1 00:00:08,660 --> 00:00:11,100 Sean Aylmer: Welcome to Fear And Greed, The Week Ahead. This is 2 00:00:11,100 --> 00:00:12,910 Sean Aylmer: where we take a look at the big events, reports 3 00:00:12,990 --> 00:00:15,270 Sean Aylmer: and releases coming up this week that give insight into 4 00:00:15,270 --> 00:00:17,390 Sean Aylmer: the economy, and a look back at what happened last 5 00:00:17,390 --> 00:00:19,939 Sean Aylmer: week, too. I'm Sean Aylmer and every Monday I'm joined 6 00:00:19,940 --> 00:00:22,540 Sean Aylmer: for The Week Ahead by economist Stephen Koukoulas. You'll find 7 00:00:22,540 --> 00:00:24,650 Sean Aylmer: him at thekouk. com, T- H- E- K- O- U- 8 00:00:24,650 --> 00:00:28,260 Sean Aylmer: K, and on Twitter using the handle @ TheKouk. Stephen, I 9 00:00:28,260 --> 00:00:31,620 Sean Aylmer: love spelling TheKouk. T- H- E- K- O- U- K. 10 00:00:32,300 --> 00:00:36,610 Stephen Koukoulas: Well, it was a bit of a funny abbreviation of Koukoulas, and I think 11 00:00:36,610 --> 00:00:39,269 Stephen Koukoulas: my daughter gave it to me, amongst other unkind people. 12 00:00:39,270 --> 00:00:41,979 Stephen Koukoulas: But anyway, it sort of stuck and I'm happy to 13 00:00:41,979 --> 00:00:43,500 Stephen Koukoulas: live with it. I'm a bit of a kook anyway. 14 00:00:43,909 --> 00:00:47,790 Sean Aylmer: When I first met you, you went and spent some 15 00:00:47,790 --> 00:00:49,589 Sean Aylmer: time working at the Financial Review, and I was working 16 00:00:49,590 --> 00:00:51,040 Sean Aylmer: there and I remember the editor at the time, a 17 00:00:51,040 --> 00:00:54,100 Sean Aylmer: guy called Glenn Burge, saying "The Kouk's here," and I thought, " The 18 00:00:54,100 --> 00:00:57,690 Sean Aylmer: what's here?" I had no idea what he was talking about, 19 00:00:57,690 --> 00:01:01,160 Sean Aylmer: and he always called you The Kouk. And so anyway, you 20 00:01:01,160 --> 00:01:01,001 Sean Aylmer: turned out (crosstalk) 21 00:01:01,490 --> 00:01:03,960 Stephen Koukoulas: Yeah, Glenn's a good bloke. And I enjoyed my time 22 00:01:03,960 --> 00:01:06,080 Stephen Koukoulas: at the AFR. Gosh, that was a long time ago now. 23 00:01:06,200 --> 00:01:08,010 Sean Aylmer: It was. It was. Let's not talk about it. Look, 24 00:01:08,340 --> 00:01:12,550 Sean Aylmer: last week, a bit going on. The Reserve Bank didn't do anything too surprising. 25 00:01:12,990 --> 00:01:16,670 Stephen Koukoulas: No as expected, they left all of the policy settings, 26 00:01:16,670 --> 00:01:19,420 Stephen Koukoulas: the interest rate, their bond buying program and the like 27 00:01:19,420 --> 00:01:23,000 Stephen Koukoulas: completely unchanged. Their analysis of the economy was actually relatively 28 00:01:23,000 --> 00:01:26,390 Stephen Koukoulas: short. In a sense, they're just saying to the markets 29 00:01:26,390 --> 00:01:28,740 Stephen Koukoulas: and to the business people and the like that they're 30 00:01:28,740 --> 00:01:31,080 Stephen Koukoulas: just going to see how the economy pans out over this 31 00:01:31,080 --> 00:01:34,450 Stephen Koukoulas: next couple of months, as the lockdowns are coming to an 32 00:01:34,450 --> 00:01:38,150 Stephen Koukoulas: end quite clearly. And when we kick off 2022 in 33 00:01:38,150 --> 00:01:40,700 Stephen Koukoulas: the very near future, they're going to be really then 34 00:01:40,700 --> 00:01:43,289 Stephen Koukoulas: just taking a bit of a recast of what sort 35 00:01:43,290 --> 00:01:46,190 Stephen Koukoulas: of recovery we're going to see as the lockdowns end, what's 36 00:01:46,190 --> 00:01:49,380 Stephen Koukoulas: happening in the global economy, and of course what's happening 37 00:01:49,540 --> 00:01:51,500 Stephen Koukoulas: in the housing, which of course was another issue that 38 00:01:51,500 --> 00:01:52,910 Stephen Koukoulas: popped up last week. 39 00:01:53,260 --> 00:01:57,670 Sean Aylmer: Yeah. Housing with APRA, the Australian Prudential Regulation Authority, saying 40 00:01:57,670 --> 00:02:02,020 Sean Aylmer: it will actually change serviceability limits. What do you make 41 00:02:02,020 --> 00:02:02,380 Sean Aylmer: of that? 42 00:02:02,500 --> 00:02:06,520 Stephen Koukoulas: Yeah, look, it's a marginal thing. You've got this dilemma 43 00:02:06,650 --> 00:02:09,780 Stephen Koukoulas: in the housing market where we do want to improve affordability, 44 00:02:10,000 --> 00:02:12,660 Stephen Koukoulas: particularly for first home buyers. So in a sense, you've 45 00:02:12,660 --> 00:02:15,910 Stephen Koukoulas: got a lot of state governments in particular throwing money 46 00:02:15,910 --> 00:02:19,400 Stephen Koukoulas: at first home buyers with stamp duty concessions and fairly 47 00:02:19,400 --> 00:02:22,179 Stephen Koukoulas: chunky cash grants to people. And then on the other hand, you've 48 00:02:22,180 --> 00:02:24,290 Stephen Koukoulas: now got APRA saying, well, hang on. If you're one 49 00:02:24,290 --> 00:02:27,900 Stephen Koukoulas: of these marginal borrowers, we changed effectively the stress test 50 00:02:28,310 --> 00:02:30,200 Stephen Koukoulas: when you apply for a loan instead of a two 51 00:02:30,200 --> 00:02:32,609 Stephen Koukoulas: and a half percentage point lift on where interest rates 52 00:02:32,610 --> 00:02:36,019 Stephen Koukoulas: are today, we've got to make that threshold three percentage points. 53 00:02:36,430 --> 00:02:38,609 Stephen Koukoulas: It's a little bit harder for people who are very 54 00:02:38,639 --> 00:02:41,110 Stephen Koukoulas: much at the margin in terms of getting a new loan. 55 00:02:41,110 --> 00:02:43,870 Stephen Koukoulas: So at the end of the day, it's probably not going to 56 00:02:43,870 --> 00:02:46,810 Stephen Koukoulas: have a huge impact. Other things will matter more at 57 00:02:46,810 --> 00:02:49,130 Stephen Koukoulas: the end of the day, like when we get immigration 58 00:02:49,130 --> 00:02:52,040 Stephen Koukoulas: coming back into the economy. And indeed, if in fact 59 00:02:52,040 --> 00:02:55,480 Stephen Koukoulas: we do get a discussion unfolding of interest rate rises 60 00:02:55,480 --> 00:02:58,040 Stephen Koukoulas: during next year or so, that will be way more 61 00:02:58,040 --> 00:03:00,150 Stephen Koukoulas: important than what APRA did. Look, it's fair enough. We 62 00:03:00,290 --> 00:03:01,709 Stephen Koukoulas: don't want the banks lending to people who aren't going 63 00:03:01,710 --> 00:03:04,460 Stephen Koukoulas: to repay them. And at the margin, it'll just sort 64 00:03:04,460 --> 00:03:05,619 Stephen Koukoulas: of dampen some demand. 65 00:03:05,820 --> 00:03:08,731 Sean Aylmer: And just before we leave last week, a whopping trade figure. 66 00:03:09,740 --> 00:03:14,620 Stephen Koukoulas: $15 billion for the month. Goodness. Again, the record high 67 00:03:14,669 --> 00:03:19,290 Stephen Koukoulas: monthly trade number. We're exporting like crazy, even though the 68 00:03:19,290 --> 00:03:22,130 Stephen Koukoulas: iron ore price has clearly come off quite dramatically this last 69 00:03:22,130 --> 00:03:24,940 Stephen Koukoulas: couple of months. The volumes and the price is still 70 00:03:24,940 --> 00:03:27,840 Stephen Koukoulas: elevated really compared to the cost of production. But we've 71 00:03:27,840 --> 00:03:31,950 Stephen Koukoulas: also got this incredible surge in other energy prices, natural gas, 72 00:03:32,240 --> 00:03:34,570 Stephen Koukoulas: coal prices, and of course we're still a big exporter 73 00:03:34,570 --> 00:03:37,790 Stephen Koukoulas: of those things. And given that imports have been constrained 74 00:03:37,790 --> 00:03:40,660 Stephen Koukoulas: by this weak economy, import values were very low. So 75 00:03:40,660 --> 00:03:44,600 Stephen Koukoulas: we had this quite spectacular, $15 billion trade surplus. And that's one of 76 00:03:45,340 --> 00:03:47,550 Stephen Koukoulas: the reasons why the economy's sort of kept its head 77 00:03:47,550 --> 00:03:49,830 Stephen Koukoulas: above water in these difficult COVID times. 