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Speaker 1: Welcome to Fear Angreed the week Ahead. I'm Sean Alma

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Speaker 1: and we're back for twenty twenty five with economist Stephen

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Speaker 1: Kokulis to talk about what's happening in the economy in

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Speaker 1: the week ahead. You'll find him at the Cook dot

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Speaker 1: com t h E. K uk thecook dot com and

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Speaker 1: I'm next using the handle the Kuk. Stephen, Welcome to

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Speaker 1: twenty twenty five.

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Speaker 2: And welcome Sean. Great to be back. I hope everybody

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Speaker 2: had a lovely break and is now gearing up for

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Speaker 2: what's going to be a fabulous fear for the economy, markets, politics,

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Speaker 2: and there I say the football.

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Speaker 1: Well, yes, I'm plea. I'm pleased you mentioned the football,

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Speaker 1: But I think we have to start with politics. What

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Speaker 1: we're twenty four hours, less than twenty four hours away

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Speaker 1: from officially having a new president. What can we expect?

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Speaker 1: In fact, this is the impossible question. What can we

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Speaker 1: expect from Trump administration? Two point zero.

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Speaker 2: Extreme and uncertain policy change? It's how I describe it,

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Speaker 2: to be advised. And we know one thing is that

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Speaker 2: we know how he handled his first term in office

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Speaker 2: because he's been president before, so this time around, I

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Speaker 2: think he's learnt a bit, and dare I say it,

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Speaker 2: he may have mellowed just a smidge that some of

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Speaker 2: the sort of crazy stuff that he was talking about

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Speaker 2: will be moderated to some extent. But and this is

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Speaker 2: the important but things that the market will be focusing on.

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Speaker 2: Things has got the potential to sort of upset economic

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Speaker 2: growth in the economy, to both domestically in the US

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Speaker 2: but also globally, will be what he does with tariffs.

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Speaker 2: Is there what do we call it, a trade war

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Speaker 2: between China and the US, Europe and US. Is that

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Speaker 2: going to be sort of the sand in the gearbox

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Speaker 2: of global trade flows, which would be not good news.

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Speaker 2: It would be adding to inflation just when it looks

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Speaker 2: as if we've got inflation lower. Is that going to

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Speaker 2: be the thing that sort of sparks inflation problem in

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Speaker 2: the US and more specifically globally. It's that sort of

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Speaker 2: stuff that the company tax cuts these talking about. We'll

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Speaker 2: have to wait and see if they're implemented. But again

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Speaker 2: that's a huge issue. We've got nil on musks of

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Speaker 2: looking at the budget position to see whether there's some

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Speaker 2: superflous spending that can be cut, because the US budget

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Speaker 2: deficit is huge, And yes it is huge, but how

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Speaker 2: do you tackle it through more taxes or less spending

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Speaker 2: or a combination of the two. But oh gosh, we'll

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Speaker 2: wake up most mornings like we used to in the

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Speaker 2: olden days. What did Donald Trump say overnight in our

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Speaker 2: while we were asleep and think, oh my god, he

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Speaker 2: said that.

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Speaker 1: Yeah. One thing about Donald Trump, those policies that he

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Speaker 1: is talking about, even if he enacts twenty percent of them,

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Speaker 1: they are inflationary. You can't get rid of immigrants without

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Speaker 1: expecting wage prices to rise. You can't increase tariffs without

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Speaker 1: expecting the price of goods to rise. What's that mean?

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Speaker 1: And does that flow through to Australia? People always say, yeah,

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Speaker 1: that's in the US. What about Australia?

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Speaker 2: It is in the US. We sort of during the pandemic,

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Speaker 2: when there's a global inflation risk will be important. You know,

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Speaker 2: we buy goods and services that are produced in the

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Speaker 2: global economy that are afraid to here the logistics prices.

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Speaker 2: And it's funny you should sort of say that because

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Speaker 2: one of my favorite indicators is the Commodities Research Bureau

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Speaker 2: Index of commodity prices. That's one of my favorite economic indicators.

