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Speaker 1: Welcome to Fear and Greed the week Ahead. I'm Sean

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Speaker 1: A Elmer, and as always I'm joined by economist Stephen Cooculis.

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Speaker 1: You'll find him at the Cook dot com, tg k

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Speaker 1: uk dot com and on next using the handle the

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Speaker 1: Kirk Stephen. Good morning, at.

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Speaker 2: A very good morning. We're halfway through a well a

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Speaker 2: fortnight of blockbusting news last week and probably equally blockbusting

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Speaker 2: news in this week coming.

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Speaker 1: Yes, so let's talk about last week. The national accounts

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Speaker 1: were released. One thing that you economists love of the

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Speaker 1: national accounts because it kind of tells you everything you

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Speaker 1: need to know about the economy.

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Speaker 2: Yes, and generally the story was not good. I think

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Speaker 2: by now everybody's probably read about how weak those numbers were.

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Speaker 2: And rather than just the calling number, even though that

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Speaker 2: was quite bad at point three, the annual figure was

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Speaker 2: the one that hit most people between the eyes. Zero

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Speaker 2: point eight percent annual growth in GDP now back in

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Speaker 2: the day like pretty pair pandemic. We u see at

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Speaker 2: point eight per quarter beginning point eight percent growth in

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Speaker 2: the economy in a year now, and that's really really weak,

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Speaker 2: And when you consider the population growth was somewhere around

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Speaker 2: about two and a half percent. In the year of September,

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Speaker 2: we had per capita GDP minus one and a half percent.

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Speaker 2: So the numbers, which every way you cut them, were

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Speaker 2: very weak. And the really fascinating part to us economists,

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Speaker 2: again well to me anyway, I won't speak for everybody,

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Speaker 2: was that all of the growth, more than all of

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Speaker 2: the growth, was coming from the public sector. So private

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Speaker 2: sector demand was actually going backwards. So private sector things

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Speaker 2: like business investment, household spending, and exports, those sorts of things.

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Speaker 2: Government demand is government demand. It's plum public services and building,

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Speaker 2: roads and defense equipment and all that sort of stuff.

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Speaker 2: So without public sector spending, we have not only had

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Speaker 2: a per capita GDP recession, we would have had a

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Speaker 2: recession recession. That's how close to the edge we are,

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Speaker 2: and that's why the numbers were really very poor.

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Speaker 1: Jim Chalmers made the comment that the private sector needs

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Speaker 1: to drive growth from here, and it's kind of obvious,

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Speaker 1: but you wonder whether there's more to it where the

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Speaker 1: private sector. I mean, we can't rely on government spending forever.

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Speaker 2: Correct, And this has been the missing link. And again

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Speaker 2: within those national accounts, as you said, there's so much

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Speaker 2: information the productivity numbers that were included within those were

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Speaker 2: again pretty poor. That they were poor unambiguously, and so

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Speaker 2: you get into that point out, well, why why is

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Speaker 2: it saying we've got all this artificial intelligence, we've got machinery,

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Speaker 2: we've got technology. Surely the use of machines is increasing

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Speaker 2: our labor productivity, We're producing more per person working. One

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Speaker 2: of the things I think Jim Chalmers was going on about,

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Speaker 2: as you said, he's right, but I don't know whether

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Speaker 2: he's got the solution or anybody's at the solution. That

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Speaker 2: absence of business investment over a decade, it's not just

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Speaker 2: the last six months, over a decade means that investment

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Speaker 2: in machinery and equipment and buildings and all this other

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Speaker 2: stuff has not been as strong as it could have been,

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Speaker 2: certainly a mile behind what's happened in the US. So

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Speaker 2: therefore that productivity enhancement that we long for, that we

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Speaker 2: wish for, isn't coming through. So we need the private

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Speaker 2: sector to step up. And this probably gets into what

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Speaker 2: we're going to talk about for one back tomorrow the

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Speaker 2: RBA board meeting. Is the private sector being held back

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Speaker 2: by interistrates being too high.

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Speaker 1: Yes, rhetorically yes, So let's I mean, what do you

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Speaker 1: think the Reserve Bank will make of that data last week,

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Speaker 1: and what do you think they'll do.

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Speaker 2: Yeah, look, I think they were surprised how weak it was.

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Speaker 2: That they're looking through their forecast they just put out

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Speaker 2: a month ago, the November Statement on Monetary Policy had

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Speaker 2: GDP growth lifting to one and a half percent by

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Speaker 2: the end of this year, and that is clearly gay

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Speaker 2: to undershit. They're not going to get anywhere near that

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Speaker 2: on these numbers underperforming. So I think they have to

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Speaker 2: now acknowledge that, particularly given this private sector this week.

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Speaker 2: Private sector is interest rates sensitive. You know, government spending

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Speaker 2: on defense and nurses and teachers, they don't care what

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Speaker 2: interestrates are. They're going to spend that money regardless. It's

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Speaker 2: private sector that's really interstraight sensitive. So I think the

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Speaker 2: RBA will probably look they're not going to move rates,

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Speaker 2: I don't think, but I suspect that we're not ruling

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Speaker 2: anything out will be dead and buried. They will rule

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Speaker 2: out rate hikes. They will be flagging that what we

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Speaker 2: the RBA need to see before we actually pull that

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Speaker 2: trigger on a rate cut, So they won't be time specific,

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Speaker 2: you know, I'm sure Bullock does not like forward guides.

