1 00:00:08,190 --> 00:00:10,530 Sean Aylmer: Welcome to Fear and Greed - The Week Ahead. I'm Sean 2 00:00:10,530 --> 00:00:13,650 Sean Aylmer: Aylmer, and as always I'm joined by economist Stephen Koukoulas. 3 00:00:13,650 --> 00:00:16,650 Sean Aylmer: You'll find him at thekouk. com, T- H- E- K- O- U- K . 4 00:00:16,829 --> 00:00:20,880 Sean Aylmer: com, and on Twitter using the handle @ TheKouk. Stephen, good 5 00:00:20,880 --> 00:00:23,910 Sean Aylmer: morning from a more usual spot today. 6 00:00:24,930 --> 00:00:29,610 Stephen Koukoulas: Yes, back in the office and just recuperating from probably 7 00:00:29,610 --> 00:00:32,100 Stephen Koukoulas: a little bit of an over indulgence in Easter eggs. 8 00:00:32,520 --> 00:00:34,650 Sean Aylmer: Ah. Well, you've had a really big week because of 9 00:00:34,650 --> 00:00:37,470 Sean Aylmer: course your side hustle, we spoke to you from the 10 00:00:37,470 --> 00:00:41,370 Sean Aylmer: Melbourne Flower Show last week. And then I know you 11 00:00:41,370 --> 00:00:43,830 Sean Aylmer: were in Sydney over the weekend, your horse was racing, 12 00:00:43,830 --> 00:00:45,900 Sean Aylmer: or you're part owner of a horse that was racing in a group 1. 13 00:00:45,900 --> 00:00:45,990 Stephen Koukoulas: Yes. 14 00:00:47,430 --> 00:00:50,970 Sean Aylmer: And all in all, a pretty big week for you, 15 00:00:50,970 --> 00:00:53,430 Sean Aylmer: quite apart from interest rates and things like that. 16 00:00:53,850 --> 00:00:56,280 Stephen Koukoulas: Well, the more important thing was that the RBA held 17 00:00:56,280 --> 00:00:59,820 Stephen Koukoulas: interest rates steady last week, which was a 50/ 50 bet amongst 18 00:00:59,820 --> 00:01:03,600 Stephen Koukoulas: economists. The market didn't have much probability of a rate 19 00:01:03,600 --> 00:01:08,009 Stephen Koukoulas: hike into the future's curve, but economists were thinking, " Gee, 20 00:01:08,010 --> 00:01:11,340 Stephen Koukoulas: inflation's a little bit persistent." The labor market numbers that 21 00:01:11,340 --> 00:01:14,640 Stephen Koukoulas: we saw recently were pretty solid. So a few of 22 00:01:14,640 --> 00:01:17,459 Stephen Koukoulas: us in the economics profession were thinking, pause, a few 23 00:01:17,459 --> 00:01:20,069 Stephen Koukoulas: of us were thinking, hike. And as it was, the 24 00:01:20,069 --> 00:01:20,970 Stephen Koukoulas: governor paused. 25 00:01:21,750 --> 00:01:24,330 Sean Aylmer: You're being too modest here. You were really definite a 26 00:01:24,330 --> 00:01:27,240 Sean Aylmer: week ago you said, " I reckon they're going to pause." 27 00:01:27,300 --> 00:01:30,000 Sean Aylmer: You were actually quite sure of that, which I was 28 00:01:30,000 --> 00:01:31,650 Sean Aylmer: surprised, but you were right. 29 00:01:32,520 --> 00:01:35,220 Stephen Koukoulas: I was right. Look, I don't go the crow too 30 00:01:35,220 --> 00:01:37,560 Stephen Koukoulas: often in life because I've often beaten down when I 31 00:01:37,560 --> 00:01:40,770 Stephen Koukoulas: get things wrong occasionally. But look, and when I looked 32 00:01:40,770 --> 00:01:43,709 Stephen Koukoulas: at the RBA statement, and of course the governor gave 33 00:01:43,709 --> 00:01:45,600 Stephen Koukoulas: a speech at the press club the following day on 34 00:01:45,600 --> 00:01:48,420 Stephen Koukoulas: the Wednesday last week, of course if there is a 35 00:01:48,420 --> 00:01:50,670 Stephen Koukoulas: move in the next few months, it'll be up not 36 00:01:50,670 --> 00:01:53,670 Stephen Koukoulas: down. But I think that they're on hold for what 37 00:01:53,670 --> 00:01:56,580 Stephen Koukoulas: we might term an extended period and extended means up 38 00:01:56,580 --> 00:01:59,700 Stephen Koukoulas: to six months because they know that there's an awful 39 00:01:59,700 --> 00:02:03,450 Stephen Koukoulas: lot of tightening in the