1 00:00:05,309 --> 00:00:07,440 Sean Aylmer: Welcome to Fear and Greed - The Week Ahead. I'm Sean 2 00:00:07,440 --> 00:00:10,410 Sean Aylmer: Aylmer, and as always I'm joined by economist Stephen Koukoulas. 3 00:00:10,410 --> 00:00:13,049 Sean Aylmer: You'll find him at thekouk. com, T- H- E- K- O- U- 4 00:00:13,049 --> 00:00:17,250 Sean Aylmer: K, thekouk. com, and on X using the handle TheKouk. 5 00:00:17,250 --> 00:00:18,149 Sean Aylmer: Stephen, good morning. 6 00:00:18,389 --> 00:00:20,490 Stephen Koukoulas : A really good morning to you, Sean, on what's a 7 00:00:20,700 --> 00:00:22,050 Stephen Koukoulas : corker of a week ahead. 8 00:00:22,829 --> 00:00:24,900 Sean Aylmer: We've been building up for this week- 9 00:00:24,989 --> 00:00:25,171 Stephen Koukoulas : We have. 10 00:00:25,171 --> 00:00:27,330 Sean Aylmer: ... For a long time. I reckon we've been talking 11 00:00:27,330 --> 00:00:30,000 Sean Aylmer: about this week for ages. We may as well start 12 00:00:30,000 --> 00:00:33,989 Sean Aylmer: with a big one. The all important inflation figures that 13 00:00:33,990 --> 00:00:35,640 Sean Aylmer: are out on, is it Wednesday? 14 00:00:35,880 --> 00:00:39,089 Stephen Koukoulas : Yes, it is. They're out on the 31st, which is 15 00:00:39,090 --> 00:00:42,210 Stephen Koukoulas : Wednesday, and they are huge. They're bigger than Ben- Hur. 16 00:00:45,179 --> 00:00:47,940 Sean Aylmer: Do you reckon people, our children, would understand that reference? 17 00:00:48,540 --> 00:00:50,968 Stephen Koukoulas : Probably not. Bigger than, I don't know, Hulk Hogan. No, 18 00:00:50,969 --> 00:00:53,009 Stephen Koukoulas : he's old too. I can't think of what's big at 19 00:00:53,010 --> 00:00:53,400 Stephen Koukoulas : the moment. 20 00:00:53,489 --> 00:00:54,599 Sean Aylmer: Bigger than Taylor Swift. 21 00:00:54,629 --> 00:01:01,320 Stephen Koukoulas : Yeah, bigger than her. It's just extraordinarily humongous. But why are they humongous? Because they're 22 00:01:01,320 --> 00:01:05,819 Stephen Koukoulas : going to be showing the trajectory of inflation through the 23 00:01:05,819 --> 00:01:10,139 Stephen Koukoulas : June quarter. They're the all encompassing quarterly data. The monthly 24 00:01:10,139 --> 00:01:12,630 Stephen Koukoulas : data, as we've discussed, are pretty good. They're pretty useful. 25 00:01:12,900 --> 00:01:16,200 Stephen Koukoulas : But the quarterly data includes goods, services, a lot of 26 00:01:16,200 --> 00:01:19,920 Stephen Koukoulas : things that are only priced infrequently. Things like school fees, 27 00:01:19,920 --> 00:01:21,510 Stephen Koukoulas : for example. They're only priced at the beginning of each 28 00:01:21,510 --> 00:01:24,780 Stephen Koukoulas : year, so it doesn't really affect the other three quarters 29 00:01:24,780 --> 00:01:27,179 Stephen Koukoulas : or the other 11 months of the year. So these numbers 30 00:01:27,809 --> 00:01:32,430 Stephen Koukoulas : are comprehensive, big, important, and if we believe what the 31 00:01:32,430 --> 00:01:35,640 Stephen Koukoulas : RBA was saying last time they had a board meeting, 32 00:01:35,940 --> 00:01:37,740 Stephen Koukoulas : that they were going to be looking at these for 33 00:01:37,890 --> 00:01:42,390 Stephen Koukoulas : confirmation or otherwise, that inflation's still on track to meet 34 00:01:42,780 --> 00:01:46,770 Stephen Koukoulas : their 2 to 3% target. So markets are looking for 35 00:01:46,859 --> 00:01:48,900 Stephen Koukoulas : a little bit of a kickback. We know that some 36 00:01:48,900 --> 00:01:51,210 Stephen Koukoulas : of the things like petrol prices and some of the 37 00:01:51,210 --> 00:01:53,610 Stephen Koukoulas : other service prices, inched up in the quarter, so we're 38 00:01:53,610 --> 00:01:55,170 Stephen Koukoulas : going to have a little bit of a quirky result. 