1 00:00:08,410 --> 00:00:10,610 Sean Aylmer: Welcome to Fear and Greed, The Week Ahead. This is 2 00:00:10,610 --> 00:00:12,319 Sean Aylmer: where we take a look at the big events, reports 3 00:00:12,320 --> 00:00:14,329 Sean Aylmer: and releases coming up this week that give insight into 4 00:00:14,330 --> 00:00:17,239 Sean Aylmer: the economy, and take a look back at what happened last week, too. 5 00:00:17,779 --> 00:00:19,570 Sean Aylmer: I'm Sean Aylmer, and every Monday I'm joined for The 6 00:00:19,570 --> 00:00:23,419 Sean Aylmer: Week Ahead by economist, Stephen Koukoulas. You'll find him at thekouk.com. 7 00:00:23,689 --> 00:00:26,049 Sean Aylmer: That's T- H- E- K- O- U- K. com and 8 00:00:26,049 --> 00:00:30,270 Sean Aylmer: on Twitter using the handle, @TheKouk. Stephen, good morning. Now, 9 00:00:30,510 --> 00:00:32,809 Sean Aylmer: I always think the people that live in Canberra, apart 10 00:00:32,809 --> 00:00:35,309 Sean Aylmer: from lockdowns, you must be really excited when it gets 11 00:00:35,309 --> 00:00:37,580 Sean Aylmer: to the 1st of September and winter's finished. 12 00:00:38,269 --> 00:00:42,089 Stephen Koukoulas: It is, and we've actually had very few minuses the 13 00:00:42,089 --> 00:00:46,510 Stephen Koukoulas: last little while. It's sunny, it's getting above double digits 14 00:00:46,510 --> 00:00:49,610 Stephen Koukoulas: for the maximum temperature. So it is very exciting. There's 15 00:00:49,610 --> 00:00:51,960 Stephen Koukoulas: blossoms on the trees, to the extent you can see them when you 16 00:00:51,960 --> 00:00:55,029 Stephen Koukoulas: go on your walk from the COVID lockdown. So it's 17 00:00:55,029 --> 00:00:57,070 Stephen Koukoulas: just starting to look lovely. 18 00:00:57,400 --> 00:01:00,840 Sean Aylmer: Floriade probably won't happen because of lockdowns, but at least those that 19 00:01:00,840 --> 00:01:03,010 Sean Aylmer: live in Canberra can take advantage of it, perhaps. 20 00:01:03,050 --> 00:01:06,309 Stephen Koukoulas: Correct. Floriade is not going ahead officially, but if you're 21 00:01:06,600 --> 00:01:09,869 Stephen Koukoulas: close to the Lake Burley Griffin precinct, and you have 22 00:01:09,869 --> 00:01:14,720 Stephen Koukoulas: a little walk through Commonwealth Park, you'll see the gorgeous renunculis, 23 00:01:14,720 --> 00:01:18,300 Stephen Koukoulas: if that's the plural, tulips and all those other gorgeous flowers. 24 00:01:18,300 --> 00:01:19,920 Stephen Koukoulas: In fact, I'm going to be going there over the 25 00:01:19,920 --> 00:01:21,300 Stephen Koukoulas: course of the next couple of weeks to have a 26 00:01:21,300 --> 00:01:24,119 Stephen Koukoulas: look around. So it won't be crowded, but like many 27 00:01:24,119 --> 00:01:29,310 Stephen Koukoulas: things with these lockdowns, those sorts of big events just aren't happening. 28 00:01:29,600 --> 00:01:33,270 Sean Aylmer: Mm. I know. Now, onto the economy. Very big week, 29 00:01:33,270 --> 00:01:36,630 Sean Aylmer: last week. Funny that when, three months ago, I'd said 30 00:01:36,630 --> 00:01:38,979 Sean Aylmer: to you, how about 0.7% for the June quarter? You 31 00:01:38,979 --> 00:01:41,899 Sean Aylmer: would have said, "Oh, that'd be disappointing." Yet, that's what happened, 32 00:01:42,009 --> 00:01:43,579 Sean Aylmer: and everyone's relieved, really. 