1 00:00:08,660 --> 00:00:10,920 Sean Aylmer: Welcome to Fear and Greed - The Week Ahead. This is 2 00:00:10,920 --> 00:00:13,350 Sean Aylmer: where we take a look at the big events, reports and releases coming 3 00:00:13,350 --> 00:00:15,310 Sean Aylmer: up this week that give insight into the economy and 4 00:00:15,310 --> 00:00:17,560 Sean Aylmer: a look back at what happened last week too. I'm 5 00:00:17,560 --> 00:00:19,480 Sean Aylmer: Sean Aylmer, and every Monday I'm joined for The Week 6 00:00:19,480 --> 00:00:22,509 Sean Aylmer: Ahead by economist Stephen Koukoulas. You'll find him at thekouk. 7 00:00:22,510 --> 00:00:26,209 Sean Aylmer: com and on Twitter using the handle, TheKouk. Stephen, good morning. 8 00:00:26,450 --> 00:00:28,370 Stephen Koukoulas: Good morning, Sean. Nearly the end of the year. 9 00:00:28,500 --> 00:00:32,580 Sean Aylmer: Almost. We're almost there. It's exciting. Now, the Reserve Bank 10 00:00:32,580 --> 00:00:35,300 Sean Aylmer: Board, it's already hit its year end because of course 11 00:00:35,300 --> 00:00:37,309 Sean Aylmer: it had its final board meeting last week. Won't be 12 00:00:37,320 --> 00:00:40,170 Sean Aylmer: meeting again until February. Sounds pretty upbeat. I mean, the 13 00:00:40,170 --> 00:00:42,409 Sean Aylmer: Reserve Bank does seem pretty happy with the economy at 14 00:00:42,409 --> 00:00:42,760 Sean Aylmer: the moment. 15 00:00:43,440 --> 00:00:44,810 Stephen Koukoulas: I think they are. And I think they're happy with 16 00:00:44,810 --> 00:00:47,430 Stephen Koukoulas: the lockdowns and with all the caveats about new variants 17 00:00:47,430 --> 00:00:51,210 Stephen Koukoulas: of the virus, whatnot. I think they're still optimistic about 18 00:00:51,210 --> 00:00:55,100 Stephen Koukoulas: the rebound in 2022, that the momentum in terms of GDP growth, 19 00:00:55,250 --> 00:00:58,440 Stephen Koukoulas: jobs momentum is going to be there. They're still very 20 00:00:58,440 --> 00:01:02,430 Stephen Koukoulas: cautious in their forecast for inflation and wages. They seem 21 00:01:02,430 --> 00:01:04,560 Stephen Koukoulas: to be a little bit low, what the market consensus 22 00:01:04,560 --> 00:01:07,220 Stephen Koukoulas: is forecasting. And because of that, they're still sort of 23 00:01:07,220 --> 00:01:09,780 Stephen Koukoulas: suggesting that the rate hike, when it finally comes will 24 00:01:09,780 --> 00:01:12,670 Stephen Koukoulas: be later rather than sooner. Although having said that, they 25 00:01:12,680 --> 00:01:16,959 Stephen Koukoulas: did drop the reference to 2024 is the likely timing 26 00:01:16,959 --> 00:01:21,410 Stephen Koukoulas: for the rate hike. And that got a few people 27 00:01:21,410 --> 00:01:23,070 Stephen Koukoulas: excited, but look, at the end of the day, they're 28 00:01:23,459 --> 00:01:25,990 Stephen Koukoulas: all mere mortals. They'll be looking at the data flow 29 00:01:26,530 --> 00:01:29,140 Stephen Koukoulas: as 2022 kicks off back in February when they next 30 00:01:29,140 --> 00:01:32,399 Stephen Koukoulas: meet. If the numbers are strong, they'll be pragmatic. They 31 00:01:32,400 --> 00:01:33,940 Stephen Koukoulas: may well change their view in February. 32 00:01:34,310 --> 00:01:36,370 Sean Aylmer: Yeah. I mean, one thing the bank has done this 33 00:01:36,370 --> 00:01:40,480 Sean Aylmer: year is tell us very plainly what it's looking for 34 00:01:40,480 --> 00:01:43,860 Sean Aylmer: before it moves on rates. And that's actually inflation and 35 00:01:43,860 --> 00:01:47,500 Sean Aylmer: wages at certain levels, not potentially at a certain level, 36 00:01:47,630 --> 00:01:50,500 Sean Aylmer: actually in that 2 to 3% target range for inflation 37 00:01:50,500 --> 00:01:51,850 Sean Aylmer: and 3 to 4% for wages. 