1 00:00:05,280 --> 00:00:07,920 Michael Thompson: Welcome to Fear and Greed the Week Ahead. I'm Michael Thompson, 2 00:00:08,000 --> 00:00:10,280 Michael Thompson: and as always at this time on a Monday morning, 3 00:00:10,280 --> 00:00:13,160 Michael Thompson: we are joined by economist Stephen Coucoulis. You'll find him 4 00:00:13,200 --> 00:00:15,760 Michael Thompson: at the kouk dot com and on x using the 5 00:00:15,840 --> 00:00:20,680 Michael Thompson: handle the kuok a prolific tweeter or xer or whatever 6 00:00:20,720 --> 00:00:23,680 Michael Thompson: you call it these days. Hllo, Stephen, Good morning, Michael. 7 00:00:24,840 --> 00:00:28,200 Michael Thompson: Big week, last week, massive week. This week. Let's start 8 00:00:28,240 --> 00:00:30,480 Michael Thompson: with last week, because it kind of sets the scene, 9 00:00:30,480 --> 00:00:33,960 Michael Thompson: doesn't it, for what's happening this week. Wages Wage price index. 10 00:00:34,000 --> 00:00:34,600 Michael Thompson: What happened? 11 00:00:35,120 --> 00:00:37,680 Stephen Koukoulas: Yeah, Look, it was sort of in the groove. Number. 12 00:00:37,720 --> 00:00:40,640 Stephen Koukoulas: It came in about one tenth above market expectations, but 13 00:00:40,680 --> 00:00:43,040 Stephen Koukoulas: in the scheme of things, that one tenth was neither 14 00:00:43,159 --> 00:00:46,720 Stephen Koukoulas: he nor there because it was driven by a number 15 00:00:46,760 --> 00:00:50,000 Stephen Koukoulas: of award wage increases in the public sector, in the 16 00:00:50,080 --> 00:00:54,400 Stephen Koukoulas: nursing profession and the healthcare workers, and so private sector 17 00:00:54,400 --> 00:00:56,680 Stephen Koukoulas: wages were a little bit softer, and of course they 18 00:00:56,720 --> 00:00:59,320 Stephen Koukoulas: are the ones that are influencing the inflation rate, so 19 00:01:00,200 --> 00:01:03,960 Stephen Koukoulas: that there is a link between wages growth and services prices. 20 00:01:04,319 --> 00:01:08,120 Stephen Koukoulas: That number was quite benign, so pretty much on target. 21 00:01:08,160 --> 00:01:11,479 Stephen Koukoulas: So in annual terms, private sector wages three point three percent, 22 00:01:11,920 --> 00:01:15,720 Stephen Koukoulas: total wages three point four percent, so one tenth difference there, 23 00:01:15,959 --> 00:01:18,320 Stephen Koukoulas: and just sort of suggesting that the labor market dre 24 00:01:18,360 --> 00:01:20,840 Stephen Koukoulas: I say it again, the goldilocks, not too hot, not 25 00:01:20,880 --> 00:01:23,760 Stephen Koukoulas: too cold, but just right. So I think when the 26 00:01:23,840 --> 00:01:26,000 Stephen Koukoulas: RBA sit back and look at the wages side of 27 00:01:26,000 --> 00:01:28,119 Stephen Koukoulas: the labor market, they're going to thinking, yeah, this is 28 00:01:28,200 --> 00:01:29,440 Stephen Koukoulas: this is pretty good. Pretty good. 29 00:01:29,560 --> 00:01:32,080 Michael Thompson: And considering those wage rises that you were talking about, 30 00:01:32,360 --> 00:01:35,880 Michael Thompson: they were ordered by the Fair Work Commission, it's fairly 31 00:01:35,880 --> 00:01:36,960 Michael Thompson: expected then, right. 32 00:01:36,880 --> 00:01:40,720 Stephen Koukoulas: Pretty much expected, and they're not the sort of wage 33 00:01:40,760 --> 00:01:43,560 Stephen Koukoulas: increase that's going to be inflationary because and they're the 34 00:01:43,560 --> 00:01:46,440 Stephen Koukoulas: ones that the labour government gave in the prior term, 35 00:01:46,720 --> 00:01:49,920 Stephen Koukoulas: promised to give a lot of female dominated industries to 36 00:01:49,960 --> 00:01:52,000 Stephen Koukoulas: sort of close the gender pay gap, to give a 37 00:01:52,040 --> 00:01:54,040 Stephen Koukoulas: fair and decent wage for these people who do a 38 00:01:54,120 --> 00:01:57,120 Stephen Koukoulas: really hard job. Until recently we're on rotten pay to 39 00:01:57,200 --> 00:01:58,920 Stephen Koukoulas: be frank. So it was one of these sort of 40 00:01:58,920 --> 00:02:02,640 Stephen Koukoulas: ones where here's a clear market failure, a really important 41 00:02:02,640 --> 00:02:05,960 Stephen Koukoulas: part of the economy getting rotten wages. Let's go through 42 00:02:05,960 --> 00:02:08,400 Stephen Koukoulas: the Fairwork Commission and give a decent sort of wage increase. 