system. They know that there's 40 00:02:03,540 --> 00:02:06,930 Stephen Koukoulas: some pretty clear indicators from household consumption spending that we, 41 00:02:06,930 --> 00:02:11,220 Stephen Koukoulas: consumers, are responding to cost of living pressures and the 42 00:02:11,220 --> 00:02:15,660 Stephen Koukoulas: pressure from these interest rate hikes more generally. And they 43 00:02:16,260 --> 00:02:18,989 Stephen Koukoulas: seem to be pretty confident that growth will be weakening 44 00:02:18,990 --> 00:02:22,020 Stephen Koukoulas: and that's, as it sort of had to happen. And 45 00:02:22,020 --> 00:02:24,750 Stephen Koukoulas: the question that they're grappling with, and Dr. Lowe mentioned 46 00:02:24,750 --> 00:02:27,810 Stephen Koukoulas: this, they're going to be revamping their forecasts ahead of 47 00:02:27,810 --> 00:02:31,650 Stephen Koukoulas: the next RBA meeting and it'll be fascinating to see what 48 00:02:31,650 --> 00:02:34,290 Stephen Koukoulas: they come up with their inflation projections, because that's the 49 00:02:34,290 --> 00:02:35,669 Stephen Koukoulas: thing at the end of the day that'll determine whether 50 00:02:35,669 --> 00:02:37,020 Stephen Koukoulas: there's another rate hike or not. 51 00:02:37,410 --> 00:02:39,330 Sean Aylmer: Okay. Now, just before we get onto this week, I 52 00:02:39,330 --> 00:02:41,820 Sean Aylmer: do also want you to crow about house prices because 53 00:02:41,820 --> 00:02:43,889 Sean Aylmer: you've got figures out last week, and you have always 54 00:02:43,889 --> 00:02:45,900 Sean Aylmer: been in the camp that you think the prices will 55 00:02:45,900 --> 00:02:50,549 Sean Aylmer: fall peak to trough 10% or thereabouts across the nation. 56 00:02:50,550 --> 00:02:53,220 Sean Aylmer: Now, last week we found out that they actually rose 57 00:02:53,220 --> 00:02:56,820 Sean Aylmer: across the capital cities, particularly in Sydney. Peak to trough 58 00:02:56,820 --> 00:02:59,550 Sean Aylmer: it's actually about 9% now. Now, I'm sure you're not 59 00:02:59,550 --> 00:03:02,519 Sean Aylmer: calling the end of the cycle yet either, but it's promising. 60 00:03:03,210 --> 00:03:06,210 Stephen Koukoulas: It is promising. Yeah. We've had a month where prices 61 00:03:06,210 --> 00:03:09,240 Stephen Koukoulas: actually rose. The core logic numbers were plus 0.6 month on 62 00:03:09,240 --> 00:03:13,500 Stephen Koukoulas: month for March. And it seems to be that the 63 00:03:13,500 --> 00:03:16,650 Stephen Koukoulas: interest rate negativity on house prices, which it obviously is, 64 00:03:16,650 --> 00:03:19,560 Stephen Koukoulas: is being more than offset or approximately offset, let's say, 65 00:03:19,889 --> 00:03:23,040 Stephen Koukoulas: by the surge in demand that's coming from a big 66 00:03:23,040 --> 00:03:26,520 Stephen Koukoulas: influx of immigration, both skilled and non- skilled workers coming 67 00:03:26,520 --> 00:03:31,230 Stephen Koukoulas: in. International students are studying in Australia and that's probably 68 00:03:31,230 --> 00:03:33,450 Stephen Koukoulas: being seen more in the rental market where we know 69 00:03:33,450 --> 00:03:38,070 Stephen Koukoulas: that there's genuine pressure and genuine pain in the rental 70 00:03:38,070 --> 00:03:41,580 Stephen Koukoulas: market in terms of a absence of properties and incredible 71 00:03:41,580 --> 00:03:44,250 Stephen Koukoulas: growth in rents at the moment. So that does spill 72 00:03:44,250 --> 00:03:46,440 Stephen Koukoulas: over into house prices. So supply and demand at the 73 00:03:46,440 --> 00:03:50,790 Stephen Koukoulas: moment are more than offsetting the pressures from interest rates. 