38 00:01:52,320 --> 00:01:53,820 Stephen Koukoulas: Yeah. It used to be the case, certainly under Glenn 39 00:01:53,820 --> 00:01:57,130 Stephen Koukoulas: Stevens when he was governor that there was that preemptive word 40 00:01:57,130 --> 00:01:59,970 Stephen Koukoulas: in terms of policy settings. If they saw enough momentum 41 00:01:59,970 --> 00:02:03,010 Stephen Koukoulas: in the economy that led them to be forecasting inflation 42 00:02:03,010 --> 00:02:05,740 Stephen Koukoulas: to be going up, for example, they would hike sort 43 00:02:05,740 --> 00:02:09,530 Stephen Koukoulas: of before the inflation rate got there. And when they were cutting too, it 44 00:02:09,530 --> 00:02:11,230 Stephen Koukoulas: was the same sort of thing. But I think with 45 00:02:11,230 --> 00:02:15,169 Stephen Koukoulas: this pandemic with a lot of uncertainty, just the economy 46 00:02:15,169 --> 00:02:17,840 Stephen Koukoulas: was a bit sluggish, pre- COVID even. I think they actually 47 00:02:17,840 --> 00:02:21,110 Stephen Koukoulas: want to see that inflation rate printing 2.5 or thereabouts for 48 00:02:21,889 --> 00:02:24,429 Stephen Koukoulas: not just one quarter, but a couple of quarters before 49 00:02:24,450 --> 00:02:26,919 Stephen Koukoulas: they'd actually consider that hiking. So it is not a 50 00:02:26,919 --> 00:02:29,970 Stephen Koukoulas: criticism, but it's sort of more reactive rather than preemptive. 51 00:02:30,630 --> 00:02:32,410 Sean Aylmer: The other data last week, which was pretty interesting was job 52 00:02:32,410 --> 00:02:35,340 Sean Aylmer: vacancies. There's certainly plenty of work around for people if 53 00:02:35,340 --> 00:02:37,110 Sean Aylmer: they're in the right place and want to do it. 54 00:02:37,450 --> 00:02:41,119 Stephen Koukoulas: Oh, indeed. The demand for labor was strong pre the 55 00:02:41,120 --> 00:02:44,590 Stephen Koukoulas: Delta lockdowns in the September quarter. It dipped a little 56 00:02:44,590 --> 00:02:46,740 Stephen Koukoulas: bit, but again, it was extraordinary that it only fell 57 00:02:46,740 --> 00:02:49,790 Stephen Koukoulas: marginally. And now that we've got the lockdowns ending, what 58 00:02:49,790 --> 00:02:51,760 Stephen Koukoulas: was that? Gosh, I can't remember, five or six weeks 59 00:02:51,760 --> 00:02:55,130 Stephen Koukoulas: ago. The demand for labor is super strong. Those vacancy 60 00:02:55,130 --> 00:02:58,140 Stephen Koukoulas: numbers are really pointing to hot demand for labor. So 61 00:02:58,450 --> 00:03:00,830 Stephen Koukoulas: again, sort of just dovetailing back to what the RBA might 62 00:03:00,840 --> 00:03:05,180 Stephen Koukoulas: be thinking on wages and inflation. If these demand for 63 00:03:05,180 --> 00:03:08,990 Stephen Koukoulas: labor indicators are as strong as they appear and it does 64 00:03:08,990 --> 00:03:12,880 Stephen Koukoulas: translate into really rapid jobs growth and wages, surprisingly pick 65 00:03:12,880 --> 00:03:15,710 Stephen Koukoulas: up through the first half of 2022, then first of 66 00:03:15,710 --> 00:03:18,530 Stephen Koukoulas: all, it's good news, of course, but the other part 67 00:03:18,530 --> 00:03:20,530 Stephen Koukoulas: of it, it does have implications for what the RBA 68 00:03:20,530 --> 00:03:22,080 Stephen Koukoulas: may be thinking in doing with rates. 69 00:03:22,530 --> 00:03:25,060 Sean Aylmer: Okay. That was last week. Stephen, the big one this 70 00:03:25,060 --> 00:03:26,170 Sean Aylmer: week is MYEFO. 71 00:03:26,530 --> 00:03:29,959 Stephen Koukoulas: It is. The Mid- year Economic and Fiscal Outlook is 72 00:03:30,000 --> 00:03:32,330 Stephen Koukoulas: MYEFO. You'll be hearing a lot about that on Thursday 73 00:03:32,330 --> 00:03:36,190 Stephen Koukoulas: when treasury and the treasurer release the budget update. It's 74 00:03:36,260 --> 00:03:38,970 Stephen Koukoulas: what they do every six months in between budgets. By 75 00:03:38,970 --> 00:03:41,230 Stephen Koukoulas: its name it's mid- financial year. Obviously we're in December, 76 00:03:41,230 --> 00:03:43,930 Stephen Koukoulas: so it's not mid- calendar year, but that'll have an 77 00:03:43,930 --> 00:03:46,640 Stephen