33 00:01:44,330 --> 00:01:48,650 Stephen Koukoulas: They are. The partial indicators that we started getting on 34 00:01:48,650 --> 00:01:51,660 Stephen Koukoulas: things like net exports, on some of the retail sales 35 00:01:51,660 --> 00:01:54,610 Stephen Koukoulas: numbers for the June quarter, I want to emphasize, were 36 00:01:54,610 --> 00:01:56,570 Stephen Koukoulas: looking a little bit soft. But when we saw the 37 00:01:56,570 --> 00:01:59,340 Stephen Koukoulas: GDP figures last week, they confirmed that the economy grew 38 00:01:59,340 --> 00:02:03,100 Stephen Koukoulas: by 0.7%, which in the scheme of things isn't bad 39 00:02:03,100 --> 00:02:07,190 Stephen Koukoulas: because it followed a 1.9% in the previous quarter, which 40 00:02:07,250 --> 00:02:10,200 Stephen Koukoulas: of course was part of the recovery from the 2020 lockdowns. 41 00:02:10,200 --> 00:02:13,910 Stephen Koukoulas: But nonetheless, it confirmed that going into these current lockdowns, 42 00:02:14,109 --> 00:02:17,329 Stephen Koukoulas: the economy had a degree of momentum, and that was 43 00:02:17,329 --> 00:02:20,260 Stephen Koukoulas: good news. So I think financial markets, certainly the treasurer, 44 00:02:20,630 --> 00:02:23,070 Stephen Koukoulas: and no doubt the RBA, they haven't commented yet, but 45 00:02:23,109 --> 00:02:25,889 Stephen Koukoulas: they would have been very pleased with those GDP figures 46 00:02:25,889 --> 00:02:26,390 Stephen Koukoulas: last week. 47 00:02:26,930 --> 00:02:30,909 Sean Aylmer: Yeah. Now, since then, obviously lockdowns kicked in, in July, 48 00:02:30,910 --> 00:02:33,619 Sean Aylmer: although there had been some restrictions in Victoria prior to 49 00:02:33,700 --> 00:02:37,320 Sean Aylmer: 30 June. Most of the indicators since then haven't been 50 00:02:37,320 --> 00:02:40,709 Sean Aylmer: as positive, like building approvals last week, for example. 51 00:02:41,250 --> 00:02:44,089 Stephen Koukoulas: Yeah. Building approvals fell sharply. I think we're now down 52 00:02:44,090 --> 00:02:47,320 Stephen Koukoulas: about 25% from the peak in March. And with the 53 00:02:47,320 --> 00:02:49,160 Stephen Koukoulas: building approvals numbers, we've got to remember that there is a bit 54 00:02:49,160 --> 00:02:51,230 Stephen Koukoulas: of a distortion, a bit of a bring forward, because 55 00:02:51,230 --> 00:02:54,169 Stephen Koukoulas: of the HomeBuilder scheme that was in place. The Commonwealth 56 00:02:54,169 --> 00:02:57,440 Stephen Koukoulas: government, wanting people to build dwellings, which is obviously a 57 00:02:57,440 --> 00:03:00,469 Stephen Koukoulas: worthy objective in itself, but also, it helped the economy 58 00:03:00,470 --> 00:03:04,160 Stephen Koukoulas: to recover. So some of those stronger economic data points 59 00:03:04,160 --> 00:03:06,769 Stephen Koukoulas: that we saw for the first half of 2021 were 60 00:03:06,769 --> 00:03:09,440 Stephen Koukoulas: linked to that. But of course, when you bring forward 61 00:03:09,530 --> 00:03:11,880 Stephen Koukoulas: activity, it means that future activity is going to be 62 00:03:12,049 --> 00:03:15,989 Stephen Koukoulas: borrowed from, so to speak. So house construction, housing construction, 63 00:03:15,989 --> 00:03:18,310 Stephen Koukoulas: I should say, is starting to taper off. There's a 