43 00:02:08,440 --> 00:02:10,840 Stephen Koukoulas: So over the course of the last eighteen months or so, 44 00:02:10,840 --> 00:02:13,280 Stephen Koukoulas: some of these wage increases have actually come through, including 45 00:02:13,320 --> 00:02:14,840 Stephen Koukoulas: with the March quarter data last week. 46 00:02:15,120 --> 00:02:17,320 Michael Thompson: It's not very often that I do the week ahead 47 00:02:17,320 --> 00:02:19,400 Michael Thompson: with you, Stephen, and so now that I'm doing it, 48 00:02:19,440 --> 00:02:21,280 Michael Thompson: I'm going to make the most of the opportunity that 49 00:02:21,320 --> 00:02:23,880 Michael Thompson: I have to ask you all of these questions. I 50 00:02:23,919 --> 00:02:27,000 Michael Thompson: was reading some commentary around this last week and around 51 00:02:27,000 --> 00:02:32,320 Michael Thompson: these these wage increases and economists saying that these rises 52 00:02:32,520 --> 00:02:36,400 Michael Thompson: aren't really able to be sustained without improvements in productivity 53 00:02:36,760 --> 00:02:38,640 Michael Thompson: along with it. Can you explain that one for me? 54 00:02:39,120 --> 00:02:41,600 Stephen Koukoulas: Yeah, Look, with the inflation, So let's start with the 55 00:02:41,600 --> 00:02:46,360 Stephen Koukoulas: inflation target two and a half percent, So the rule 56 00:02:46,400 --> 00:02:49,320 Stephen Koukoulas: of thumb or the economic modeling that the RBA does 57 00:02:49,360 --> 00:02:51,519 Stephen Koukoulas: in simple terms, I'll just distill it so even I 58 00:02:51,560 --> 00:02:56,359 Stephen Koukoulas: can understand it, is that if you need productivity to 59 00:02:57,200 --> 00:02:59,880 Stephen Koukoulas: generate a sustained increase of three and a half percent 60 00:03:00,360 --> 00:03:02,920 Stephen Koukoulas: in annual wages growth, because the way that's worked out 61 00:03:02,960 --> 00:03:05,079 Stephen Koukoulas: is that you know, two and a half percent of 62 00:03:05,120 --> 00:03:07,480 Stephen Koukoulas: the three and a half percent wage increase is inflation. 63 00:03:08,240 --> 00:03:11,040 Stephen Koukoulas: That's fine. The RBA and everybody's happy with that. To 64 00:03:11,080 --> 00:03:13,640 Stephen Koukoulas: get that extra percentage point you need productivity growth to 65 00:03:13,680 --> 00:03:15,920 Stephen Koukoulas: be one percentage point two. And we know for the 66 00:03:15,960 --> 00:03:19,840 Stephen Koukoulas: past decade productivity has been rotten. It's been sort of 67 00:03:19,919 --> 00:03:22,240 Stephen Koukoulas: barely positive. It's sort of been negative and positive sort 68 00:03:22,240 --> 00:03:25,160 Stephen Koukoulas: of waved in and out of positive negative. And productivity 69 00:03:25,200 --> 00:03:28,639 Stephen Koukoulas: is producing more goods for the same amount of labor input, 70 00:03:29,080 --> 00:03:34,600 Stephen Koukoulas: so it's not necessarily working harder. It's using technology and 71 00:03:34,639 --> 00:03:38,240 Stephen Koukoulas: things to produce more outputs. So you know, compare a 72 00:03:38,280 --> 00:03:40,800 Stephen Koukoulas: pick and a shovel and a wheelbarrow versus a digger 73 00:03:40,800 --> 00:03:43,000 Stephen Koukoulas: and a truck to sort of mine I and or 74 00:03:43,040 --> 00:03:46,880 Stephen Koukoulas: for example, that's productivity. You require machinery cap x to 75 00:03:46,880 --> 00:03:48,760 Stephen Koukoulas: allow you to do that. So that's the sort of 76 00:03:48,760 --> 00:03:50,680 Stephen Koukoulas: linkage that the RBA looks at when they see this 77 00:03:50,760 --> 00:03:54,520 Stephen Koukoulas: wage number. They need that productivity to come through, and well, 78 00:03:54,920 --> 00:03:55,920 Stephen Koukoulas: let's wait and see. 79 00:03:56,280 --> 00:03:58,320 Michael Thompson: Okay. Now, the other big one last week, of course, 80 00:03:58,440 --> 00:04:00,960 Michael Thompson: was the labor for Stater a bit of a jobs, a. 81 00:04:01,000 --> 00:04:03,840 Stephen Koukoulas: Big surgeon jobs eighty nine thousand. My goodness, that was 82 00:04:03,840 --> 00:04:06,720 Stephen Koukoulas: a whopper, as they say. But the interest thing is 83 00:04:06,720 --> 00:04:09,200 Stephen Koukoulas: that the unemployment rate was steady at four point one percent, 84 00:04:09,280 --> 00:04:13,080 Stephen Koukoulas: so all those jobs didn't feed into a fall in 85 00:04:13,120 --> 00:04:16,320 Stephen Koukoulas: the unemployment rate, and basically the unemployment rate's been four 86 00:04:16,480 --> 00:04:18,680 Stephen Koukoulas: or four point one percent for the best part of 87 00:04:18,680 --> 00:04:21,159 Stephen Koukoulas: the year now and it really hasn't moved up, even 88 00:04:21,160 --> 00:04:24,440 Stephen Koukoulas: though the economy has been strong. Now this eighty nine 89 00:04:24,480 --> 00:04:27,640 Stephen Koukoulas: thousand warning warning Will Robinson, there's a couple of little 90 00:04:27,680 --> 00:04:31,880 Stephen Koukoulas: issues that are there. The previous month was impacted by 91 00:04:32,000 --> 00:04:36,400 Stephen Koukoulas: some employment results in the cyclone effect affected areas in 92 00:04:36,600 --> 00:04:39,000 Stephen Koukoulas: southern Queensland and northern New South Wales, so there was 93 00:04:39,040 --> 00:04:40,800 Stephen Koukoulas: a quirk last month and that was sort of partly 94 00:04:40,880 --> 00:04:43,839 Stephen Koukoulas: unwound this month. As the Bureau of Statistics liked to 95 00:04:43,839 --> 00:04:46,920 Stephen Koukoulas: tell us, use the trend, which puts a trend through 96 00:04:46,960 --> 00:04:49,880 Stephen Koukoulas: all of this volatility, and over the last three to 97 00:04:49,960 --> 00:04:53,520 Stephen Koukoulas: four months, the trend employment increase per month's about twenty 98 00:04:53,560 --> 00:04:58,320 Stephen Koukoulas: five thousand, So that's the nice steady rate of the 99 00:04:58,400 --> 00:05:01,160 Stephen Koukoulas: labor market numbers. One other in the labor market numbers, 100 00:05:01,480 --> 00:05:04,360 Stephen Koukoulas: the hours worked actually was dead flat in the month. 101 00:05:04,400 --> 00:05:06,840 Stephen Koukoulas: So even though they are all these jobs created, aggregate 102 00:05:06,880 --> 00:05:09,160 Stephen Koukoulas: hours work was lower, So the average work week for 103 00:05:09,640 --> 00:05:12,440 Stephen Koukoulas: the average person with the job was actually a little 104 00:05:12,440 --> 00:05:14,800 Stephen Koukoulas: bit lower. And that's saying that maybe people aren't working 105 00:05:14,800 --> 00:05:16,560 Stephen Koukoulas: as much over time, or they're being told to have 106 00:05:16,600 --> 00:05:20,320 Stephen Koukoulas: half a day off here, So there's quirkiness in these numbers. 107 00:05:21,160 --> 00:05:23,799 Michael Thompson: You are starting to sound like our friend Sean Aylmer, 108 00:05:23,920 --> 00:05:26,479 Michael Thompson: who constantly reminds me that the trend is your friend, 109 00:05:27,480 --> 00:05:29,680 Michael Thompson: and he has taught me this now over the years 110 00:05:29,720 --> 00:05:31,800 Michael Thompson: that we've been doing fear and greed. All right, So 111 00:05:32,279 --> 00:05:37,040 Michael Thompson: last week big week, obviously with wages, jobs, but it 112 00:05:37,080 --> 00:05:39,640 Michael Thompson: all feeds into this week, doesn't it, because this is 113 00:05:40,400 --> 00:05:43,400 Michael Thompson: the main game. The Reserve Bank Board meeting today and tomorrow. 