1 00:00:08,660 --> 00:00:11,680 Sean Aylmer: Welcome to Fear and Greed- The Week Ahead. This is where we take 2 00:00:11,680 --> 00:00:14,310 Sean Aylmer: a look at the big events, reports, and releases coming up this week 3 00:00:14,640 --> 00:00:16,860 Sean Aylmer: that give insight into the economy, and a look back 4 00:00:16,860 --> 00:00:19,340 Sean Aylmer: at what happened last week, too. I'm Sean Aylmer, and 5 00:00:19,350 --> 00:00:21,580 Sean Aylmer: every Monday I'm joined for The Week Ahead by economist, 6 00:00:21,620 --> 00:00:25,950 Sean Aylmer: Stephen Koukoulas. You'll find him at TheKouk. com: T- H- E- K- O- U- K, 7 00:00:27,140 --> 00:00:30,020 Sean Aylmer: and on Twitter using the handle, @TheKouk. Stephen, good morning. 8 00:00:30,400 --> 00:00:31,240 Stephen Koukoulas: Good morning, Sean. 9 00:00:31,490 --> 00:00:33,430 Sean Aylmer: It's such a big week coming up, but first we'll 10 00:00:33,430 --> 00:00:37,030 Sean Aylmer: have a quick look at last week. CapEx: interesting figures 11 00:00:37,040 --> 00:00:37,540 Sean Aylmer: last week. 12 00:00:38,130 --> 00:00:40,690 Stephen Koukoulas: They were, Sean. Look, we know that these figures were 13 00:00:40,850 --> 00:00:44,450 Stephen Koukoulas: for the September quarter; lockdowns in New South Wales, Victoria, 14 00:00:44,450 --> 00:00:47,400 Stephen Koukoulas: and the ACT for the bulk of that September quarter. So, 15 00:00:47,400 --> 00:00:50,830 Stephen Koukoulas: we had an overall fall of 2.2% in CapEx in 16 00:00:50,830 --> 00:00:54,660 Stephen Koukoulas: the September quarter, concentrated in the ACT and New South Wales, 17 00:00:54,790 --> 00:00:57,510 Stephen Koukoulas: and to some extent in Victoria. Most of the other 18 00:00:57,510 --> 00:01:00,790 Stephen Koukoulas: states recorded an increase, but what was really important in 19 00:01:00,790 --> 00:01:04,500 Stephen Koukoulas: these numbers were the expectations data that the Bureau of 20 00:01:04,500 --> 00:01:06,770 Stephen Koukoulas: Statistics asked business, they sort of say "How much you're 21 00:01:06,770 --> 00:01:10,699 Stephen Koukoulas: expecting to invest in the next financial year?" And that 22 00:01:10,700 --> 00:01:16,610 Stephen Koukoulas: figure was +19.7% from the same survey a year ago. So, 23 00:01:16,890 --> 00:01:19,000 Stephen Koukoulas: to cut to the chase, that's actually saying that the 24 00:01:19,000 --> 00:01:23,740 Stephen Koukoulas: businesses are looking to ramp up their investment in machinery 25 00:01:23,740 --> 00:01:26,080 Stephen Koukoulas: and equipment, in buildings and structures and these sort of things by 26 00:01:26,319 --> 00:01:30,770 Stephen Koukoulas: almost 20%. So, if that actually comes to pass, 2021-2022 27 00:01:31,300 --> 00:01:35,190 Stephen Koukoulas: financial year will be an absolute corker, with business investment 28 00:01:35,190 --> 00:01:37,459 Stephen Koukoulas: really coming to the fore, and really adding to that 29 00:01:37,459 --> 00:01:38,839 Stephen Koukoulas: positive economic outlook. 30 00:01:39,220 --> 00:01:41,010 Sean Aylmer: Well, that's last week. We'll be back in a moment 31 00:01:41,190 --> 00:01:42,179 Sean Aylmer: to get into the week ahead. 32 00:01:47,150 --> 00:01:51,370 Sean Aylmer: I'm with economist, Stephen Koukoulas, aka TheKouk. Huge week for 33 00:01:51,370 --> 00:01:52,650 Sean Aylmer: you economist types, Stephen. 34 00:01:53,110 --> 00:01:55,440 Stephen Koukoulas: Oh, look, it's one of those great weeks. It's always 35 00:01:55,440 --> 00:01:57,100 Stephen Koukoulas: good when the national accounts come out. 36 00:01:57,100 --> 00:01:57,500 Sean Aylmer: Hmm. 37 00:01:57,530 --> 00:02:02,910 Stephen Koukoulas: They're going to be showing the September quarter GDP numbers and, again, 38 00:02:02,910 --> 00:02:04,900 Stephen Koukoulas: as we were just saying on the CapEx numbers, we know 39 00:02:04,900 --> 00:02:06,920 Stephen Koukoulas: that it's going to be a negative, that yeah, we were, 40 00:02:06,920 --> 00:02:10,429 Stephen Koukoulas: or half the country was locked down, really limiting their spending. 