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Speaker 2: Because it's an all encompassing commodity price index, unlike our

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Speaker 2: RBA Index of commodity prices, which is really specific to Australia,

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Speaker 2: but this one includes you know, coffee, orange juice, eggs

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Speaker 2: and all that sort of stuff, and it is actually

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Speaker 2: rising already. Some people have analyzed this more closer than

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Speaker 2: I do, and they say it's possibly in anticipation of

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Speaker 2: some sort of tariff war going on, as we just

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Speaker 2: discussed a minute ago. If that's true, and we get

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Speaker 2: that lift in global commodity prices that's linked to trade

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Speaker 2: dislocation and all these other things, then yes, we do

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Speaker 2: have an inflation risk anyway that in the next six

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Speaker 2: to twelve months inflation will be high. We're currently pricing

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Speaker 2: in and currently thinking about, even though those expectations have

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Speaker 2: changed quite a bit while we were on our Christmas

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Speaker 2: Gudio holidays.

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Speaker 1: Beautiful segue in. I mean, not a lot of economic

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Speaker 1: data this week but into next week, but we have

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Speaker 1: the December quarter CPI next week. Now we will talk

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Speaker 1: about that, you know, in seven days time, but really

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Speaker 1: all eyes on that, particularly after what in the last

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Speaker 1: few weeks we've had labor market figures. We had those

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Speaker 1: November CPI figures a fair bit going on.

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Speaker 2: There's a lot going on in the well. The labor

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Speaker 2: market figures last week were good, you know, that were

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Speaker 2: terrific news in many ways, low unemployment. It ticked up

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Speaker 2: to four point zero percent fifty five thousand jobs or thereabouts.

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Speaker 2: So we've got that sort of dynamic occurring. But in

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Speaker 2: a funny way, it is the CPI that matters more

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Speaker 2: to the RBA. I think this time around when wages

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Speaker 2: growth is already decelerating. So next week, when we get

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Speaker 2: the December quarter CPI, which is the comprehensive view of

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Speaker 2: inflation as opposed to the monthly indicator, which is very,

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Speaker 2: very useful, But the quarterly one is the main game

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Speaker 2: in town. It's the one that the RBA like to

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Speaker 2: trim to get their underlying or core inflation measure coming through.

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Speaker 2: And the market's got roughly a seventy percent chance of

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Speaker 2: a rate cut in the middle of February if this

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Speaker 2: number the trimm de mean, I think the one that's

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Speaker 2: going to be focusing everyone's attention. If the CPI next

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Speaker 2: week comes in a zero point six for the trim

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Speaker 2: mean or less, it'll be game on point seven and above.

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Speaker 2: It might just be enough for the RBA to sit

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Speaker 2: tight given some of these other political risks we were just

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Speaker 2: talking about with the Trump administration, some of the labor

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Speaker 2: market numbers that we saw last week, which were nice

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Speaker 2: and strong. So gosh, it's rare that one number has

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Speaker 2: such a dominant influence on what the RBA might do.

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Speaker 2: But I think this one could be one of those

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Speaker 2: that really is yay or no to the rate cut

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Speaker 2: in the middle of February.

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Speaker 1: It's going to be a fun year, isn't it.

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Speaker 2: Oh, I can't wait. I think we're going to be

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Speaker 2: seeing lots of stuff going on, not just internationally, but

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Speaker 2: we've got our own election coming up gosh, sometime in

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Speaker 2: the next few months. We don't know the date yet,

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Speaker 2: but again, the policy agenda starting to be rolled out

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Speaker 2: by both sides as and if the bidding markets are any guide,

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Speaker 2: it's a lineball call, as they say, too close to call.

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Speaker 2: That could throw up some policy issues that will influence

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Speaker 2: markets as well as US people who turn out to vote.

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Speaker 1: And Joe the week, Stephen will speak to you next Monday.

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Speaker 2: Thanks you on see you next week.

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Speaker 1: No, it is economist Stephen Coculis Betternne is the Koki.

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Speaker 1: Can find him at the cook dot com and follow

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Speaker 1: him on X using the handle the kok. I'm Suan Almer,

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Speaker 1: and this is fear and greed. The week ahead