64 00:03:18,310 --> 00:03:21,070 Stephen Koukoulas: bit of a pipeline of activity to go, but these 65 00:03:21,070 --> 00:03:23,669 Stephen Koukoulas: building approvals numbers are suggesting that once we get to 66 00:03:23,669 --> 00:03:27,649 Stephen Koukoulas: the end of 2021, and into 2022, the housing construction 67 00:03:27,649 --> 00:03:30,489 Stephen Koukoulas: side will be a little bit weak, probably compounded by 68 00:03:30,489 --> 00:03:33,169 Stephen Koukoulas: the fact that immigration is also extremely low and we 69 00:03:33,169 --> 00:03:35,379 Stephen Koukoulas: just don't have that population growth to move into all 70 00:03:35,380 --> 00:03:38,119 Stephen Koukoulas: of these dwellings. So yeah, it's just some signs that 71 00:03:38,119 --> 00:03:42,080 Stephen Koukoulas: the September quarter data, the early indications are that it's 72 00:03:42,080 --> 00:03:42,990 Stephen Koukoulas: going to be pretty weak. 73 00:03:43,440 --> 00:03:46,110 Sean Aylmer: Okay. So what about credit? There's credit stats out too 74 00:03:46,110 --> 00:03:46,499 Sean Aylmer: last week. 75 00:03:46,670 --> 00:03:49,539 Stephen Koukoulas: Yeah, they were strong. We're borrowing like crazy. I suppose, 76 00:03:49,540 --> 00:03:52,170 Stephen Koukoulas: to support these high house prices, you've got to borrow. 77 00:03:52,860 --> 00:03:55,690 Stephen Koukoulas: Not everybody's got that chunky deposit to put into their dwelling, 78 00:03:55,690 --> 00:03:58,630 Stephen Koukoulas: so we saw a big lift in housing credit. No 79 00:03:58,630 --> 00:04:01,420 Stephen Koukoulas: doubt about that. But interestingly and rather good news too, 80 00:04:01,420 --> 00:04:04,599 Stephen Koukoulas: I would have thought, was the lift in business credit. 81 00:04:04,600 --> 00:04:07,530 Stephen Koukoulas: So we saw a week or so ago too, the CapEx 82 00:04:08,210 --> 00:04:11,070 Stephen Koukoulas: numbers for the June quarter, and they showed a nice 83 00:04:11,070 --> 00:04:13,560 Stephen Koukoulas: lift in business investment. Well, some of that money is 84 00:04:13,560 --> 00:04:16,800 Stephen Koukoulas: being borrowed. The corporate sector is going out to financial institutions, 85 00:04:16,800 --> 00:04:20,089 Stephen Koukoulas: going to banks, borrowing that money and they're investing. So 86 00:04:20,089 --> 00:04:23,310 Stephen Koukoulas: that fits with the story of a better business climate. 87 00:04:23,310 --> 00:04:26,870 Stephen Koukoulas: And again, just emphasising that was pre the current lockdowns. 88 00:04:27,159 --> 00:04:29,270 Sean Aylmer: And what is happening to house prices? They're rising, but 89 00:04:29,469 --> 00:04:31,180 Sean Aylmer: perhaps not quite as much as they were. 90 00:04:31,380 --> 00:04:34,620 Stephen Koukoulas: Yes. They're still going up. According to the CoreLogic numbers, 91 00:04:34,969 --> 00:04:37,620 Stephen Koukoulas: lift of around about one and a half percent on 92 00:04:37,620 --> 00:04:41,609 Stephen Koukoulas: a national basis. Sydney, a little bit stronger. Gosh, Hobart 93 00:04:41,610 --> 00:04:44,270 Stephen Koukoulas: and Canberra doing very well, surprisingly, as well. 94 00:04:44,270 --> 00:04:44,980 Sean Aylmer: Self interest there, Stephen, self interest. 