41 00:02:10,430 --> 00:02:13,550 Stephen Koukoulas: We do know business investment was down in the quarter. So, 42 00:02:13,550 --> 00:02:16,430 Stephen Koukoulas: the consensus at this stage is for GDP to drop 43 00:02:16,430 --> 00:02:21,220 Stephen Koukoulas: by around about 2.5% for the quarter, and in normal times, 44 00:02:21,220 --> 00:02:22,919 Stephen Koukoulas: if that was happening, you'd think, "Oh my goodness, that's 45 00:02:22,919 --> 00:02:25,650 Stephen Koukoulas: an utter disaster. You know, the economy's going backwards at 46 00:02:25,650 --> 00:02:26,609 Stephen Koukoulas: an alarming pace." 47 00:02:26,639 --> 00:02:26,660 Sean Aylmer: Yeah. 48 00:02:27,280 --> 00:02:31,480 Stephen Koukoulas: But, yeah. We know why it happened, and we know 49 00:02:31,520 --> 00:02:35,169 Stephen Koukoulas: how we responded last year when the lockdowns ended in 2020, 50 00:02:35,169 --> 00:02:39,660 Stephen Koukoulas: that there was a really sudden rebound in spending from consumers, from 51 00:02:39,660 --> 00:02:43,320 Stephen Koukoulas: businesses investing again. So, I think we'll largely look through 52 00:02:43,320 --> 00:02:47,690 Stephen Koukoulas: this result, and instead focus on what's happening now that 53 00:02:47,690 --> 00:02:50,290 Stephen Koukoulas: the borders are reopened, and just how strong the rebound 54 00:02:50,290 --> 00:02:52,030 Stephen Koukoulas: will be from what will be a low point in 55 00:02:52,030 --> 00:02:54,970 Stephen Koukoulas: the economic cycle with this GDP figure that's coming out 56 00:02:54,970 --> 00:02:55,390 Stephen Koukoulas: this week. 57 00:02:55,960 --> 00:02:58,920 Sean Aylmer: Now, we've just had the biggest auction weekend of the year, 58 00:02:59,430 --> 00:03:02,250 Sean Aylmer: with record numbers of auctions in some of the capital cities. 59 00:03:02,669 --> 00:03:04,980 Sean Aylmer: The CoreLogic house prices will be interesting for the month 60 00:03:04,980 --> 00:03:07,880 Sean Aylmer: of November, on the back of what's happened in the 61 00:03:07,880 --> 00:03:10,350 Sean Aylmer: auction market, and it certainly, the heat does seem to 62 00:03:10,350 --> 00:03:11,350 Sean Aylmer: have come out somewhat. 63 00:03:11,590 --> 00:03:13,820 Stephen Koukoulas: Yeah, it seems to have come out. So, the CoreLogic 64 00:03:14,100 --> 00:03:18,120 Stephen Koukoulas: house price numbers for November will probably be up around about 1%. So, 65 00:03:18,760 --> 00:03:20,740 Stephen Koukoulas: some people would paint that as the weakest growth in 66 00:03:20,740 --> 00:03:22,590 Stephen Koukoulas: probably six months, but not as.. 67 00:03:23,002 --> 00:03:23,003 Sean Aylmer: Still not bad. Yeah. 68 00:03:24,090 --> 00:03:27,950 Stephen Koukoulas: It'll be 1% per month. It'll still be a 12% per annum, yeah, roughly. So, 69 00:03:27,950 --> 00:03:31,060 Stephen Koukoulas: it's still a pretty robust increase. That said, there's a 70 00:03:31,060 --> 00:03:34,239 Stephen Koukoulas: lot of evidence that momentum through the month... Because, don't 71 00:03:34,370 --> 00:03:38,310 Stephen Koukoulas: forget CoreLogic publish their data on a daily basis, and 72 00:03:38,310 --> 00:03:40,940 Stephen Koukoulas: just in the last few weeks there's been a cooling 73 00:03:40,940 --> 00:03:43,360 Stephen Koukoulas: in the price growth in Melbourne and Sydney, the two 74 00:03:43,360 --> 00:03:47,710 Stephen Koukoulas: hottest markets. Perth has been weak. Brisbane's still very strong. So, 75 00:03:47,900 --> 00:03:51,170 