39 00:01:55,620 --> 00:01:59,670 Stephen Koukoulas : 1% for the quarter, about 3. 6%, 3. 7% for 40 00:01:59,670 --> 00:02:02,460 Stephen Koukoulas : the year. The trimmed mean, which of course the RBA 41 00:02:02,460 --> 00:02:04,410 Stephen Koukoulas : likes to look at because it takes out those volatile 42 00:02:04,410 --> 00:02:08,280 Stephen Koukoulas : items, tobacco prices and these sorts of things usually, probably 43 00:02:08,280 --> 00:02:12,150 Stephen Koukoulas : a touch higher, a little under 4%, so about 3. 8, 3. 44 00:02:12,630 --> 00:02:15,750 Stephen Koukoulas : 9 perhaps, as terms of the annual increase in trimmed 45 00:02:15,750 --> 00:02:19,439 Stephen Koukoulas : mean inflation. So that's going to be mighty important. 46 00:02:20,340 --> 00:02:24,150 Sean Aylmer: Okay. Stephen, what do we get worried about? What's the 47 00:02:24,210 --> 00:02:26,970 Sean Aylmer: number, if it comes out, that we should get worried 48 00:02:26,970 --> 00:02:28,260 Sean Aylmer: about interest rates? 49 00:02:29,040 --> 00:02:32,429 Stephen Koukoulas : I think the threshold is quite high, as in we 50 00:02:32,429 --> 00:02:37,230 Stephen Koukoulas : need to see probably headline and these trimmed figures over 51 00:02:37,230 --> 00:02:39,839 Stephen Koukoulas : 4% because, and the reason why I say that is 52 00:02:39,839 --> 00:02:42,780 Stephen Koukoulas : that while they are important, yes, they're huge, they do 53 00:02:42,780 --> 00:02:46,020 Stephen Koukoulas : matter, sort of the economy has moved on a bit. 54 00:02:46,260 --> 00:02:49,320 Stephen Koukoulas : As we've been discussing in recent weeks, the unemployment rate 55 00:02:49,500 --> 00:02:53,669 Stephen Koukoulas : is creeping up. We've got economic growth creeping down. We 56 00:02:53,669 --> 00:02:57,899 Stephen Koukoulas : know that the economy is weakening and arguably when we 57 00:02:57,900 --> 00:03:01,380 Stephen Koukoulas : get the RBA board meeting next week, 6th of August, 58 00:03:01,380 --> 00:03:03,060 Stephen Koukoulas : we hear what the result of their meeting is, but 59 00:03:03,060 --> 00:03:05,160 Stephen Koukoulas : we'll talk about that next week, they're going to be 60 00:03:05,160 --> 00:03:09,000 Stephen Koukoulas : revising their inflation forecast. And I've looked at my good 61 00:03:09,000 --> 00:03:13,559 Stephen Koukoulas : friends at Westpac, CBA, were forecasting from the next quarter, 62 00:03:13,559 --> 00:03:16,649 Stephen Koukoulas : don't want to be sort of preempting too much into the future, inflation back 63 00:03:16,650 --> 00:03:18,539 Stephen Koukoulas : in the target from the September quarter, down at 2.7, 2. 8%. 64 00:03:20,460 --> 00:03:24,060 Stephen Koukoulas : So do you react to what's the ancient history of 65 00:03:24,060 --> 00:03:26,518 Stephen Koukoulas : the June quarter 2024 or do you sort of preempt 66 00:03:26,520 --> 00:03:29,790 Stephen Koukoulas : what's going on? So to answer your question in a 67 00:03:29,790 --> 00:03:33,719 Stephen Koukoulas : shortened version, we really need to see a figure well 68 00:03:33,719 --> 00:03:36,510 Stephen Koukoulas : above 4% for the market to be sort of convinced 69 00:03:36,510 --> 00:03:39,300 Stephen Koukoulas : that the RBA will hike again. I don't think they're 70 00:03:39,300 --> 00:03:40,590 Stephen Koukoulas : going to, because I think we'll get a figure that's 71 00:03:40,590 --> 00:03:44,369 Stephen Koukoulas : probably tolerable. And when the RBA do meet next week, 72 00:03:44,370 --> 00:03:46,889 Stephen Koukoulas : they'll outline why they are not going to be hiking 73 00:03:46,889 --> 00:03:47,430 Stephen Koukoulas : interest rates. 