114 00:05:43,600 --> 00:05:45,760 Michael Thompson: What are they going to do. 115 00:05:46,160 --> 00:05:49,200 Stephen Koukoulas: Tomorrow two thirty pm East Coast time, two thirty and 116 00:05:49,320 --> 00:05:52,560 Stephen Koukoulas: maybe one or two seconds. We'll see what they do. Now, 117 00:05:53,240 --> 00:05:56,599 Stephen Koukoulas: the market's got a twenty five point rate cut priced in, 118 00:05:56,640 --> 00:05:59,160 Stephen Koukoulas: effectively fully priced in. There's a lot odd basis point 119 00:05:59,160 --> 00:06:01,920 Stephen Koukoulas: here or there, but it's a factively priced in, notwithstanding 120 00:06:01,920 --> 00:06:03,760 Stephen Koukoulas: the sell off in US bond yields, which and the 121 00:06:04,720 --> 00:06:07,800 Stephen Koukoulas: more cautious tone from the US Federal Reserve. That's one 122 00:06:07,800 --> 00:06:10,400 Stephen Koukoulas: thing that does impact the RBA. But also some of 123 00:06:10,400 --> 00:06:13,440 Stephen Koukoulas: this local data. While the labor market numbers were and 124 00:06:13,480 --> 00:06:16,839 Stephen Koukoulas: the wages numbers were a little stronger than expected, we've 125 00:06:16,880 --> 00:06:19,720 Stephen Koukoulas: also had in recent weeks. Don't forget, we've had disappointing 126 00:06:19,760 --> 00:06:24,000 Stephen Koukoulas: household spending numbers. The actual inflation rate is lovely and low, 127 00:06:24,080 --> 00:06:26,719 Stephen Koukoulas: so we've had this confirmation that inflation's on target. So 128 00:06:27,440 --> 00:06:32,040 Stephen Koukoulas: the discussion about a twenty five point rate cut from 129 00:06:32,040 --> 00:06:34,640 Stephen Koukoulas: the RBA is all about the fact that interest rates 130 00:06:34,680 --> 00:06:38,320 Stephen Koukoulas: are still restrictive. So if the RBA did nothing, they 131 00:06:38,360 --> 00:06:41,320 Stephen Koukoulas: would still be putting downward pressure on job growth, on 132 00:06:41,520 --> 00:06:44,880 Stephen Koukoulas: economic growth, and downward pressure on inflation, which they don't 133 00:06:44,880 --> 00:06:48,000 Stephen Koukoulas: need to do anymore. So it'll be a cautious move 134 00:06:48,080 --> 00:06:51,200 Stephen Koukoulas: from our friends at the RBA. They what are trim rates, 135 00:06:51,200 --> 00:06:53,040 Stephen Koukoulas: They'll be cautious in their language. And I'm looking forward 136 00:06:53,040 --> 00:06:56,680 Stephen Koukoulas: to seeing Michelle Bullock the RBA governor's press conference afterwards. 137 00:06:56,680 --> 00:06:58,280 Stephen Koukoulas: She'll be grilled about why did you do it? Or 138 00:06:58,279 --> 00:06:59,840 Stephen Koukoulas: what are you worried about? What keeps you awake at 139 00:07:00,120 --> 00:07:02,360 Stephen Koukoulas: these sorts of things, and she'll sort of say, I'm 140 00:07:02,400 --> 00:07:04,880 Stephen Koukoulas: sure that it's the sustainability of this inflatation. Yet we 141 00:07:04,920 --> 00:07:06,719 Stephen Koukoulas: delight that we've got it around about two and a half. 142 00:07:07,320 --> 00:07:11,080 Stephen Koukoulas: We delighted the unemployment rates low, but we're just a 143 00:07:11,160 --> 00:07:14,720 Stephen Koukoulas: little bit itchy about whether we can sustain. 144 00:07:14,360 --> 00:07:16,720 Michael Thompson: These There's been a lot of speculation then that there 145 00:07:16,840 --> 00:07:20,559 Michael Thompson: will be maybe another one, another two potentially this year. 146 00:07:21,200 --> 00:07:24,200 Michael Thompson: Do you ever feel sorry then for Michelle Bullock, the 147 00:07:24,240 --> 00:07:27,680 Michael Thompson: Reserve Bank Governor in the press conferences afterwards, because there 148 00:07:27,720 --> 00:07:30,520 Michael Thompson: is so much analysis and so much pressure on every 149 00:07:30,560 --> 00:07:32,920 Michael Thompson: single word, everyone will be looking for clues as to 150 00:07:33,000 --> 00:07:34,880 Michael Thompson: will we be seeing another cut, will we be seeing 151 00:07:34,920 --> 00:07:37,560 