Stephen Koukoulas: with the auction clearance rates sort of showing some signs 76 00:03:51,170 --> 00:03:54,580 Stephen Koukoulas: of fatigue, yeah, that big increase in the supply of 77 00:03:54,580 --> 00:03:57,850 Stephen Koukoulas: dwellings on the market, and perhaps some buyers hitting that 78 00:03:58,020 --> 00:04:00,780 Stephen Koukoulas: sticker price... Paying that much money is something they don't 79 00:04:00,810 --> 00:04:03,560 Stephen Koukoulas: want to do. The chatter of interest rate hikes sort 80 00:04:03,560 --> 00:04:06,250 Stephen Koukoulas: of getting a little bit more profile in the media, 81 00:04:06,250 --> 00:04:09,260 Stephen Koukoulas: and therefore in people's minds when they're bidding for a house 82 00:04:09,260 --> 00:04:11,550 Stephen Koukoulas: is probably going to suggest that we are in the early 83 00:04:11,550 --> 00:04:16,909 Stephen Koukoulas: stages of the cooling in housing. CoreLogic numbers won't really show that. 84 00:04:17,080 --> 00:04:19,060 Stephen Koukoulas: Over the next few months we'll be looking very, very 85 00:04:19,060 --> 00:04:22,330 Stephen Koukoulas: closely at these auction clearance rates and prices for a 86 00:04:22,330 --> 00:04:24,480 Stephen Koukoulas: genuine sign that the heat's coming out of housing. 87 00:04:25,040 --> 00:04:28,170 Sean Aylmer: Okay. We also get balance of payments figures. We're expecting 88 00:04:28,170 --> 00:04:31,170 Sean Aylmer: a huge surplus. Just explain, and many years ago, we 89 00:04:31,180 --> 00:04:33,479 Sean Aylmer: talk a lot about balance of payments. It doesn't sort of 90 00:04:33,480 --> 00:04:35,850 Sean Aylmer: seem to hit the headlines so much nowadays. What is 91 00:04:35,850 --> 00:04:37,910 Sean Aylmer: the balance of payments, and what are you expecting? 92 00:04:38,270 --> 00:04:42,450 Stephen Koukoulas: The key aspects of balance of payments are our exports and 93 00:04:42,450 --> 00:04:45,960 Stephen Koukoulas: imports of goods and services, plus what we call the 94 00:04:46,339 --> 00:04:50,180 Stephen Koukoulas: net income balance. So, good and services, we understand that's 95 00:04:50,790 --> 00:04:54,240 Stephen Koukoulas: exporting iron ore and importing phones and things like that. 96 00:04:54,460 --> 00:04:57,140 Stephen Koukoulas: Services are things like tourism and education, so that's a 97 00:04:57,140 --> 00:05:01,200 Stephen Koukoulas: relatively easy thing, but they also include these invisibles, which 98 00:05:01,200 --> 00:05:05,310 Stephen Koukoulas: is when a company or a fund manager here buys 99 00:05:05,370 --> 00:05:08,600 Stephen Koukoulas: shares in a foreign company, and that foreign company pays 100 00:05:08,600 --> 00:05:11,130 Stephen Koukoulas: a dividend. That's an inflow to us. 101 00:05:11,220 --> 00:05:11,299 Sean Aylmer: Mm- hmm. 102 00:05:11,480 --> 00:05:13,210 Stephen Koukoulas: So it's a, it's a plus, if you like. It's 103 00:05:13,210 --> 00:05:17,029 Stephen Koukoulas: not an export, but it's an income inflow. And similarly, 104 00:05:17,029 --> 00:05:19,430 Stephen Koukoulas: when a foreign company owns shares in some of our 105 00:05:19,430 --> 00:05:22,210 Stephen Koukoulas: big listed companies, or own our government bonds, for that example, 106 00:05:22,420 --> 00:05:24,700 Stephen Koukoulas: the interest payment on the bonds or the dividends that 107 00:05:24,700 --> 00:05:26,860 Stephen Koukoulas: a big company here might pay to the foreigners is 108 00:05:26,860 --> 00:05:29,570 Stephen Koukoulas: an outflow. So, that's actually part of the balance of payments. 