74 00:03:48,000 --> 00:03:50,669 Sean Aylmer: Okay, let's hope so. Plenty of other data out this 75 00:03:50,670 --> 00:03:52,830 Sean Aylmer: week, which gives us a read on what's happening in 76 00:03:52,830 --> 00:03:57,900 Sean Aylmer: the economy now. Building approvals. Stephen, any hope for that sector? 77 00:03:58,350 --> 00:04:00,720 Stephen Koukoulas : There's a lot of hope and not much action, I 78 00:04:00,720 --> 00:04:03,900 Stephen Koukoulas : think, on that one. What we are seeing last month 79 00:04:03,900 --> 00:04:05,580 Stephen Koukoulas : was a little bit of a blip up, which was 80 00:04:05,580 --> 00:04:09,060 Stephen Koukoulas : lovely to see. Market's looking for another little blip up. 81 00:04:09,299 --> 00:04:12,330 Stephen Koukoulas : We are still under- building by about 30% what we 82 00:04:12,330 --> 00:04:16,020 Stephen Koukoulas : need to, to meet underlying demand for dwellings and obviously 83 00:04:16,380 --> 00:04:19,770 Stephen Koukoulas : cost pressures in the construction sector, labor shortages, these sorts 84 00:04:19,770 --> 00:04:21,839 Stephen Koukoulas : of things are still having an impact. But it'd be 85 00:04:21,839 --> 00:04:26,160 Stephen Koukoulas : lovely to see some of this high profile building approval 86 00:04:26,160 --> 00:04:29,219 Stephen Koukoulas : sort of information, particularly from the state and local government 87 00:04:29,219 --> 00:04:32,640 Stephen Koukoulas : sector, translate into actual building approvals. But it's a very 88 00:04:32,640 --> 00:04:35,550 Stephen Koukoulas : choppy number, month- on- month, but it'll be just hoping 89 00:04:35,550 --> 00:04:36,990 Stephen Koukoulas : and a- wishing and a- praying that we see a 90 00:04:36,990 --> 00:04:37,830 Stephen Koukoulas : plus number for it. 91 00:04:38,428 --> 00:04:39,269 Sean Aylmer: Retail trade? 92 00:04:39,599 --> 00:04:43,049 Stephen Koukoulas : Yeah, big one, because that includes the June quarterly, because 93 00:04:43,049 --> 00:04:45,299 Stephen Koukoulas : here we are speaking about quarterly data. This is the 94 00:04:45,299 --> 00:04:49,529 Stephen Koukoulas : real retail sales number for the June quarter. Probably going 95 00:04:49,529 --> 00:04:52,830 Stephen Koukoulas : to be dead flat in real terms. We do know 96 00:04:52,830 --> 00:04:57,389 Stephen Koukoulas : that obviously the April and May numbers were sort of weak- 97 00:04:57,389 --> 00:05:00,599 Stephen Koukoulas : ish, barely increasing at the rate of inflation, hence a 98 00:05:00,599 --> 00:05:04,650 Stephen Koukoulas : real increase of nothing. But just confirming that we consumers, 99 00:05:04,680 --> 00:05:06,660 Stephen Koukoulas : we are hunkering down, we are responding to cost of 100 00:05:06,660 --> 00:05:10,049 Stephen Koukoulas : living pressures, we're responding to the interest rate hikes and 101 00:05:10,470 --> 00:05:12,779 Stephen Koukoulas : we're not spending all that much. So that's one of 102 00:05:12,779 --> 00:05:15,178 Stephen Koukoulas : the reasons why, as I alluded to with that inflation 103 00:05:15,178 --> 00:05:17,339 Stephen Koukoulas : number, now, if we get in the course of this 104 00:05:17,400 --> 00:05:22,589 Stephen Koukoulas : coming week elevated inflation somewhat, but really poor news on 105 00:05:22,920 --> 00:05:26,010 Stephen Koukoulas : economic activity, that's the dilemma that the RBA does not 106 00:05:26,580 --> 00:05:28,770 Stephen Koukoulas : want to see and will not enjoy trying to analyze. 