1 00:00:08,250 --> 00:00:10,770 Sean Aylmer: Welcome to Fear & Greed, The Week Ahead. I'm Sean Aylmer, 2 00:00:10,770 --> 00:00:12,959 Sean Aylmer: and as always at this time on a Monday morning, 3 00:00:13,020 --> 00:00:16,409 Sean Aylmer: I'm joined by economist, Stephen Koukoulas. You'll find him at thekouk. 4 00:00:16,410 --> 00:00:19,470 Sean Aylmer: com, T- H- E- K- O- U- K, thekouk. com, and 5 00:00:19,470 --> 00:00:22,140 Sean Aylmer: on X using the handle TheKouk. Stephen, good morning. 6 00:00:22,739 --> 00:00:24,390 Stephen Koukoulas: And an excellent morning to you, Sean. 7 00:00:24,810 --> 00:00:27,389 Sean Aylmer: Well, it is for a man like yourself, because you 8 00:00:27,389 --> 00:00:30,540 Sean Aylmer: had inflation last week, you got economic growth this week. 9 00:00:30,990 --> 00:00:32,278 Sean Aylmer: It's an economist paradise. 10 00:00:32,759 --> 00:00:35,309 Stephen Koukoulas: It is. We've got, even though this is the first 11 00:00:35,459 --> 00:00:39,270 Stephen Koukoulas: week without an RBA meeting on the first Tuesday of 12 00:00:39,270 --> 00:00:42,059 Stephen Koukoulas: the month, we have a lot of information still. We're 13 00:00:42,060 --> 00:00:44,760 Stephen Koukoulas: still digesting all the news from last week. We had 14 00:00:44,760 --> 00:00:47,820 Stephen Koukoulas: the local inflation numbers, US inflation numbers on Friday night. 15 00:00:47,820 --> 00:00:49,679 Stephen Koukoulas: There's a whole lot of stuff that we're still sort 16 00:00:49,679 --> 00:00:51,839 Stephen Koukoulas: of trying to work out where we're at. But this 17 00:00:51,839 --> 00:00:54,690 Stephen Koukoulas: week, yeah, GDP numbers and a whole lot more. Great fun. 18 00:00:54,690 --> 00:00:55,080 Stephen Koukoulas: I love it. 19 00:00:55,650 --> 00:00:58,770 Sean Aylmer: Okay, so let's start local and let's talk about the 20 00:00:58,770 --> 00:01:02,760 Sean Aylmer: inflation numbers last week. Also, retail trade, our partial indicators. 21 00:01:03,000 --> 00:01:04,738 Sean Aylmer: Where do we end up at the end of last week, 22 00:01:05,010 --> 00:01:06,029 Sean Aylmer: given all that information? 23 00:01:06,360 --> 00:01:10,348 Stephen Koukoulas: We ended up with the market expectations for interest rate 24 00:01:10,350 --> 00:01:14,580 Stephen Koukoulas: cuts being reinforced, I suppose, that even though inflation came 25 00:01:14,580 --> 00:01:17,730 Stephen Koukoulas: in at annual terms at 3. 4% in the monthly indicator, 26 00:01:17,730 --> 00:01:21,120 Stephen Koukoulas: which, just as a reinforcement to everybody listening, is not 27 00:01:21,120 --> 00:01:25,169 Stephen Koukoulas: as complete and as broad as the quarterly indicator, but 28 00:01:25,170 --> 00:01:27,839 Stephen Koukoulas: it's still got lots of information about price pressures. It 29 00:01:27,839 --> 00:01:30,750 Stephen Koukoulas: came in at an annual rate of 3.4%, so unchanged from 30 00:01:30,750 --> 00:01:34,110 Stephen Koukoulas: December. But the markets were looking for a little bit 31 00:01:34,110 --> 00:01:37,560 Stephen Koukoulas: of an uptick because a lot of prices are adjusted 32 00:01:37,560 --> 00:01:39,720 Stephen Koukoulas: on the 1st of January. There's a bit of seasonality there. 33 00:01:39,870 --> 00:01:42,120 Stephen Koukoulas: It didn't happen or it did happen, but it was 34 00:01:42,120 --> 00:01:46,830 Stephen Koukoulas: offset by falls in some food prices, meat and seafood, 35 00:01:46,830 --> 00:01:51,090 Stephen Koukoulas: and holiday travel was down. So the inflation momentum is 36 00:01:51,090 --> 00:01:54,450 Stephen Koukoulas: still squarely to the downside. It probably was below what 37 00:01:54,450 --> 00:01:58,620 Stephen Koukoulas: the Reserve Bank were assuming. So that rate cut expectation 38 00:01:58,620 --> 00:02:01,710 Stephen Koukoulas: that's been building for several months, both globally but also 39 00:02:01,710 --> 00:02:03,689 Stephen Koukoulas: here in Australia, just got a little bit of a 40 00:02:03,719 --> 00:02:04,439 Stephen Koukoulas: shot in the arm. 41 00:02:05,100 --> 00:02:08,610 Sean Aylmer: Fantastic. Let's talk about this week then, because it's a 42 00:02:08,610 --> 00:02:12,270 Sean Aylmer: big one: GDP, December quarter. Why do we care so 43 00:02:12,389 --> 00:02:14,130 Sean Aylmer: much about old information, Stephen? 