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Speaker 1: Welcome to Fear and Greed Q and A where we

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Speaker 1: ask and answer questions about business, investing, economics, politics and more.

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Speaker 1: I'm Michael Thompson and every Monday morning we are joined

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Speaker 1: by economist Stephen Coucoulis to look at the week ahead.

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Speaker 1: You'll find him at the kook dot com that is

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Speaker 1: thg kouk dot com and on X using the handle

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Speaker 1: of the Kirk Stephen.

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Speaker 2: Good morning, top of the morning to you, Michael.

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Speaker 1: We have got so much to talk about about what's

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Speaker 1: coming up this week, but before we do that, we

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Speaker 1: need to put a few things to bed from last

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Speaker 1: week wages data. We talked last Monday about how important

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Speaker 1: it was. What did you make of the figures?

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Speaker 2: Yeah, Well, the headline figure, the zero point eight percent

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Speaker 2: increase in the wage pricing next for the September quarter

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Speaker 2: three point four percent in annual terms, spot on expectations.

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Speaker 2: So in a sense it went through to the keeper

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Speaker 2: and it was not really that sort of market moving thing. However,

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Speaker 2: there were a few little snippets of information that were

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Speaker 2: interesting in that some of the resilience was in public

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Speaker 2: sector wages growth and the private sector wages growth the

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Speaker 2: one that's more sensitive to interest rate settings actually slowed

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Speaker 2: to three point two percent, its lowest in three and

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Speaker 2: a half years.

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Speaker 1: Okay, the other big thing last week was the release

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Speaker 1: of the minutes of the Reserve Bank Board meeting that

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Speaker 1: had happened two weeks prior and really show that the

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Speaker 1: central Bank's got no plans to cut rates unless inflation

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Speaker 1: data improves, right, So it it really feels like the

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Speaker 1: there's nothing going to be happening in the near future.

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Speaker 2: And it's interesting you spot on. That's that's the first thing.

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Speaker 2: And the second thing is that we do know that

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Speaker 2: when the RBA pauses and they pause for a long

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Speaker 2: period of time, if we look back at history when

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Speaker 2: they've done a few cuts or done a few hikes,

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Speaker 2: and you know, they decide to look, well, just wait

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Speaker 2: and see what happens. There are many examples where it's

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Speaker 2: been a year sometimes more between interest rate moves. So

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Speaker 2: it doesn't completely rule out a rate cut or lock

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Speaker 2: in a rate hike for that matter, but it's really

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Speaker 2: one of those ones that the RBA just doesn't want

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Speaker 2: to see one or two or three months of information.

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Speaker 2: They need to see, as you said, confirmation that that

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Speaker 2: inflation rate is back on track. To be the middle

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Speaker 2: or below the middle of the target band. They need

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Speaker 2: to see confirmation one way or another on what's happening

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Speaker 2: to the labor market, including those wage numbers. So reading

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Speaker 2: the minutes, they're clearly getting ready for the for the

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Speaker 2: Christmas parties, end of year celebrations, and the bit of

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Speaker 2: time at the beach because they're not going to be

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Speaker 2: doing anything on monetary policy.

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Speaker 1: So when you say that then they like to wait

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Speaker 1: and see the data. They generally then have a bias

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Speaker 1: towards holding that is that the case?

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Speaker 2: Yes, so on hold correct?

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Speaker 1: Ye okay, all right, this week we obviously we talked

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Speaker 1: about inflation there about the fact that this is the

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Speaker 1: key thing, the pivotal thing. We get the monthly inflation

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Speaker 1: data out this week. Now, correct me if I'm wrong.

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Speaker 1: Is this the first time that we are getting the

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Speaker 1: comprehensive set of monthly numbers rather than the kind of

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Speaker 1: the partial print that we've had in the past.

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Speaker 2: Michael, you're spot on. This is the one that we've

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Speaker 2: all been waiting for, for some of us for decades actually.

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Speaker 2: But this is a comprehensive monthly Now the ABS, the

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Speaker 2: Bureau of Statistics has produced what they might term an

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Speaker 2: experimental or a partial monthly inflation indicator, and it's been

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Speaker 2: useful for getting little bits and information on data in

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Speaker 2: between getting the quarterly results. So this is the one

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Speaker 2: that actually is a fairly comprehensive survey, similar to the

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Speaker 2: methodology used internationally. And most other countries have monthly inflation numbers,

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Speaker 2: so we'll be watching this one with a great deal

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Speaker 2: of interest. It might just take us, all us economists

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Speaker 2: so were used to look at the quarterly numbers a

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Speaker 2: little bit more time just to digest what's in and

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Speaker 2: what's out, and what's trimmed out, and the whole gamut

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Speaker 2: of information that's going to be there on the monthly CPI.