78 00:03:50,210 --> 00:03:52,250 Sean Aylmer: Well, that's last week. We'll be back in a moment 79 00:03:52,250 --> 00:03:53,370 Sean Aylmer: and get into the week ahead. 80 00:03:58,460 --> 00:04:02,140 Sean Aylmer: I'm with economist, Stephen Koukoulas, AKA The Kouk. So Stephen, 81 00:04:02,440 --> 00:04:04,490 Sean Aylmer: we'll get to the big one in a moment, but there's business 82 00:04:04,490 --> 00:04:06,440 Sean Aylmer: confidence and consumer sentiment data out. 83 00:04:06,560 --> 00:04:09,250 Stephen Koukoulas: They're both really good indicators. I like to see what consumers 84 00:04:09,790 --> 00:04:12,690 Stephen Koukoulas: and business are thinking. The NAB survey will be sort 85 00:04:12,690 --> 00:04:15,810 Stephen Koukoulas: of reflecting how the businesses are seeing the economy. Now clearly, 86 00:04:16,260 --> 00:04:18,169 Stephen Koukoulas: the survey was conducted a couple of weeks ago and 87 00:04:18,170 --> 00:04:20,169 Stephen Koukoulas: they're publishing the results this week, but it'll sort of 88 00:04:20,170 --> 00:04:23,950 Stephen Koukoulas: be a guide to whether this optimism as the lockdowns 89 00:04:23,950 --> 00:04:27,170 Stephen Koukoulas: are sort of on the horizon anyway, will be sparking and 90 00:04:27,170 --> 00:04:31,820 Stephen Koukoulas: lifting hiring in terms of selling prices, capacity utilisation, and 91 00:04:31,820 --> 00:04:35,040 Stephen Koukoulas: indeed just general business confidence. So that's a good indicator 92 00:04:35,040 --> 00:04:39,080 Stephen Koukoulas: on the business side. And for us consumers, the Westpac Consumer Sentiment 93 00:04:39,200 --> 00:04:41,480 Stephen Koukoulas: Index has got a really good track record at picking 94 00:04:42,100 --> 00:04:44,930 Stephen Koukoulas: the swings in the mood of the consumer, linked to 95 00:04:44,930 --> 00:04:48,430 Stephen Koukoulas: things like unemployment, stock market changes, and these sorts of things. 96 00:04:48,450 --> 00:04:51,589 Stephen Koukoulas: And you'd expect that with these lockdowns coming to an end, 97 00:04:51,589 --> 00:04:54,360 Stephen Koukoulas: these really high vaccination rates coming through in most places, 98 00:04:54,360 --> 00:04:56,570 Stephen Koukoulas: that consumers will be a little bit more optimistic. 99 00:04:56,960 --> 00:04:59,080 Sean Aylmer: Okay. The big one next week is the labour force 100 00:04:59,080 --> 00:05:03,770 Sean Aylmer: data for September. Now August we had this almost unbelievable 101 00:05:03,770 --> 00:05:06,150 Sean Aylmer: unemployment rate of four and a half per cent. What do 102 00:05:06,150 --> 00:05:07,360 Sean Aylmer: you think will happen this week? 103 00:05:08,880 --> 00:05:12,779 Stephen Koukoulas: I've almost given up trying to forecast these monthly moves 104 00:05:12,779 --> 00:05:16,020 Stephen Koukoulas: in the labour force numbers because of those ... Well, quirks 105 00:05:16,020 --> 00:05:19,159 Stephen Koukoulas: is sort of an understatement that ... The funny thing about 106 00:05:19,160 --> 00:05:22,070 Stephen Koukoulas: that low unemployment rate was the fact that we still had, 107 00:05:22,070 --> 00:05:25,620 Stephen Koukoulas: if I remember correctly, several hundred thousand people counted as employed, 108 00:05:25,620 --> 00:05:29,120 Stephen Koukoulas: but they were working zero hours. That's