95 00:04:46,080 --> 00:04:49,620 Stephen Koukoulas: There is. There is, so I'm happy. The wealth is 96 00:04:49,620 --> 00:04:51,760 Stephen Koukoulas: going up a little bit. But look, there's still a 97 00:04:51,760 --> 00:04:53,839 Stephen Koukoulas: fair bit of momentum, and even though the rate of 98 00:04:53,839 --> 00:04:56,169 Stephen Koukoulas: increase isn't quite as strong as it was earlier on, 99 00:04:56,469 --> 00:04:59,429 Stephen Koukoulas: there's still a lot of momentum. These low interest rates 100 00:04:59,430 --> 00:05:02,960 Stephen Koukoulas: seem to be encouraging people to go out there, borrow 101 00:05:03,270 --> 00:05:04,810 Stephen Koukoulas: and bid up prices. 102 00:05:05,500 --> 00:05:07,429 Sean Aylmer: Well, that's last week, we'll be back in a moment 103 00:05:07,430 --> 00:05:08,630 Sean Aylmer: and get into the week ahead. 104 00:05:08,630 --> 00:05:18,520 Sean Aylmer: I'm with economist, Stephen Koukoulas, AKA The Kouk. So Stephen, after all the activity last 105 00:05:18,520 --> 00:05:20,900 Sean Aylmer: week, a little quieter. Tomorrow, the Reserve Bank board meets. 106 00:05:21,159 --> 00:05:24,089 Stephen Koukoulas: Yes. Tomorrow, the RBA board meeting and look, I won't 107 00:05:24,089 --> 00:05:26,150 Stephen Koukoulas: say it's a live meeting, but it'll be interesting to 108 00:05:26,150 --> 00:05:28,309 Stephen Koukoulas: see a couple of things. First of all, what's the 109 00:05:28,650 --> 00:05:31,909 Stephen Koukoulas: RBA thinking of this period of weakness that's driven by 110 00:05:31,909 --> 00:05:34,930 Stephen Koukoulas: these lockdowns? And in a sense, there's no point quibbling 111 00:05:34,930 --> 00:05:37,469 Stephen Koukoulas: whether the September quarter GDP is going to be minus three, 112 00:05:37,469 --> 00:05:40,099 Stephen Koukoulas: or minus two, or minus four, which seems to be 113 00:05:40,099 --> 00:05:42,739 Stephen Koukoulas: a range of forecast that I'm aware of. But rather, 114 00:05:42,740 --> 00:05:45,909 Stephen Koukoulas: what's it seeing when these lockdowns end? We know that 115 00:05:45,909 --> 00:05:49,880 Stephen Koukoulas: the lockdowns will end or be scaled back significantly over 116 00:05:49,880 --> 00:05:51,859 Stephen Koukoulas: the course of the next few months, certainly by the 117 00:05:51,859 --> 00:05:55,150 Stephen Koukoulas: beginning of 2022. So the RBA wouldn't want to be going 118 00:05:55,150 --> 00:05:59,629 Stephen Koukoulas: out there and massively adjusting monetary policy, knowing that within 119 00:05:59,630 --> 00:06:03,609 Stephen Koukoulas: three or four months, hopefully, that we are largely vaccinated 120 00:06:04,039 --> 00:06:06,489 Stephen Koukoulas: and getting about our business again. But it will be 121 00:06:06,490 --> 00:06:08,740 Stephen Koukoulas: interesting to see first, their take on the economy, and 122 00:06:08,740 --> 00:06:12,219 Stephen Koukoulas: indeed whether they tinker with the bond buying program. Obviously, 123 00:06:12,219 --> 00:06:15,789 Stephen Koukoulas: official rates are unchanged. They're probably not going to extend 124 00:06:15,789 --> 00:06:19,229 Stephen Koukoulas: their bond buying to the November, 2024 bonds. But they still 125 00:06:19,229 --> 00:06:22,129 Stephen Koukoulas: have a quantitative easing. Will they be buying 4 billion 126 00:06:22,130 --> 00:06:24,250 Stephen Koukoulas: or 5 billion, or even ramping it up to $6 