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Speaker 2: But that set it looks like a pretty good serve

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Speaker 2: of price pressures in the economy, and it could just

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Speaker 2: sort of sway market sentiment one way or another if

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Speaker 2: we get something outside expectations.

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Speaker 1: So does it have then limited value as a comparison

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Speaker 1: to the previous month, because that's the end of the

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Speaker 1: old data, and now we're going to start a new

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Speaker 1: and you're going to need to wait and see a

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Speaker 1: few months and see how it tracks.

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Speaker 2: Last week, the Bureau Statistics put out a revised monthly

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Speaker 2: series based on the new methodology. What they have been doing,

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Speaker 2: in their wisdom is producing the experimental or the partial

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Speaker 2: one and publishing that. But they've also been producing the

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Speaker 2: more comprehensive one, but hadn't published it until last week.

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Speaker 2: They didn't want to publish it because they just wanted

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Speaker 2: to check that it was okay, that they didn't have

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Speaker 2: any inherent biases or errors in their methodology. So we

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Speaker 2: do know what the history is, the revised history, so

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Speaker 2: it will be actually know something pretty meaningful, and I

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Speaker 2: think once we get used to it and the market

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Speaker 2: gets used to it, it'll become one of the clearly

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Speaker 2: top tier economic release each month.

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Speaker 1: Okay, what kind of number are we looking for?

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Speaker 2: Yeah, of course, yeah, we're looking for an annual figure,

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Speaker 2: the headline figure probably staying around about that three point

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Speaker 2: three three point four percent, because a lot of the

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Speaker 2: what we call administered prices, prices of childcare and electricity

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Speaker 2: for example, where the subsidies are being phased out, have spiked.

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Speaker 2: They've unwound that reduction. The trimmed mean or that underlying

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Speaker 2: inflation measures probably going to be holding just to smidge

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Speaker 2: a tenth or two below three percent, so sort of

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Speaker 2: not horrendous, but just a little too high for the

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Speaker 2: RBA and the market's confidence about getting that next rate cut.

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Speaker 2: So we're looking for a figure headline three point four.

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Speaker 2: The trims mean about two point nine percent and annual terms.

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Speaker 2: All right.

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Speaker 1: The other big thing this week is private capex, which is,

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Speaker 1: as you've said in the past, this is important for productivity.

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Speaker 1: Take us through kind of how it's I'd love to

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Speaker 1: know how it's measured and why it matters so much.

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Speaker 2: The Bureau of Statistics do two components to this CAPEX

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Speaker 2: Capital Expenditure survey for the private sector. One is the

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Speaker 2: actual expenditure for the quarter. This is the September quarter number.

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Speaker 2: It's probably going to be flat, which is a little

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Speaker 2: bit disappointing. But they also ask, this is the other

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Speaker 2: really important part of this CAPEX survey, expected investment for

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Speaker 2: the next financial year. So they asked firms, well, how

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Speaker 2: much money did you invest in the quarter. I bought

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Speaker 2: some machinery and equipment and a new building and construction

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Speaker 2: activity or artificial intelligence. They're investing in those sorts of things,

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Speaker 2: and that is the actual number. But then businesses sort

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Speaker 2: of respond all say, oh, look, planning on spending two

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Speaker 2: point five billion next year or one hundred million next year,

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Speaker 2: and they add them up to the expectations numbers. So

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Speaker 2: it's not only the actual result, obviously very important that

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Speaker 2: broadly feeds into the GDP numbers for the September quarter,

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Speaker 2: which come out in early December, but it's the expectations.

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Speaker 2: It's sort of like a great big business confidence survey

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Speaker 2: when it comes to cap X, and if businesses are

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Speaker 2: feeling optimistic, A lot of CAPEX takes time to come

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Speaker 2: to fruition. So if you are wanting to build a

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Speaker 2: new warehouse, for example, you don't build it in a quarter,

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Speaker 2: so you're expected CAPEX might be two billion over the

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Speaker 2: course of the next couple of years, but you're only

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Speaker 2: outlaying a quarter of billion dollars every quarter. So that's

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Speaker 2: why the expectations numbers are so important.