the effect of 109 00:05:29,120 --> 00:05:31,770 Stephen Koukoulas: the lockdowns and some of the support payments that are going 110 00:05:31,770 --> 00:05:34,220 Stephen Koukoulas: out to workers. So we had this really strange labour 111 00:05:34,220 --> 00:05:36,890 Stephen Koukoulas: force result, but suffice to say the labour market is 112 00:05:36,890 --> 00:05:39,409 Stephen Koukoulas: still weak. When we look at aggregate hours worked, so 113 00:05:39,510 --> 00:05:43,560 Stephen Koukoulas: how many hours, the 13- odd million people who are working, 114 00:05:43,589 --> 00:05:45,620 Stephen Koukoulas: that was very, very weak. So I think we'll be 115 00:05:45,620 --> 00:05:49,180 Stephen Koukoulas: analysing that to see whether the labour market still is weak. 116 00:05:49,180 --> 00:05:50,710 Stephen Koukoulas: There's no doubt it will be because of course, as 117 00:05:50,710 --> 00:05:53,570 Stephen Koukoulas: you mentioned, these are for the month of September. Lockdowns 118 00:05:53,680 --> 00:05:58,320 Stephen Koukoulas: in New South Wales, Victoria, ACT, closed borders in other states. 119 00:05:58,320 --> 00:06:01,400 Stephen Koukoulas: So likely to be another weak result in terms of 120 00:06:01,490 --> 00:06:05,920 Stephen Koukoulas: employment and hours worked, but as we've been noting for 121 00:06:05,920 --> 00:06:08,390 Stephen Koukoulas: some time now, the demand for labour is still pretty good. 122 00:06:08,620 --> 00:06:11,150 Stephen Koukoulas: The job vacancies and job add series is still quite firm. 123 00:06:11,360 --> 00:06:13,870 Sean Aylmer: And Stephen, I know you're Canberra- based, but certainly New 124 00:06:13,870 --> 00:06:16,810 Sean Aylmer: South Wales should get a fillip from today with reopening, 125 00:06:16,810 --> 00:06:18,870 Sean Aylmer: and that should help the labour market as we go forward. 126 00:06:19,050 --> 00:06:21,400 Stephen Koukoulas: Oh, no doubt about that, that demand for workers. And in fact, 127 00:06:21,970 --> 00:06:24,409 Stephen Koukoulas: I'm already hearing from a couple of different sources that 128 00:06:24,750 --> 00:06:26,940 Stephen Koukoulas: the restaurants, pubs and clubs were all opening and they 129 00:06:26,940 --> 00:06:31,039 Stephen Koukoulas: can't find staff. So to the extent that they want to go open, 130 00:06:31,040 --> 00:06:33,420 Stephen Koukoulas: obviously you need someone to cook the meals and serve 131 00:06:33,420 --> 00:06:35,500 Stephen Koukoulas: the beers and all the rest of it. Yes, it's 132 00:06:35,500 --> 00:06:38,070 Stephen Koukoulas: going to be a constraint on that opening up, but 133 00:06:38,070 --> 00:06:39,710 Stephen Koukoulas: in a sense, it's a sign that the economy is 134 00:06:39,710 --> 00:06:44,130 Stephen Koukoulas: really like the proverbial coiled spring, ready to unleash. So again, 135 00:06:44,130 --> 00:06:47,230 Stephen Koukoulas: there's optimism hopefully coming through as these lockdowns, not just 136 00:06:47,230 --> 00:06:50,870 Stephen Koukoulas: in New South Wales from now, but hopefully very soon 137 00:06:50,870 --> 00:06:53,380 Stephen Koukoulas: in the ACT and hopefully in Victoria in the not too 138 00:06:53,380 --> 00:06:54,130 Stephen Koukoulas: distant future. 139 00:06:54,430 --> 00:06:55,610 Sean Aylmer: Stephen, have a great week. 140 00:06:55,740 --> 00:06:56,380 Stephen Koukoulas: Thanks Sean. 141 00:06:56,710 --> 00:06:59,740 Sean Aylmer: That was economist Stephen Koukoulas, better known as The Kouk. You can 142 00:06:59,740 --> 00:07:02,420 Sean Aylmer: find him at thekouk. com, and follow him on Twitter 143 00:07:02,420 --> 00:07:06,100 Sean Aylmer: using the handle, @ TheKouk. I'm Sean Aylmer, and this is Fear and Greed, 144 00:07:06,140 --> 00:07:06,730 Sean Aylmer: The Week Ahead.