephen Koukoulas: a good summary, because what we did see house prices 52 00:02:31,910 --> 00:02:34,010 Stephen Koukoulas: up just a little bit over 1% in the month, 53 00:02:34,010 --> 00:02:36,470 Stephen Koukoulas: and look, we had a bit of a divergence from 54 00:02:36,470 --> 00:02:39,600 Stephen Koukoulas: capital city to capital city. Brisbane and Adelaide were the 55 00:02:39,600 --> 00:02:43,930 Stephen Koukoulas: boom cities. They're increasing two and a half to 3% month- on- 56 00:02:43,970 --> 00:02:47,590 Stephen Koukoulas: month. Sydney's cooling, goodness me, if that's the right word, 57 00:02:47,590 --> 00:02:51,169 Stephen Koukoulas: to just under 1%. Melbourne was a little bit weaker, so 58 00:02:51,169 --> 00:02:53,020 Stephen Koukoulas: in a sense I think what we are seeing is 59 00:02:53,320 --> 00:02:56,720 Stephen Koukoulas: in broad terms, just the start of perhaps a bit 60 00:02:56,720 --> 00:02:59,780 Stephen Koukoulas: of a cooling in this house price boom. Regional areas 61 00:02:59,780 --> 00:03:02,389 Stephen Koukoulas: are still growing very strongly. I suspect that's because they 62 00:03:02,389 --> 00:03:04,430 Stephen Koukoulas: were cheap and a lot of city slickers all cashed 63 00:03:04,430 --> 00:03:07,160 Stephen Koukoulas: up are looking to buy in these regional cities and 64 00:03:07,160 --> 00:03:11,770 Stephen Koukoulas: towns. Look, the housing market's still pretty buoyant, but as 65 00:03:11,770 --> 00:03:14,540 Stephen Koukoulas: we also saw with some of the lending data for 66 00:03:14,540 --> 00:03:17,330 Stephen Koukoulas: housing, that there's a bit of a cooling coming off. 67 00:03:17,570 --> 00:03:19,490 Stephen Koukoulas: It's not a decline, don't get me wrong, but it's 68 00:03:19,790 --> 00:03:21,320 Stephen Koukoulas: just the rate of growth is slowing. 69 00:03:21,680 --> 00:03:23,620 Sean Aylmer: Well, that's last week. We'll be back in a moment 70 00:03:23,790 --> 00:03:24,900 Sean Aylmer: and get into the week ahead. 71 00:03:29,940 --> 00:03:34,240 Sean Aylmer: I'm with economist Stephen Koukoulas, aka TheKouk. Stephen, big week, 72 00:03:34,470 --> 00:03:36,880 Sean Aylmer: of course the highlight being tomorrow's board meeting from the 73 00:03:36,880 --> 00:03:37,510 Sean Aylmer: Reserve Bank. 74 00:03:37,960 --> 00:03:40,500 Stephen Koukoulas: Yeah, tomorrow the RBA board meeting, and it's their last 75 00:03:40,500 --> 00:03:43,460 Stephen Koukoulas: meeting until February. They don't meet in January, so in 76 00:03:43,460 --> 00:03:47,300 Stephen Koukoulas: a sense it's an opportunity for them to recast some 77 00:03:47,300 --> 00:03:50,010 Stephen Koukoulas: of their thoughts on the economy. They're unlikely to do 78 00:03:50,370 --> 00:03:54,240 Stephen Koukoulas: anything much in terms of a policy stance. The buying 79 00:03:54,240 --> 00:03:56,580 Stephen Koukoulas: of bonds will still be there. They might signal that 80 00:03:56,580 --> 00:04:01,590 Stephen Koukoulas: February they'll end it. They're probably unlikely to be using 81 00:04:01,590 --> 00:04:04,070 Stephen Koukoulas: the meeting tomorrow to say that rates are going to 82 00:04:04,070 --> 00:04:07,300 Stephen Koukoulas: be brought forward from the 2024 rate hiking scenario that 83 00:04:07,300 --> 00:04:09,560 Stephen Koukoulas: they've got in place at the moment, but they've got 84 00:04:09,560 --> 00:04:12,730 Stephen Koukoulas: to acknowledge that even in the US, FED chairperson Powell 85 00:04:12,730 --> 00:04:15,620 Stephen Koukoulas: have acknowledged that inflation is no longer just a transitory issue, 86 00:04:15,670 --> 00:04:18,589 Stephen Koukoulas: it seems to be a little bit more entrenched, so I 87 00:04:18,589 --> 00:04:21,339 Stephen Koukoulas: think they've just got to continue to soften up for 88 00:04:21,339 --> 00:04:24,850 Stephen