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Speaker 1: All right now, I should have mentioned this before when

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Speaker 1: we were talking about the Reserve Bank and about the

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Speaker 1: fact that the RBA likes to wait and see the

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Speaker 1: data if there are any concerns that they just want

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Speaker 1: to wait and see how things play out. And I

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Speaker 1: think we have to spare a thought for the FED,

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Speaker 1: the Federal Reserve in the US because late last week

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Speaker 1: it was confirmed from the Bureau of Labor Statistics, and

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Speaker 1: this is after the government shutdown has ended, that the

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Speaker 1: October jobs report isn't going to be released independently. Part

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Speaker 1: of it's all going to come out with the November

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Speaker 1: jobs report. That's all going to happen in mid December,

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Speaker 1: which is after the FED next meets. And so you've

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Speaker 1: got to say it makes it very very difficult for

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Speaker 1: the FED to do its job right.

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Speaker 2: Well. Indeed, of course central banks, our Reserve Bank and

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Speaker 2: the US Federal Reserve on economic news to determine all

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Speaker 2: is inflation high or low? Is unemployment high or low?

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Speaker 2: Are we creating a lot of jobs or not many jobs,

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Speaker 2: or are we losing jobs? And of course, with the shutdown,

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Speaker 2: the Bureau of Labor Statistics, who are the body that

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Speaker 2: produced the bulk of the government statistics over there that

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Speaker 2: the FED relies on, and financial markets for that matter,

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Speaker 2: have not been producing anything. Now they're sort of playing

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Speaker 2: catch up that the lockdown or the shutdown has ended,

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Speaker 2: and the period where they was shut down for the

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Speaker 2: data just wasn't collected. So there's a sort of a

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Speaker 2: little bit of catch up, and as you alluded to,

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Speaker 2: the FED meeting will be flying blind, I think is

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Speaker 2: the terminology. They'll be sort of sitting down with anecdotal

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Speaker 2: evidence about you know, they've got various private sector surveys

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Speaker 2: due to supply management, surveys of construction, of services, of

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Speaker 2: manufacturing are useful indicators, but they're not the hand on

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Speaker 2: your heart, this is what the economy is doing sort

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Speaker 2: of indicators. So they'll be assessing monetary policy from a

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Speaker 2: perspective with you know, pretty limited data. As you said,

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Speaker 2: it doesn't come out and they don't resume that business

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Speaker 2: as usual data flow until after the December meeting of

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Speaker 2: the FIMC. So that's one reason why the market has

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Speaker 2: gone from pricing in a high probability of a rate

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Speaker 2: cut to one where it's sort of seen to be well,

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Speaker 2: they'd be playing with fire if they were to cut

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Speaker 2: rates not knowing what inflation's doing and what the labor market's.

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Speaker 1: Doing, especially when it is a time when there is

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Speaker 1: probably more disagreement within the FED about rates than there

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Speaker 1: has been in kind of recent memory, isn't there because

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Speaker 1: they've got the minutes effectively showing that there were I

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Speaker 1: think strongly differing views was which is the quote which

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Speaker 1: usually these decisions are either unanimous or pretty close to unanimous.

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Speaker 2: Indeed. And so one of the things that I think

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Speaker 2: a lot of us have been doing is looking at

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Speaker 2: what the various FED members have been talking about. Unlike

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Speaker 2: our Reserve Bankboard that doesn't speak a lot, they don't

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Speaker 2: give a lot of speeches unless you're the official RBA

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Speaker 2: staff in the US, the FED officials talk a lot.

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Speaker 2: And so we've been looking at what they've been saying.

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Speaker 2: And there's various hawks and doves and people who are

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Speaker 2: neutral and trying to weigh up what they're saying. And

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Speaker 2: there seems to be this skewing of views of the

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Speaker 2: people who matter, the ones who make the decision on

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Speaker 2: US interest rates, saying, look, we just really want to

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Speaker 2: sit tight. We want to The economy is doing okay.

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Speaker 2: You know, the stock markets rebounded nicely. We had a

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Speaker 2: little bit of a pull off, a pullback earlier, and

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Speaker 2: it's recovered quite nicely. So they're sort of saying they

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Speaker 2: want to wait and see. And if they want to

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Speaker 2: wait and see, the signals coming through pretty clear rates

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Speaker 2: on hold. So watch what the Fed officials are talking

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Speaker 2: about over the course of this week too, because that's

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Speaker 2: going to be a pretty good guide on what they're

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Speaker 2: going to be thinking when they sit down to discuss

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Speaker 2: whether rate should be cut or left unchanged.

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Speaker 1: Exciting times. Thank you very much, Steven, Thank you, Michael.

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Speaker 1: That was economist Stephen Coo Coolest, better known as the Kook.

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

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Speaker 1: follow him on X of course using the handle the Kook.

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Speaker 1: I'm Michael Thompson and this is Fear and Greed Q

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Speaker 1: and a