109 00:05:29,570 --> 00:05:32,730 Stephen Koukoulas: The goods and services component will show a huge surplus, 110 00:05:32,980 --> 00:05:37,409 Stephen Koukoulas: but interestingly, as our local fund managers have accumulated more, 111 00:05:37,410 --> 00:05:39,860 Stephen Koukoulas: and more, and more, and more money, and they've been looking offshore 112 00:05:39,860 --> 00:05:42,760 Stephen Koukoulas: to invest their money. We've actually got an approximate balance, 113 00:05:42,760 --> 00:05:44,920 Stephen Koukoulas: or even a small surplus in this net income balance, 114 00:05:44,920 --> 00:05:46,800 Stephen Koukoulas: so we're getting as much money in as is going out, 115 00:05:46,800 --> 00:05:50,500 Stephen Koukoulas: and that's very different from the Banana Republic years of 116 00:05:50,500 --> 00:05:53,730 Stephen Koukoulas: Paul Keating in the mid- 80s, where we had such 117 00:05:53,730 --> 00:05:56,370 Stephen Koukoulas: poor levels of savings in Australia that we were paying 118 00:05:56,370 --> 00:05:59,450 Stephen Koukoulas: out heaps of dividends and heaps of interest on our 119 00:05:59,450 --> 00:06:01,740 Stephen Koukoulas: government bonds, and we weren't getting much back in. 120 00:06:02,060 --> 00:06:03,589 Sean Aylmer: Superannuation. There you go. 121 00:06:03,870 --> 00:06:06,900 Stephen Koukoulas: Yes, it's simply that. The superannuation, they've got so much 122 00:06:06,900 --> 00:06:08,539 Stephen Koukoulas: money that they have to invest offshore. 123 00:06:09,279 --> 00:06:11,990 Sean Aylmer: And a few little... I mean, credit growth, international trade, Guy Debelle's 124 00:06:11,990 --> 00:06:13,650 Sean Aylmer: talking from the bank, all interesting? 125 00:06:14,190 --> 00:06:16,789 Stephen Koukoulas: All little things. Credit growth will show that housing, credit 126 00:06:16,790 --> 00:06:18,820 Stephen Koukoulas: is still increasing at a solid pace, as we just 127 00:06:18,839 --> 00:06:21,900 Stephen Koukoulas: discussed with CoreLogic house prices. International trade, well that is 128 00:06:21,970 --> 00:06:25,539 Stephen Koukoulas: goods and services. Look, we're probably going to have a deficit... deficit. Goodness, 129 00:06:25,540 --> 00:06:28,169 Stephen Koukoulas: there's my ancient history coming to the fore. We'll have 130 00:06:28,170 --> 00:06:31,200 Stephen Koukoulas: a surplus of about $10 billion, I think. Some of 131 00:06:31,200 --> 00:06:33,740 Stephen Koukoulas: the commodity prices have just come off a bit, and 132 00:06:33,820 --> 00:06:37,020 Stephen Koukoulas: some of the iron ore export volumes are down a bit, but 133 00:06:37,290 --> 00:06:40,570 Stephen Koukoulas: still a chunky surplus. And Guy Debelle, yes. He's giving 134 00:06:40,570 --> 00:06:44,060 Stephen Koukoulas: a talk. The RBA board meeting next week will be their 135 00:06:44,060 --> 00:06:45,940 Stephen Koukoulas: last for the year, obviously, and their last for a 136 00:06:45,940 --> 00:06:48,170 Stephen Koukoulas: couple of months, and yeah, the market's clamouring for a 137 00:06:48,170 --> 00:06:51,830 Stephen Koukoulas: bit more guidance on whether they're genuinely worried about inflation, 138 00:06:51,830 --> 00:06:56,279 Stephen Koukoulas: whether their guidance on no hikes until 2024 is still valid. So, 139 00:06:56,490 --> 00:06:58,180 Stephen Koukoulas: we'll be watching Guy speak to that this week with 140 00:06:58,180 --> 00:06:59,050 Stephen Koukoulas: a great deal of interest. 141 00:06:59,610 --> 00:07:00,590 Sean Aylmer: Enjoy your week, Stephen. 142 00:07:00,910 --> 00:07:01,279 Stephen Koukoulas: Thanks, Sean. 143 00:07:01,820 --> 00:07:04,760 Sean Aylmer: That was economist, Stephen Koukoulas, better known as TheKouk. You 144 00:07:04,760 --> 00:07:07,250 Sean Aylmer: can find him at TheKouk.com and follow him on Twitter 145 00:07:07,500 --> 00:07:10,590 Sean Aylmer: using the handle @TheKouk. I'm Sean Aylmer, and this is Fear 146 00:07:10,590 --> 00:07:11,600 Sean Aylmer: and Greed - The Week Ahead.