1 00:00:05,370 --> 00:00:07,320 Sean Aylmer: Welcome to Fear and Greed - The Week Ahead. I'm Sean 2 00:00:07,410 --> 00:00:10,559 Sean Aylmer: Aylmer, and as always I'm joined by economist Stephen Koukoulas. 3 00:00:10,559 --> 00:00:13,049 Sean Aylmer: You'll find him at thekouk. com and on X using 4 00:00:13,049 --> 00:00:15,269 Sean Aylmer: the handle TheKouk. Stephen, good morning. 5 00:00:15,420 --> 00:00:16,410 Stephen Koukoulas : Good morning to you, Sean. 6 00:00:16,799 --> 00:00:18,840 Sean Aylmer: Why do you make of those labor force figures last 7 00:00:18,840 --> 00:00:19,110 Sean Aylmer: week 8 00:00:19,920 --> 00:00:23,310 Stephen Koukoulas : They were the proverbial data release that had something for 9 00:00:23,340 --> 00:00:26,910 Stephen Koukoulas : everyone. If you wanted to be upbeat on the economy, 10 00:00:26,910 --> 00:00:29,190 Stephen Koukoulas : we're doing fine. And gee, the RBA might have to 11 00:00:29,219 --> 00:00:32,219 Stephen Koukoulas : hike again. You would focus on the plus 50,000 in 12 00:00:32,219 --> 00:00:35,369 Stephen Koukoulas : employment because that's a pretty impressive result. If you wanted 13 00:00:35,369 --> 00:00:38,098 Stephen Koukoulas : to say, well, hang on, the economy appears to be 14 00:00:38,100 --> 00:00:42,659 Stephen Koukoulas : slowing, the unemployment rate is more important, because that employment 15 00:00:42,659 --> 00:00:46,110 Stephen Koukoulas : number being inflated by this surge in immigration, the strong 16 00:00:46,110 --> 00:00:49,620 Stephen Koukoulas : population growth, so the unemployment rate is still the residual 17 00:00:49,620 --> 00:00:52,619 Stephen Koukoulas : of people who are unemployed as a proportion of the labor force, and 18 00:00:52,619 --> 00:00:58,050 Stephen Koukoulas : it went up from 4.0% to 4. 1%, meaning that it's 19 00:00:58,050 --> 00:01:02,070 Stephen Koukoulas : gone up 0. 6 percentage points over the last 12 20 00:01:02,070 --> 00:01:06,029 Stephen Koukoulas : months. And curiously, when I look at the US, guess 21 00:01:06,030 --> 00:01:07,799 Stephen Koukoulas : what's happened to its unemployment rate in the last 12 22 00:01:07,799 --> 00:01:13,169 Stephen Koukoulas : months? 3. 5 to 4. 1. Australia, 3. 5 to 4. 23 00:01:13,440 --> 00:01:17,640 Stephen Koukoulas : 1. And then Sean, I superimposed monetary policy expectations on 24 00:01:17,640 --> 00:01:21,179 Stephen Koukoulas : that. Then expected to cut rates in September, again before 25 00:01:21,179 --> 00:01:22,709 Stephen Koukoulas : the end of the year and another four or five 26 00:01:22,709 --> 00:01:25,500 Stephen Koukoulas : rate cuts in 2025, we're still talking rate hikes. 27 00:01:26,819 --> 00:01:29,039 Sean Aylmer: Okay, so that's what the market's pricing in. What do 28 00:01:29,039 --> 00:01:30,360 Sean Aylmer: you think will happen, Stephen? 29 00:01:30,959 --> 00:01:33,450 Stephen Koukoulas : Look, I'm in that latter camp. I think the unemployment 30 00:01:33,450 --> 00:01:37,830 Stephen Koukoulas : rate's important and even though we had the plus 50, 000 jobs 31 00:01:37,830 --> 00:01:40,110 Stephen Koukoulas : and the like, we still have the other news on 32 00:01:40,110 --> 00:01:44,610 Stephen Koukoulas : the economy. It's weak. Annual GDP growth 1. 