Koukoulas: the possibility at least that maybe the economy's a little 89 00:04:24,850 --> 00:04:27,300 Stephen Koukoulas: bit stronger than they feared. Maybe it's a little bit 90 00:04:27,300 --> 00:04:30,050 Stephen Koukoulas: prone to some inflation risks, and if that isn't the 91 00:04:30,050 --> 00:04:33,159 Stephen Koukoulas: case then they'll be pragmatic, I suppose, is the word, 92 00:04:33,160 --> 00:04:35,760 Stephen Koukoulas: and look to hike earlier than they're currently thinking. Look, 93 00:04:35,940 --> 00:04:38,020 Stephen Koukoulas: always interesting to see what they've got to say about the 94 00:04:38,020 --> 00:04:41,430 Stephen Koukoulas: economy on wages, on the labour market and these sorts of issues, 95 00:04:41,430 --> 00:04:43,770 Stephen Koukoulas: but for the moment it'll probably go pretty much through 96 00:04:43,770 --> 00:04:46,210 Stephen Koukoulas: to the keeper, and we'll revisit everything when we all 97 00:04:46,210 --> 00:04:47,640 Stephen Koukoulas: convene in early February. 98 00:04:48,000 --> 00:04:50,480 Sean Aylmer: Mind you, we will hear from Philip Lowe, the Governor 99 00:04:50,480 --> 00:04:52,070 Sean Aylmer: of the Reserve Bank, so maybe he'll have a little 100 00:04:52,070 --> 00:04:52,650 Sean Aylmer: more to say. 101 00:04:52,960 --> 00:04:55,380 Stephen Koukoulas: Yeah, and the last few months in fact, he's been a 102 00:04:55,380 --> 00:04:58,270 Stephen Koukoulas: lot more open, is my observation, having looked at RBA 103 00:04:58,270 --> 00:05:01,010 Stephen Koukoulas: speeches and the written word, but when he does have 104 00:05:01,010 --> 00:05:03,150 Stephen Koukoulas: a speech and when he's subjected to some Q and 105 00:05:03,150 --> 00:05:05,380 Stephen Koukoulas: A, which of course he's very, very happy to engage 106 00:05:05,380 --> 00:05:09,090 Stephen Koukoulas: in, he's really candid and I think he's acknowledging that... 107 00:05:09,200 --> 00:05:11,450 Stephen Koukoulas: and this is of course a very true issue, it's 108 00:05:11,450 --> 00:05:14,220 Stephen Koukoulas: really hard to read the economy during these lockdowns and 109 00:05:14,240 --> 00:05:17,909 Stephen Koukoulas: with the coronavirus and its various forms coming through right 110 00:05:17,910 --> 00:05:20,610 Stephen Koukoulas: now, and so in a sense, and it's alluded to what 111 00:05:20,610 --> 00:05:24,409 Stephen Koukoulas: we're saying just before, that a minus 1.9 GDP result is considered 112 00:05:24,410 --> 00:05:25,140 Stephen Koukoulas: to be pretty good. 113 00:05:25,640 --> 00:05:25,880 Sean Aylmer: Yeah. 114 00:05:25,970 --> 00:05:29,270 Stephen Koukoulas: It's because the volatility in the hard data on the 115 00:05:29,270 --> 00:05:32,510 Stephen Koukoulas: economy is so extreme and it's so hard to read 116 00:05:32,510 --> 00:05:35,469 Stephen Koukoulas: the economy, so he's been really, really candid, so maybe 117 00:05:35,470 --> 00:05:38,300 Stephen Koukoulas: he'll just flag the possibility that, hey, if we get 118 00:05:38,300 --> 00:05:40,720 Stephen Koukoulas: through to the middle of next year, the economy's recovered, 119 00:05:40,720 --> 00:05:44,240 Stephen Koukoulas: there's no more variants of the virus, he may look 120 00:05:44,240 --> 00:05:46,909 Stephen Koukoulas: to be bringing forward that timing of the first rate hike. 121 00:05:47,490 --> 00:05:50,200 Sean Aylmer: It brings the point, Philip Lowe is a lot more 122 00:05:50,200 --> 00:05:53,589 Sean Aylmer: candid than his predecessor Glenn Stevens, and I'm sure you know 123 00:05:53,589 --> 00:05:57,140 Sean Aylmer: them both. Glenn is certainly a lot more circumspect or 124 00:05:57,140 --> 00:05:59,680 Sean Aylmer: introverted. He's going to be chair of Macquarie Bank, which 125 00:05:59,680 --> 00:06:02,260 Sean Aylmer: I actually found quite surprising, shall we say- 126 00:06:02,470 --> 00:06:02,471 Stephen Koukoulas: Yeah. 127 00:06:02,471 --> 00:06:06,170 Sean Aylmer: ... because Macquarie is not an introverted organisation, but Glenn 128 00:06:06,170 --> 00:06:08,659 Sean Aylmer: Stevens is certainly a quieter guy. Phil Lowe is a 129 00:06:08,660 --> 00:06:10,010 Sean Aylmer: lot louder, would you agree? 