Michael Thompson: another two cuts this year, and trying to extract as 152 00:07:37,600 --> 00:07:39,760 Michael Thompson: much meaning as they possibly can from the words that 153 00:07:39,800 --> 00:07:41,280 Michael Thompson: she does actually say. 154 00:07:41,520 --> 00:07:44,600 Stephen Koukoulas: That's why she's so careful with her words and her 155 00:07:44,960 --> 00:07:48,240 Stephen Koukoulas: statements recently. Not ruling anything in, not ruling anything out 156 00:07:48,480 --> 00:07:50,680 Stephen Koukoulas: is actually really clever and a good way of putting it. 157 00:07:50,720 --> 00:07:53,080 Stephen Koukoulas: And I'm reminded there is a many years go by. 158 00:07:53,200 --> 00:07:58,080 Stephen Koukoulas: This is a war story there, Michael Quick. I remember 159 00:07:58,080 --> 00:08:01,760 Stephen Koukoulas: that one statement when I think Stevens was governor of 160 00:08:01,800 --> 00:08:05,800 Stephen Koukoulas: the RBASH fifteen years ago, whenever that was. And someone 161 00:08:05,880 --> 00:08:07,560 Stephen Koukoulas: pointed out that in the press release that they put it, 162 00:08:07,600 --> 00:08:11,280 Stephen Koukoulas: they left right steady that particular month, and instead of 163 00:08:11,560 --> 00:08:16,320 Stephen Koukoulas: strong economy they said solid rate of economic growth, and 164 00:08:16,440 --> 00:08:19,760 Stephen Koukoulas: someone interpreted that to be a softening in their language, 165 00:08:19,840 --> 00:08:21,920 Stephen Koukoulas: and he said, look, we're just sick and tired of 166 00:08:22,040 --> 00:08:24,520 Stephen Koukoulas: using strong, so we just changed the wording, because otherwise 167 00:08:24,560 --> 00:08:27,120 Stephen Koukoulas: the whole statement would have been unchanged. So they changed 168 00:08:27,120 --> 00:08:30,680 Stephen Koukoulas: the word just for a bit of poetic and license. 169 00:08:30,760 --> 00:08:32,920 Stephen Koukoulas: And people were, oh, what did he really mean by that? 170 00:08:33,000 --> 00:08:36,440 Stephen Koukoulas: All he said strong and soften, So pro old Michelle Bullock. 171 00:08:36,440 --> 00:08:38,880 Stephen Koukoulas: He has careful with your language. But we'll be watching 172 00:08:38,960 --> 00:08:41,320 Stephen Koukoulas: very closely and we'll probably make up a story about 173 00:08:41,520 --> 00:08:45,000 Stephen Koukoulas: whether she said sustainable or uncertain or whatever the case 174 00:08:45,040 --> 00:08:45,360 Stephen Koukoulas: may be. 175 00:08:45,559 --> 00:08:48,120 Michael Thompson: It is wildly open to interpretation. 176 00:08:47,640 --> 00:08:49,160 Stephen Koukoulas: And that's what makes it fun, and that's what that's 177 00:08:49,160 --> 00:08:51,640 Stephen Koukoulas: what makes that's what the markets are looking at right now. 178 00:08:51,679 --> 00:08:53,599 Stephen Koukoulas: You know, there's some really good econmos out there in 179 00:08:53,640 --> 00:08:56,959 Stephen Koukoulas: the markets and elsewhere who analyze this stuff, analyze the data. 180 00:08:57,040 --> 00:09:00,280 Stephen Koukoulas: And you know, the last survey I saw was that 181 00:09:00,559 --> 00:09:03,679 Stephen Koukoulas: the twenty five point cuts priced in with a cautious 182 00:09:04,160 --> 00:09:05,559 Stephen Koukoulas: language surrounding the rate cut. 183 00:09:05,920 --> 00:09:08,200 Michael Thompson: All right, exciting, couple of days. Have a good week, Stephen, 184 00:09:08,400 --> 00:09:10,480 Michael Thompson: Thanks Michael. That was a kind of a Stephen cook 185 00:09:10,480 --> 00:09:12,520 Michael Thompson: coolest better known as the Kook. You can find him 186 00:09:12,520 --> 00:09:15,320 Michael Thompson: at the kook dot com and follow him on ex 187 00:09:15,440 --> 00:09:17,720 Michael Thompson: using the handle of the kouk that's k o uk. 188 00:09:18,040 --> 00:09:20,280 Michael Thompson: I'm Michael Thompson and this is fear and greed. The 189 00:09:20,280 --> 00:09:20,840 Michael Thompson: week ahead