5%. Retail 33 00:01:44,610 --> 00:01:51,210 Stephen Koukoulas : sales, weak. Consumer sentiment, weak. Business confidence, weak. Housing approvals, 34 00:01:51,240 --> 00:01:53,370 Stephen Koukoulas : weak. So you look through the run rate of all 35 00:01:53,370 --> 00:01:56,790 Stephen Koukoulas : these indicators on the economy and they are still tilting 36 00:01:57,000 --> 00:02:01,049 Stephen Koukoulas : quite squarely to the downside of the economy. And that's 37 00:02:01,049 --> 00:02:04,139 Stephen Koukoulas : a problem to me. Of course, of course, all eyes 38 00:02:04,139 --> 00:02:07,020 Stephen Koukoulas : are on the 31st of July here in Australia, we 39 00:02:07,020 --> 00:02:11,010 Stephen Koukoulas : get the June quarter CPI numbers. They're probably going to 40 00:02:11,010 --> 00:02:13,950 Stephen Koukoulas : be a little bit elevated. We know that from the 41 00:02:13,980 --> 00:02:16,590 Stephen Koukoulas : monthly numbers. We know that from things like petrol prices 42 00:02:16,590 --> 00:02:20,849 Stephen Koukoulas : and the like. But look, I think there's enough going 43 00:02:20,849 --> 00:02:24,990 Stephen Koukoulas : on in economic activity, unemployment, for the RBA just to 44 00:02:25,050 --> 00:02:26,400 Stephen Koukoulas : have a cup of tea, a bit of a lie 45 00:02:26,400 --> 00:02:29,639 Stephen Koukoulas : down and wait and see how the economy pans out in the 46 00:02:29,639 --> 00:02:30,870 Stephen Koukoulas : second half of 2024. 47 00:02:31,139 --> 00:02:32,970 Sean Aylmer: A cup of tea and a Becks for the Reserve Bank, I like that idea. 48 00:02:32,970 --> 00:02:36,179 Sean Aylmer: I like that idea. We don't actually have a lot 49 00:02:36,179 --> 00:02:38,370 Sean Aylmer: of data coming out this week. It's a very quiet 50 00:02:38,370 --> 00:02:41,189 Sean Aylmer: week. I suppose we'll all gain ... I mean, I know, 51 00:02:41,788 --> 00:02:43,830 Sean Aylmer: is it the Central Bank of Canada doing an interest 52 00:02:43,830 --> 00:02:44,700 Sean Aylmer: rate decision? Is that right? 53 00:02:45,330 --> 00:02:49,200 Stephen Koukoulas : Yeah. There's nothing locally. Yeah, we get the weekly consumer 54 00:02:49,200 --> 00:02:51,690 Stephen Koukoulas : sentiment numbers and they're sort of interesting, but there's nothing of 55 00:02:51,690 --> 00:02:53,880 Stephen Koukoulas : note that's going to move the markets or influence the 56 00:02:53,880 --> 00:02:57,269 Stephen Koukoulas : RBA other than, as you quite rightly pointed out, we've 57 00:02:57,270 --> 00:02:59,759 Stephen Koukoulas : got a Bank of Canada decision. And they've already cut 58 00:02:59,760 --> 00:03:02,250 Stephen Koukoulas : rates, don't forget. They trimmed rates at their last meeting. 59 00:03:02,610 --> 00:03:05,970 Stephen Koukoulas : The Canadian economy's weakening more than in Australia. Their unemployment 60 00:03:05,970 --> 00:03:11,370 Stephen Koukoulas : rate's spiking. We had the Canadian unemployment rate at 6.4%, so 61 00:03:11,370 --> 00:03:15,029 Stephen Koukoulas : the market spending that they'll probably cut rates again. So 62 00:03:15,030 --> 00:03:17,669 Stephen Koukoulas : that'll be interesting to see if they do. What's the 63 00:03:17,669 --> 00:03:20,190 Stephen Koukoulas : rhetoric they put around, because of course, guess who Canada's 64 00:03:20,190 --> 00:03:24,180 Stephen Koukoulas : major trading partner is? The US. So the linkages from 65 00:03:24,180 --> 00:03:26,730 Stephen Koukoulas : Canada to the US are still very, very important. So in 66 00:03:26,730 --> 00:03:29,580 Stephen Koukoulas : a week when there's not much domestically going on, we'll 67 00:03:29,580 --> 00:03:32,879 Stephen Koukoulas : be looking overseas for news information, policy decisions. 