44 00:02:15,690 --> 00:02:18,208 Stephen Koukoulas: It is old information, yeah. Here we are in March, 45 00:02:18,210 --> 00:02:20,489 Stephen Koukoulas: early March, and this is the December quarter, which of 46 00:02:20,490 --> 00:02:25,410 Stephen Koukoulas: course is October, November, and December divided by July, August 47 00:02:25,410 --> 00:02:27,720 Stephen Koukoulas: and September for the quarterly growth rate. Wow. What was 48 00:02:27,720 --> 00:02:31,620 Stephen Koukoulas: happening way back then? Look, it does matter because it 49 00:02:31,620 --> 00:02:35,639 Stephen Koukoulas: is really an indicator of all of the spending, the 50 00:02:35,639 --> 00:02:39,809 Stephen Koukoulas: investment, the exporting, the importing, the level of inventories and 51 00:02:39,809 --> 00:02:42,419 Stephen Koukoulas: these sorts of things in the economy. And it is 52 00:02:42,419 --> 00:02:48,450 Stephen Koukoulas: so comprehensive that the assessment that the Reserve Bank, Treasury 53 00:02:48,690 --> 00:02:51,750 Stephen Koukoulas: us economists do, it rebuilds the base on where we 54 00:02:51,750 --> 00:02:53,639 Stephen Koukoulas: think the economy is going. So if we get a 55 00:02:53,639 --> 00:02:57,418 Stephen Koukoulas: shock in the GDP numbers later this week, and just say 56 00:02:57,419 --> 00:02:59,850 Stephen Koukoulas: it's a shock to the downside, the economy's slow, we 57 00:02:59,850 --> 00:03:03,780 Stephen Koukoulas: get a weak number there, then that rebasing of where 58 00:03:03,780 --> 00:03:06,180 Stephen Koukoulas: the economy was at the end of 2023 has big 59 00:03:06,180 --> 00:03:09,330 Stephen Koukoulas: implications for where we're going in 2024. So that's why 60 00:03:09,330 --> 00:03:11,849 Stephen Koukoulas: it's important. Market is looking for a weak result, just 61 00:03:11,849 --> 00:03:14,910 Stephen Koukoulas: by the way. There's a few partial indicators coming out 62 00:03:14,910 --> 00:03:17,940 Stephen Koukoulas: on government spending whatnot today and tomorrow before we get 63 00:03:17,940 --> 00:03:21,360 Stephen Koukoulas: the number on Wednesday. But it does look as if 64 00:03:21,360 --> 00:03:24,690 Stephen Koukoulas: GDP is going to be sort of 0. 2% for the 65 00:03:24,690 --> 00:03:29,370 Stephen Koukoulas: quarter, about 1.2, 1. 3 for annual figures. That's weak. And 66 00:03:29,370 --> 00:03:31,440 Stephen Koukoulas: I think that's going to just sort of reinforce the 67 00:03:31,860 --> 00:03:34,439 Stephen Koukoulas: market pricing, as we were discussing a minute or two 68 00:03:34,440 --> 00:03:37,800 Stephen Koukoulas: ago, of rate cuts coming through from the RBA in 69 00:03:37,800 --> 00:03:39,210 Stephen Koukoulas: the not too distant future. 70 00:03:39,750 --> 00:03:41,970 Sean Aylmer: But it's kind of what is supposed to happen, isn't 71 00:03:41,970 --> 00:03:44,369 Sean Aylmer: it, given that we've had so many rate rises last year? 72 00:03:44,700 --> 00:03:48,120 Stephen Koukoulas: Yeah, yeah. Look, in fact, what's happening now, when you 73 00:03:48,120 --> 00:03:50,280 Stephen Koukoulas: hike interest rates, and remembering that interest rates have gone 74 00:03:50,280 --> 00:03:53,249 Stephen Koukoulas: from 0.1% at the low point to 1. 1 to 2. 75 00:03:53,249 --> 00:03:57,060 Stephen Koukoulas: 1 to 3. 1 to 4. 35, GDP has slowed 76 00:03:57,060 --> 00:04:00,390 Stephen Koukoulas: from 0. 9 to 0. 5 to 0. 4 to 0. 