107 00:05:29,339 --> 00:05:32,070 Sean Aylmer: Finally, house prices. What's going on there? We get the 108 00:05:32,130 --> 00:05:33,660 Sean Aylmer: July figures at the end of the week. 109 00:05:33,839 --> 00:05:36,750 Stephen Koukoulas : We do from our friends at CoreLogic, and we know 110 00:05:36,750 --> 00:05:39,450 Stephen Koukoulas : from their high frequency daily data, it's going to be 111 00:05:39,450 --> 00:05:43,620 Stephen Koukoulas : up about 0.4, 0. 5%, which is actually one of the weakest 112 00:05:43,620 --> 00:05:46,320 Stephen Koukoulas : results in the last 18 months. So house price growth 113 00:05:46,560 --> 00:05:50,370 Stephen Koukoulas : is slowing, but, and it's a really big but, the 114 00:05:50,370 --> 00:05:54,570 Stephen Koukoulas : divergence from city- to- city is astronomical in ... I'll talk 115 00:05:54,570 --> 00:05:58,109 Stephen Koukoulas : about the annual figures. We know that in Perth, annual 116 00:05:58,109 --> 00:06:04,890 Stephen Koukoulas : house prices are rising by about 24%, 25%. That's phenomenal. Whereas 117 00:06:04,890 --> 00:06:08,459 Stephen Koukoulas : we contrast that with lovely Melbourne and Hobart, they're flat 118 00:06:08,460 --> 00:06:12,120 Stephen Koukoulas : to slightly down. So we've got this real, I don't 119 00:06:12,120 --> 00:06:16,409 Stephen Koukoulas : know, patchwork, multi- speed housing market coming through. But of 120 00:06:16,410 --> 00:06:19,349 Stephen Koukoulas : course they're important from the perspective of a wealth effect 121 00:06:19,350 --> 00:06:20,940 Stephen Koukoulas : and what's going to be happening to the banking sector. 122 00:06:20,940 --> 00:06:23,220 Stephen Koukoulas : So the RBA will have a bit of a look 123 00:06:23,220 --> 00:06:25,260 Stephen Koukoulas : at them. Obviously they don't target house prices with their 124 00:06:25,260 --> 00:06:27,630 Stephen Koukoulas : monetary policy settings, but they do look at them from 125 00:06:27,630 --> 00:06:30,328 Stephen Koukoulas : the wealth effect, the confidence effect that we get when 126 00:06:30,330 --> 00:06:32,490 Stephen Koukoulas : house prices are going up or down or whatever they're 127 00:06:32,490 --> 00:06:35,039 Stephen Koukoulas : going to be doing. So house prices, if you're in 128 00:06:35,190 --> 00:06:39,510 Stephen Koukoulas : Perth, Brisbane, Adelaide and you own residential property, you can 129 00:06:39,510 --> 00:06:41,940 Stephen Koukoulas : do cartwheels down the main street because you're making lots 130 00:06:41,940 --> 00:06:42,299 Stephen Koukoulas : of money. 131 00:06:43,410 --> 00:06:47,460 Sean Aylmer: Okay, Stephen, enjoy the week. I mean you'll be exhausted by the 132 00:06:47,460 --> 00:06:48,360 Sean Aylmer: end of it, I'd imagine. 133 00:06:49,080 --> 00:06:52,738 Stephen Koukoulas : Come Friday I'll be just looking forward to a nice 134 00:06:52,770 --> 00:06:56,070 Stephen Koukoulas : glass of Tasmanian (inaudible) and a nice little bit of Chinese food. 135 00:06:57,810 --> 00:06:59,219 Sean Aylmer: Very flash. Stephen, enjoy the week. 136 00:06:59,488 --> 00:06:59,849 Stephen Koukoulas : Thanks Sean. 137 00:06:59,849 --> 00:07:02,820 Sean Aylmer: That was economist, Stephen Koukoulas, better known as The Kouk. 138 00:07:02,849 --> 00:07:05,130 Sean Aylmer: You can find him at thekouk. com and follow him 139 00:07:05,130 --> 00:07:07,770 Sean Aylmer: on X using the handle TheKouk. I'm Sean Aylmer and 140 00:07:07,770 --> 00:07:09,419 Sean Aylmer: this is Fear and Greed - The Week Ahead.