Koukoulas: update on the budget figuring, including the forward estimates out 78 00:03:46,640 --> 00:03:50,440 Stephen Koukoulas: the next three financial years. And it'll incorporate new news 79 00:03:50,440 --> 00:03:54,100 Stephen Koukoulas: on the economy, what's happened to employment, momentum in terms 80 00:03:54,100 --> 00:03:57,330 Stephen Koukoulas: of inflation, company tax receipts, all these things. And I 81 00:03:57,330 --> 00:03:59,130 Stephen Koukoulas: think it has to be said that the economy is 82 00:03:59,130 --> 00:04:02,580 Stephen Koukoulas: better than they were forecasting back in May. The budget 83 00:04:02,580 --> 00:04:05,320 Stephen Koukoulas: deficit numbers, while they'll still be big, they'll still be 84 00:04:05,320 --> 00:04:08,490 Stephen Koukoulas: very big, they'll be less big than they were assuming 85 00:04:08,490 --> 00:04:11,110 Stephen Koukoulas: back in May. And I think the treasurer's probably going to sort of say, " 86 00:04:11,640 --> 00:04:13,760 Stephen Koukoulas: Well, look, we've got a pretty big job to repair 87 00:04:13,760 --> 00:04:16,270 Stephen Koukoulas: the budget and get back to balance, but if the 88 00:04:16,270 --> 00:04:19,039 Stephen Koukoulas: economy can grow, then we get a bit of a 89 00:04:19,040 --> 00:04:22,040 Stephen Koukoulas: free kick in terms of extra revenue flowing into treasury." 90 00:04:22,200 --> 00:04:24,110 Stephen Koukoulas: Some of their outlays will be a little bit lower 91 00:04:24,110 --> 00:04:25,890 Stephen Koukoulas: when the economy's strong. And I think that's what he's going 92 00:04:25,890 --> 00:04:27,729 Stephen Koukoulas: to be banking on. I don't think we're going to 93 00:04:27,730 --> 00:04:30,920 Stephen Koukoulas: see too many policy changes announced that will impact the 94 00:04:30,920 --> 00:04:33,660 Stephen Koukoulas: budget bottom line, but always interesting also to see what 95 00:04:33,660 --> 00:04:36,650 Stephen Koukoulas: treasury is forecasting for the economy, whether they're going to 96 00:04:36,650 --> 00:04:39,730 Stephen Koukoulas: embrace that 4% target for unemployment rate. 97 00:04:40,290 --> 00:04:42,770 Sean Aylmer: Yeah. That will be interesting. And of course there's an election 98 00:04:42,839 --> 00:04:45,080 Sean Aylmer: in the first half of next year, probably May. So 99 00:04:45,080 --> 00:04:46,790 Sean Aylmer: I'd imagine there's not going to be too many announcements 100 00:04:46,790 --> 00:04:47,900 Sean Aylmer: until the campaign. 101 00:04:48,640 --> 00:04:50,440 Stephen Koukoulas: Look, I think that's true too. So there's all these 102 00:04:50,970 --> 00:04:53,370 Stephen Koukoulas: line item in the budget documents for us sad folk 103 00:04:53,640 --> 00:04:57,330 Stephen Koukoulas: who troll through these hundreds of pages of budget documents. 104 00:04:57,330 --> 00:05:04,380 Stephen Koukoulas: There's money spent, but not yet allocated. That's code for, " 105 00:05:04,750 --> 00:05:07,719 Stephen Koukoulas: We've put $ 5 or $ 10 billion bucks aside, and we're going to 106 00:05:07,720 --> 00:05:10,110 Stephen Koukoulas: announce what we're going to spend it on when the election campaign hots 107 00:05:10,110 --> 00:05:12,910 Stephen Koukoulas: up." But yeah, that's just standard government practice for whoever's 108 00:05:12,910 --> 00:05:13,549 Stephen Koukoulas: the incumbent. 109 00:05:14,320 --> 00:05:17,300 Sean Aylmer: This week's also the week of sentiment. So the National 110 00:05:17,300 --> 00:05:20,919 Sean Aylmer: Australia Bank Business Survey, the Westpac Consumer Sentiment surveys, how 111 00:05:20,920 --> 00:05:21,870 Sean Aylmer: are things looking on that front? 