2. The 77 00:04:00,390 --> 00:04:02,460 Stephen Koukoulas: unemployment rate's gone up, as you would assume with a 78 00:04:02,460 --> 00:04:05,220 Stephen Koukoulas: slower economy in rate hikes, from 3. 4 to 3. 79 00:04:05,429 --> 00:04:09,150 Stephen Koukoulas: 6 to 4. 1. And inflation has gone from, in 80 00:04:09,150 --> 00:04:13,140 Stephen Koukoulas: monthly numbers, 8. 4% to 6 to 5 to 3. 81 00:04:13,410 --> 00:04:15,870 Stephen Koukoulas: 4. So this is a win for economics 101. This 82 00:04:15,870 --> 00:04:18,238 Stephen Koukoulas: is a thing that I can sort of hold my 83 00:04:18,240 --> 00:04:22,229 Stephen Koukoulas: head high and say, " Gee, isn't it lovely when economics 84 00:04:22,230 --> 00:04:25,889 Stephen Koukoulas: works and we've had the policy tightening, weaker growth, higher 85 00:04:25,889 --> 00:04:29,489 Stephen Koukoulas: unemployment, and lower inflation?" Three cheers for eco 101. 86 00:04:30,779 --> 00:04:33,719 Sean Aylmer: Fantastic. Just quickly, before we go, building approvals, and the 87 00:04:33,720 --> 00:04:36,089 Sean Aylmer: reason I'm interested in that is the construction sector is such 88 00:04:36,089 --> 00:04:37,470 Sean Aylmer: an important part of the economy. 89 00:04:37,890 --> 00:04:40,830 Stephen Koukoulas: It is, and it's this housing shortage that's the issue 90 00:04:40,830 --> 00:04:43,289 Stephen Koukoulas: too from the building approvals numbers. Look, month to month, 91 00:04:43,290 --> 00:04:46,019 Stephen Koukoulas: they're incredibly volatile, yet there's a couple of big apartment 92 00:04:46,020 --> 00:04:49,529 Stephen Koukoulas: blocks approved in a major capital city. They can jump 93 00:04:49,529 --> 00:04:53,520 Stephen Koukoulas: and fall. Last month we had a 9. 5% decline. Look, 94 00:04:53,520 --> 00:04:55,229 Stephen Koukoulas: the market's looking for a bit of a bounce back, 95 00:04:55,230 --> 00:04:59,940 Stephen Koukoulas: that there is some tentative evidence that the federal government, 96 00:04:59,940 --> 00:05:03,748 Stephen Koukoulas: state and local governments trying to fast track zoning and 97 00:05:04,049 --> 00:05:07,650 Stephen Koukoulas: the approval process is starting to work a little bit. 98 00:05:07,650 --> 00:05:09,690 Stephen Koukoulas: I don't want to overstate it, but there's some evidence that it's 99 00:05:09,690 --> 00:05:14,309 Stephen Koukoulas: working. That probably feeds into an expectation that we will 100 00:05:14,309 --> 00:05:18,300 Stephen Koukoulas: see and desperately want to see a rebuild in housing 101 00:05:18,300 --> 00:05:21,479 Stephen Koukoulas: construction, because that's an absolutely fundamental part of addressing this 102 00:05:21,480 --> 00:05:24,659 Stephen Koukoulas: housing shortage in terms of buying, renting and all the 103 00:05:24,660 --> 00:05:26,969 Stephen Koukoulas: rest of it. So hoping that the building approvals numbers, 104 00:05:27,240 --> 00:05:30,719 Stephen Koukoulas: it's just a little bit stronger than the last month. 105 00:05:30,930 --> 00:05:33,960 Sean Aylmer: Fantastic. Stephen, enjoy your week, especially Wednesday, especially those GDP 106 00:05:33,960 --> 00:05:35,820 Sean Aylmer: figures. You'll be at that all for hours, won't you? 107 00:05:36,660 --> 00:05:38,669 Stephen Koukoulas: I'll be pouring over it. Look, there used to be 108 00:05:38,670 --> 00:05:41,698 Stephen Koukoulas: like 68 tables of data, and then there's a whole 109 00:05:41,699 --> 00:05:45,750 Stephen Koukoulas: lot of subset. I'll be here until midnight Wednesday night. 110 00:05:45,870 --> 00:05:49,710 Sean Aylmer: Fantastic. Enjoy your week, Stephen. That was economist, Stephen Koukoulas, 111 00:05:49,710 --> 00:05:51,779 Sean Aylmer: better known as The Kouk. You can find him at thekouk. 112 00:05:51,779 --> 00:05:54,480 Sean Aylmer: com and follow him on X using the handle TheKouk. 113 00:05:54,779 --> 00:05:56,909 Sean Aylmer: I'm Sean Aylmer, and this Fear & Greed, The Week Ahead.