74 00:03:50,790 --> 00:03:52,950 Stephen Koukoulas: And look, you're quite right. I'm not saying that we're 75 00:03:52,950 --> 00:03:55,980 Stephen Koukoulas: having any sort of house price pickup of any magnitude 76 00:03:55,980 --> 00:03:59,910 Stephen Koukoulas: coming through, but more likely as these interplay of forces 77 00:03:59,910 --> 00:04:02,880 Stephen Koukoulas: continue to impact on the housing market, I think we're 78 00:04:02,880 --> 00:04:04,440 Stephen Koukoulas: just going to get little ups and little downs for 79 00:04:04,440 --> 00:04:06,990 Stephen Koukoulas: the next six months. So basically a flat picture until 80 00:04:06,990 --> 00:04:10,530 Stephen Koukoulas: we get to September and if that's the situation when 81 00:04:10,530 --> 00:04:12,960 Stephen Koukoulas: the RBA then thinks about rate cuts and that's what's 82 00:04:12,960 --> 00:04:15,900 Stephen Koukoulas: being priced in, we might get house prices doing a 83 00:04:15,900 --> 00:04:18,180 Stephen Koukoulas: little bit better in 2024, and that is going up. 84 00:04:18,810 --> 00:04:22,170 Sean Aylmer: Okay. The next week is a big one, labor force, 85 00:04:22,230 --> 00:04:26,969 Sean Aylmer: NAB business confidence, Westpac Consumer Sentiment, all variables at the 86 00:04:26,970 --> 00:04:29,250 Sean Aylmer: Reserve Bank at one point or another in this year 87 00:04:29,250 --> 00:04:32,310 Sean Aylmer: have talked about, what do you expect to see with 88 00:04:32,310 --> 00:04:33,180 Sean Aylmer: the labor force? 89 00:04:33,510 --> 00:04:37,650 Stephen Koukoulas: Yeah, the labor force, we had that choppy employment change 90 00:04:37,650 --> 00:04:41,190 Stephen Koukoulas: from November, December, January because the seasonal adjustment factors were 91 00:04:41,640 --> 00:04:43,890 Stephen Koukoulas: hard to calculate. So we had two months of negative 92 00:04:43,890 --> 00:04:47,250 Stephen Koukoulas: employment and then a plus 60, 000. Look, I think there's 93 00:04:47,250 --> 00:04:50,640 Stephen Koukoulas: still solid demand for workers in the economy so the 94 00:04:50,640 --> 00:04:54,000 Stephen Koukoulas: market consensus seems to be for an increase in employment 95 00:04:54,000 --> 00:04:57,960 Stephen Koukoulas: of approximately 20 to 25, 000. But given the size of 96 00:04:57,960 --> 00:05:00,330 Stephen Koukoulas: the Australian economy now, that's not big enough to prevent 97 00:05:00,330 --> 00:05:03,420 Stephen Koukoulas: a rise in the unemployment rate. So again, the consensus 98 00:05:03,420 --> 00:05:05,700 Stephen Koukoulas: is looking for an uptick in the unemployment rate from 3. 99 00:05:05,970 --> 00:05:09,719 Stephen Koukoulas: 5 to 3. 6%. So hand on heart, you'd probably 100 00:05:09,720 --> 00:05:13,380 Stephen Koukoulas: say they're solid numbers and if there's any deviation from 101 00:05:13,440 --> 00:05:17,070 Stephen Koukoulas: them on the up or the downside, clearly that'll feed 102 00:05:17,070 --> 00:05:19,650 Stephen Koukoulas: into the RBA thinking for its May meeting. 103 00:05:20,220 --> 00:05:22,529 Sean Aylmer: What about the NAB business confidence and conditions? 104 00:05:23,010 --> 00:05:25,710 Stephen Koukoulas: Yeah, the NAB survey has been resilient. While we consumers 105 00:05:25,710 --> 00:05:29,099 Stephen Koukoulas: have been feeling pretty pessimistic over the last year, NAB 106 00:05:29,400 --> 00:05:33,029 Stephen Koukoulas: conditions have been resilient. They're actually a little above the 107 00:05:33,029 --> 00:05:35,760 Stephen Koukoulas: long run average. So the business sector's actually doing just 108 00:05:35,760 --> 00:05:39,539 Stephen Koukoulas: fine in this economic climate right now. Confidence has taken 109 00:05:39,540 --> 00:05:42,330 Stephen Koukoulas: a hit in recent months, so while conditions are strong, 110 00:05:42,360 --> 00:05:46,169 Stephen Koukoulas: the touchy- feely confidence measure has taken a bit of 111 00:05:46,170 --> 00:05:48,419 Stephen Koukoulas: a step lower, and that also could be linked to 112 00:05:48,420 --> 00:05:51,270 