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Speaker 2: She's not gonna say, oh, we're going to do it

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Speaker 2: in February or April or May. If this happens, you'll

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Speaker 2: say that the preconditions for us to trim rates is

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Speaker 2: more confirmation than inflation's for and not just the headline figure,

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Speaker 2: but the trim possibly an uptick in that unemployment rate,

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Speaker 2: and if growth remain soggy, that is when we will

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Speaker 2: cut rates. So I think that's what they're going to do.

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Speaker 2: They'll move to a dubbish bias, as they say, and frankly,

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Speaker 2: the market's already moved there, you know, the money markets

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Speaker 2: starting a price in a high probability of a cut

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Speaker 2: in April and roughly fifty to fifty chance of one

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Speaker 2: in February.

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Speaker 1: It's kind of interesting that so many good economists, yourself included,

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Speaker 1: have four months and months and months said that we

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Speaker 1: expect to rate cut, if not now, early next year.

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Speaker 1: That was definitely the consensus. And we're talking seriously good

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Speaker 1: economists like yourself, Steven. The Reserve Bank has been kind

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Speaker 1: of pushing back on or it has been pushing back

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Speaker 1: on that for all good reason. But I mean, just

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Speaker 1: when we were doing the hiking cycle. You wonder whether

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Speaker 1: the reserve banks a little bit behind the ball on

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Speaker 1: the falling cycle.

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Speaker 2: Look, I think that's not a bad analogy too, because

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Speaker 2: again I look at all my mates and my competitors whatever,

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Speaker 2: and yes, the vast bulk of them was saying, you're

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Speaker 2: probable cuts late twenty twenty four. This is going back

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Speaker 2: six months.

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Speaker 1: Yep.

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Speaker 2: They've pushed them back. Yeah, obviously as the Reserve Bank cas.

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Speaker 2: So one of the things I think that we are

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Speaker 2: looking at again, I'll do the collective economists. Is that

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Speaker 2: a murder of economists or a gaggle or something. Anyway,

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Speaker 2: they are now seeing what's happening in the global economy. Yeah,

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Speaker 2: the Fed's probably going to be cutting this week too.

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Speaker 2: We had New Zealand recently cutting fifty. Canada, you know,

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Speaker 2: we've gone through. This is Canada, Europe, you know, everyone

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Speaker 2: and their dog. It's South Korea, even after their political terminals,

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Speaker 2: actually cut states as well. So we've got this global

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Speaker 2: rate cutting cycle in play, and Australia is one of

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Speaker 2: very few countries not playing the game at the moment.

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Speaker 2: So these other countries don't have inflation spot on their

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Speaker 2: target either. That they've got weak growth, rising unemployment, these

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Speaker 2: sorts of things. So yeah, that's why I think your

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Speaker 2: compident has the RBA behind the curb. Well maybe, but

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Speaker 2: if they are well, there's a couple things that can happen.

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Speaker 2: They go cut, cut, cut the first three or four

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Speaker 2: meetings of next year, or I wouldn't rule this out.

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Speaker 2: I'm not ruling it in or out. Slam on a

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Speaker 2: fifty point cut. If the economy actually turns out to

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Speaker 2: be a good deal weaker, an inflation a good deal low.

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Speaker 2: But that's going to be driven by what we see

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Speaker 2: in the data in the next month or two.

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Speaker 1: The out bit of data this week which we will

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Speaker 1: be interesting is employment figures.

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Speaker 2: Well, speaking of numbers that could change the thinking of

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Speaker 2: the RBA and the markets and everybody else. Labor market

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Speaker 2: numbers and yeah, gosh, we've had surprising resilience in employment

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Speaker 2: growth and surprising stability in the unemployment rate. It had

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Speaker 2: the unemployed rate was four point one percent at the

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Speaker 2: beginning of the year. It's sort of bobbed up and

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Speaker 2: down a bit four point one percent of the moment. Look,

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Speaker 2: I think the consensus that we will finally get a

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Speaker 2: little bit of an uptick in the unemployed rate. Because

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Speaker 2: the GDP numbers are so weak, you've got to have

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Speaker 2: firms not hiring as many people. So for the labor

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Speaker 2: market numbers, all eyes on whether it's a weak number.

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Speaker 2: If it is, and we get say a shock increased

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Speaker 2: a unemployment to four point three, then the herd galloping

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Speaker 2: towards rate cuts in February will become well, a little

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Speaker 2: bit louder, heardier, heardier, Birds and murders and gaggles.

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Speaker 1: Yeah, Stephen, enjoy the week, it sounds like you will.

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Speaker 2: I can't wait for all these things to happen. It'll

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Speaker 2: be great now, it was.

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Speaker 1: The economist Stephen Cookola has better known as the Coup.

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Speaker 1: You can find him at the cook dot com and

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Speaker 1: follow him on ex using the handle of the cook.

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Speaker 1: I'm sure, Alma, and this is here, and greet the

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Speaker 1: weak ahead