130 00:06:10,270 --> 00:06:13,870 Stephen Koukoulas: He is, and Phil... I think in the early years pre 131 00:06:13,870 --> 00:06:17,310 Stephen Koukoulas: COVID, Phil was what I'd classify very much a textbook 132 00:06:17,380 --> 00:06:21,800 Stephen Koukoulas: central banker. He relied heavily on his models, he relied 133 00:06:21,800 --> 00:06:25,010 Stephen Koukoulas: heavily on the forecasts, and arguably if we look back 134 00:06:25,010 --> 00:06:26,580 Stephen Koukoulas: to that period, it was one reason why they didn't 135 00:06:26,580 --> 00:06:28,839 Stephen Koukoulas: cut, even though rates were low, they didn't cut back 136 00:06:28,839 --> 00:06:33,790 Stephen Koukoulas: in 2018, '19, even though inflation was below their target, 137 00:06:33,790 --> 00:06:35,950 Stephen Koukoulas: where other central banks did, because he was looking at 138 00:06:35,950 --> 00:06:39,580 Stephen Koukoulas: the academic side of central banking, but then along came 139 00:06:39,990 --> 00:06:42,180 Stephen Koukoulas: the virus and he changed, and I think with that 140 00:06:42,180 --> 00:06:44,279 Stephen Koukoulas: he became, as we were just saying, a lot more 141 00:06:44,279 --> 00:06:47,860 Stephen Koukoulas: open, a lot more open to ideas and discussion and 142 00:06:47,860 --> 00:06:49,900 Stephen Koukoulas: frankly, scenarios, and I think that's a good thing. 143 00:06:51,000 --> 00:06:52,820 Sean Aylmer: The other data that we should just mention this week, job vacancies. 144 00:06:52,820 --> 00:06:56,710 Sean Aylmer: Obviously the employment market and wages is critical to interest rates. 145 00:06:57,400 --> 00:07:00,339 Stephen Koukoulas: It is, and the various indicators that we've got on 146 00:07:00,339 --> 00:07:03,670 Stephen Koukoulas: job vacancies have been that they're trending higher, even during 147 00:07:03,670 --> 00:07:06,309 Stephen Koukoulas: the lockdowns. The falls were very moderate, and since the 148 00:07:06,310 --> 00:07:08,799 Stephen Koukoulas: lockdowns have ended we've got some evidence from some of 149 00:07:08,800 --> 00:07:11,300 Stephen Koukoulas: the other vacancy series that they're coming back, so demand 150 00:07:11,300 --> 00:07:13,710 Stephen Koukoulas: for labour is running red hot. I don't think there's 151 00:07:13,710 --> 00:07:16,820 Stephen Koukoulas: much doubt that when we finally get the labour force 152 00:07:16,820 --> 00:07:19,960 Stephen Koukoulas: data reflecting what's happening in the post- lockdown economy, we'll 153 00:07:19,960 --> 00:07:23,140 Stephen Koukoulas: be seeing an unemployment rate back into the mid -fours, 154 00:07:23,140 --> 00:07:25,550 Stephen Koukoulas: something like that, and if these job vacancies numbers are 155 00:07:25,550 --> 00:07:29,060 Stephen Koukoulas: very strong, that'll be entirely consistent with a sharp improvement 156 00:07:29,060 --> 00:07:29,880 Stephen Koukoulas: in the labour market. 157 00:07:30,130 --> 00:07:31,140 Sean Aylmer: Have a great week, Stephen. 158 00:07:31,340 --> 00:07:32,270 Stephen Koukoulas: Thank you Sean, you too. 159 00:07:32,420 --> 00:07:35,130 Sean Aylmer: That was economist Stephen Koukoulas, better known as TheKouk. You 160 00:07:35,130 --> 00:07:37,330 Sean Aylmer: can find him at thekouk. com and follow him on 161 00:07:37,330 --> 00:07:40,690 Sean Aylmer: Twitter using the handle TheKouk. I'm Sean Aylmer, and this 162 00:07:40,690 --> 00:07:42,210 Sean Aylmer: is Fear and Greed - The Week Ahead.