Stephen Koukoulas: some of the banking problems and market volatility that we've 113 00:05:51,270 --> 00:05:55,440 Stephen Koukoulas: seen over the past month. So again, the RBA does 114 00:05:55,529 --> 00:05:57,330 Stephen Koukoulas: put a lot of weight on the NAB survey as 115 00:05:57,660 --> 00:06:01,800 Stephen Koukoulas: a leading indicator of things like CapEx, demand for labor, 116 00:06:02,070 --> 00:06:04,799 Stephen Koukoulas: price pressures. So that'll be very, very closely watched by 117 00:06:04,800 --> 00:06:07,080 Stephen Koukoulas: all of us to see whether the business sector's still 118 00:06:07,080 --> 00:06:09,180 Stephen Koukoulas: got this relative degree of optimism. 119 00:06:09,720 --> 00:06:12,779 Sean Aylmer: And do you think that we consumers can pick ourselves 120 00:06:12,779 --> 00:06:17,820 Sean Aylmer: up? The old Westpac survey is showing consumer confidence really 121 00:06:17,820 --> 00:06:20,100 Sean Aylmer: at record lows. I'm not sure when the survey was 122 00:06:20,100 --> 00:06:22,770 Sean Aylmer: taken that we're going to get this week, but surely 123 00:06:22,770 --> 00:06:24,900 Sean Aylmer: a pause in interest rates must make people feel a 124 00:06:24,900 --> 00:06:25,500 Sean Aylmer: little bit better. 125 00:06:26,100 --> 00:06:30,390 Stephen Koukoulas: A pause in interest rates and relative stability in housing 126 00:06:30,390 --> 00:06:33,029 Stephen Koukoulas: could be a couple of things that feed into a 127 00:06:33,029 --> 00:06:36,479 Stephen Koukoulas: less gloomy consumer and the fact that the labor market's 128 00:06:36,480 --> 00:06:39,360 Stephen Koukoulas: doing well. Clearly, if you've got a job, your optimism's 129 00:06:39,360 --> 00:06:41,159 Stephen Koukoulas: going to be better than if you are unemployed, for 130 00:06:41,160 --> 00:06:44,640 Stephen Koukoulas: example. So of course, very, very difficult to forecast these 131 00:06:44,790 --> 00:06:48,000 Stephen Koukoulas: consumer sentiment numbers because they've been shown in the past 132 00:06:48,000 --> 00:06:51,480 Stephen Koukoulas: to be driven by even things like Australia winning test 133 00:06:51,480 --> 00:06:54,570 Stephen Koukoulas: cricket and things like that. So they're fickle and they're 134 00:06:54,570 --> 00:06:57,659 Stephen Koukoulas: volatile, but it'll be lovely to see just an upturning 135 00:06:57,660 --> 00:07:00,900 Stephen Koukoulas: consumer sentiment because we do know the level of consumer 136 00:07:00,900 --> 00:07:04,260 Stephen Koukoulas: sentiment is a pretty good leading indicator to consumer spending. 137 00:07:04,260 --> 00:07:08,760 Stephen Koukoulas: And if consumers remain too bleak for too long, then 138 00:07:08,910 --> 00:07:11,310 Stephen Koukoulas: some of the downside risks that the RBA is talking 139 00:07:11,310 --> 00:07:14,460 Stephen Koukoulas: about for the economy will come to fruition. And we 140 00:07:14,460 --> 00:07:16,500 Stephen Koukoulas: don't want a recession, no one wants a recession, and 141 00:07:16,920 --> 00:07:18,870 Stephen Koukoulas: not that I don't think we're heading to one, but 142 00:07:18,870 --> 00:07:23,700 Stephen Koukoulas: if consumer sentiment remains miserably weak or weakens even further, 143 00:07:23,700 --> 00:07:25,260 Stephen Koukoulas: the odds of a recession increase. 144 00:07:25,740 --> 00:07:26,850 Sean Aylmer: Stephen, have a great week. 145 00:07:27,240 --> 00:07:27,900 Stephen Koukoulas: Thanks, Sean. 146 00:07:28,380 --> 00:07:30,840 Sean Aylmer: That was economist Stephen Koukoulas, better known as The Kouk. 147 00:07:30,870 --> 00:07:33,390 Sean Aylmer: You can find him at thekouk. com and follow him 148 00:07:33,390 --> 00:07:36,119 Sean Aylmer: on Twitter using the handle @ TheKouk. I'm Sean Aylmer, and 149 00:07:36,120 --> 00:07:37,980 Sean Aylmer: this is Fear and Greed - The Week Ahead.