68 00:03:33,120 --> 00:03:36,509 Sean Aylmer: Do you reckon the Reserve Bank cares that overseas jurisdictions 69 00:03:36,900 --> 00:03:39,120 Sean Aylmer: are cutting rates? Does it matter to them much? 70 00:03:39,960 --> 00:03:44,580 Stephen Koukoulas : Look, it's not unimportant. They do not move in lockstep 71 00:03:44,580 --> 00:03:48,120 Stephen Koukoulas : with the Fed and the Bank of England, the ECB, 72 00:03:48,120 --> 00:03:53,790 Stephen Koukoulas : whatever. But if everyone or eight out of 10 banks 73 00:03:54,119 --> 00:03:56,850 Stephen Koukoulas : around the world are cutting interest rates, they're doing it 74 00:03:56,850 --> 00:03:59,250 Stephen Koukoulas : for a reason. Growth and inflation are the two, of 75 00:03:59,250 --> 00:04:02,580 Stephen Koukoulas : course, that drive interest rates being lowered. And so you've 76 00:04:02,580 --> 00:04:04,380 Stephen Koukoulas : got this sort of scenario that if you've got the 77 00:04:04,380 --> 00:04:06,780 Stephen Koukoulas : ECB, even though they left rates steady last week, they 78 00:04:06,780 --> 00:04:10,230 Stephen Koukoulas : cut them the month before. Sweden's been cutting rates, Switzerland 79 00:04:10,230 --> 00:04:12,180 Stephen Koukoulas : been cutting rates, and as I said, rate cuts have 80 00:04:12,180 --> 00:04:15,000 Stephen Koukoulas : been priced into the US, UK. New Zealand had a 81 00:04:15,000 --> 00:04:18,570 Stephen Koukoulas : low inflation number last week, so we've got rate cuts 82 00:04:18,570 --> 00:04:21,328 Stephen Koukoulas : priced everywhere. The RBA would look at that and say, 83 00:04:21,330 --> 00:04:24,029 Stephen Koukoulas : well, what's it mean for Australia? We're an export economy. 84 00:04:24,479 --> 00:04:28,709 Stephen Koukoulas : Export's important to us and we import goods that are priced 85 00:04:28,709 --> 00:04:30,659 Stephen Koukoulas : in the global market, or many of them are. So 86 00:04:30,900 --> 00:04:35,070 Stephen Koukoulas : if the inflation rate is falling overseas enough for the 87 00:04:35,070 --> 00:04:36,810 Stephen Koukoulas : Bank of Canada and all these other central banks to 88 00:04:36,900 --> 00:04:40,589 Stephen Koukoulas : cut rates, yeah, it does sway them even though they 89 00:04:40,589 --> 00:04:43,049 Stephen Koukoulas : do not move in lockstep with what's happening in the 90 00:04:43,049 --> 00:04:43,830 Stephen Koukoulas : US, for example. 91 00:04:44,400 --> 00:04:47,609 Sean Aylmer: Fair enough. Well, Stephen, enjoy this quieter week. What do 92 00:04:47,609 --> 00:04:49,409 Sean Aylmer: you do when there's no economic data out? Do you 93 00:04:49,650 --> 00:04:51,180 Sean Aylmer: put your feet up? I dare say no. 94 00:04:51,750 --> 00:04:56,849 Stephen Koukoulas : Clear out my email junk and yeah, unfortunately middle of 95 00:04:56,849 --> 00:04:59,219 Stephen Koukoulas : winter there's no cricket to sort of while away, seven 96 00:04:59,219 --> 00:05:00,120 Stephen Koukoulas : or eight hours during the day. 97 00:05:00,540 --> 00:05:01,709 Sean Aylmer: Yeah, enjoy it. 98 00:05:01,980 --> 00:05:02,370 Stephen Koukoulas : Thanks mate. 99 00:05:02,730 --> 00:05:05,669 Sean Aylmer: That was Economist Stephen Koukoulas, better known as The Kouk. You can 100 00:05:05,670 --> 00:05:08,460 Sean Aylmer: find him at thekouk. com, T- H- E- K- O- U- 101 00:05:08,460 --> 00:05:10,500 Sean Aylmer: K, thekouk. com, and follow him on X using the 102 00:05:10,500 --> 00:05:13,260 Sean Aylmer: handle TheKouk. I'm Sean Aylmer and this is Fear and Greed - 103 00:05:13,260 --> 00:05:13,830 Sean Aylmer: The Week Ahead.