112 00:05:22,490 --> 00:05:25,740 Stephen Koukoulas: They're good. We do have the business sentiment picking up 113 00:05:25,740 --> 00:05:28,029 Stephen Koukoulas: again in line with the ending of the lockdowns and the 114 00:05:28,029 --> 00:05:32,160 Stephen Koukoulas: better economic news more broadly. The NAB survey does include 115 00:05:32,160 --> 00:05:35,669 Stephen Koukoulas: a price and wage question. So it'll be interesting to 116 00:05:35,670 --> 00:05:37,640 Stephen Koukoulas: see where the business is saying they're expecting to put up 117 00:05:37,640 --> 00:05:40,049 Stephen Koukoulas: their selling prices, because of course, by definition, that is 118 00:05:40,050 --> 00:05:43,930 Stephen Koukoulas: a leading indicator of what might be happening to inflation. And then 119 00:05:43,930 --> 00:05:46,200 Stephen Koukoulas: on wages too, are they paying more for their staff? 120 00:05:46,200 --> 00:05:49,339 Stephen Koukoulas: And we consumers, look, we're not quite as exuberant as 121 00:05:49,339 --> 00:05:52,619 Stephen Koukoulas: we were pre- COVID, two years ago, but consumer sentiment's 122 00:05:52,620 --> 00:05:56,240 Stephen Koukoulas: pretty strong. I think we're feeling reasonably comfortable with our 123 00:05:56,240 --> 00:05:59,440 Stephen Koukoulas: personal finances, house prices going up, the stock market's doing 124 00:05:59,440 --> 00:06:02,690 Stephen Koukoulas: pretty well, the labor market's improving. Just by the way, 125 00:06:02,690 --> 00:06:04,520 Stephen Koukoulas: we're going to get the labor force numbers too, which 126 00:06:04,520 --> 00:06:08,300 Stephen Koukoulas: is likely to show a big, I don't know, 250, 000 127 00:06:08,300 --> 00:06:11,920 Stephen Koukoulas: jump in employment because people have gone out of lockdown 128 00:06:11,920 --> 00:06:14,830 Stephen Koukoulas: and back into the restaurants, cafes shops and these sorts 129 00:06:14,830 --> 00:06:16,760 Stephen Koukoulas: of things. So that's going to be another important indicator 130 00:06:16,760 --> 00:06:17,160 Stephen Koukoulas: as well. 131 00:06:17,430 --> 00:06:20,270 Sean Aylmer: Wow. And then just finally, Philip Lowe, the governor of the Reserve Bank 132 00:06:20,270 --> 00:06:22,960 Sean Aylmer: speaking, presumably it's his last speech of the year. 133 00:06:23,330 --> 00:06:25,550 Stephen Koukoulas: I think it is. And look, again, as we were just 134 00:06:25,550 --> 00:06:28,360 Stephen Koukoulas: discussing a few moments ago, he will possibly have a 135 00:06:28,360 --> 00:06:31,700 Stephen Koukoulas: chance just to sort of round out his hopes and 136 00:06:31,700 --> 00:06:35,219 Stephen Koukoulas: optimism for 2022 being a better year for the economy. 137 00:06:35,560 --> 00:06:37,980 Stephen Koukoulas: He might be wanting to flag some of these issues 138 00:06:37,980 --> 00:06:42,210 Stephen Koukoulas: associated with housing. That's one that's still a thorn in 139 00:06:42,210 --> 00:06:45,770 Stephen Koukoulas: the side, I suppose. Nobody wants to see 20% annual 140 00:06:45,770 --> 00:06:49,450 Stephen Koukoulas: increases in house prices. It does create some uncertainty. So 141 00:06:49,640 --> 00:06:51,950 Stephen Koukoulas: he may want to flag something along those lines too, 142 00:06:51,950 --> 00:06:55,010 Stephen Koukoulas: but it's his chance just to, " Oh, we'll tell the 143 00:06:55,010 --> 00:06:57,030 Stephen Koukoulas: markets and tell the punters what they're thinking before we 144 00:06:57,410 --> 00:07:00,020 Stephen Koukoulas: completely go offline and spend all of our time watching 145 00:07:00,020 --> 00:07:00,650 Stephen Koukoulas: the cricket." 146 00:07:00,920 --> 00:07:02,940 Sean Aylmer: Fair enough. Stephen, have a great week. 147 00:07:03,170 --> 00:07:04,050 Stephen Koukoulas: Thanks, Sean. You too. 148 00:07:04,180 --> 00:07:07,140 Sean Aylmer: That was economist, Stephen Koukoulas, better known as TheKouk. You 149 00:07:07,140 --> 00:07:10,130 Sean Aylmer: can find him at thekouk. com, T- H- E- K- O- U- K. 150 00:07:10,340 --> 00:07:12,680 Sean Aylmer: com and follow him on Twitter using the handle, TheKouk. 151 00:07:13,400 --> 00:07:15,460 Sean Aylmer: I'm Sean Alymer, and this is Fear and Greed - The 152 00:07:15,460 --> 00:07:16,020 Sean Aylmer: Week Ahead.