127 00:06:24,250 --> 00:06:26,810 Stephen Koukoulas: billion per week in terms of keeping the yield curve 128 00:06:26,810 --> 00:06:29,650 Stephen Koukoulas: under control? So a lot of interest there from the 129 00:06:29,650 --> 00:06:33,179 Stephen Koukoulas: RBA as there is every month. This one, again, as 130 00:06:33,180 --> 00:06:34,400 Stephen Koukoulas: I said, it's going to be a little bit more 131 00:06:34,400 --> 00:06:36,559 Stephen Koukoulas: interesting than the recent months where the RBA has been 132 00:06:36,580 --> 00:06:37,469 Stephen Koukoulas: happy to sit tight. 133 00:06:37,870 --> 00:06:39,950 Sean Aylmer: It makes the speeches this week by Guy Debelle, the 134 00:06:39,950 --> 00:06:42,100 Sean Aylmer: deputy governor, perhaps just a little bit more interesting. 135 00:06:42,440 --> 00:06:45,320 Stephen Koukoulas: Oh yes. Guy Debelle is giving a couple of talks 136 00:06:45,320 --> 00:06:47,529 Stephen Koukoulas: during the latter part of this week, and of course 137 00:06:47,529 --> 00:06:49,559 Stephen Koukoulas: he will be able to put some flesh on the 138 00:06:49,560 --> 00:06:52,460 Stephen Koukoulas: bones of what the RBA might be saying on Tuesday 139 00:06:52,460 --> 00:06:56,670 Stephen Koukoulas: afternoon when they put out their board meeting results. So, 140 00:06:56,680 --> 00:06:59,549 Stephen Koukoulas: Guy Debelle clearly would be able to be quizzed in 141 00:06:59,549 --> 00:07:01,630 Stephen Koukoulas: the Q and A session about where the economy is going, 142 00:07:01,630 --> 00:07:05,520 Stephen Koukoulas: what the RBA is thinking. And it's really also an 143 00:07:05,520 --> 00:07:09,840 Stephen Koukoulas: important benchmark, I suppose, for the RBA to be resetting 144 00:07:09,840 --> 00:07:12,450 Stephen Koukoulas: the economic debate. Clearly all of us economists look at 145 00:07:12,450 --> 00:07:14,680 Stephen Koukoulas: what the RBA say. Now, we agree or disagree from 146 00:07:14,680 --> 00:07:17,390 Stephen Koukoulas: time to time. But nonetheless, they are the arbiters of 147 00:07:17,660 --> 00:07:20,930 Stephen Koukoulas: the macro view of the economy, the inflation pressures, the 148 00:07:20,930 --> 00:07:23,910 Stephen Koukoulas: labour market pressures and these sorts of things, so what 149 00:07:23,910 --> 00:07:27,570 Stephen Koukoulas: they say tomorrow in the RBA statement, and then what 150 00:07:27,570 --> 00:07:29,190 Stephen Koukoulas: Guy Debelle says, will be really important. 151 00:07:29,880 --> 00:07:31,860 Sean Aylmer: Of course, ANZ job ads are also out and that's 152 00:07:31,860 --> 00:07:35,640 Sean Aylmer: a leading indicator of the employment market, which looks a 153 00:07:35,640 --> 00:07:37,020 Sean Aylmer: little bit suspect at the moment. 154 00:07:37,300 --> 00:07:40,470 Stephen Koukoulas: Yeah, well, a lot of people are working zero hours. 155 00:07:40,560 --> 00:07:43,739 Stephen Koukoulas: A lot of businesses have closed. By definition, these lockdowns 156 00:07:43,739 --> 00:07:46,739 Stephen Koukoulas: are actually hurting. So no surprises if we see a 157 00:07:46,739 --> 00:07:49,840 Stephen Koukoulas: pretty significant fall in job ads. I'd want to note too, 158 00:07:49,840 --> 00:07:52,630 Stephen Koukoulas: that that's from a very high base. Prior to these lockdowns, 159 00:07:52,630 --> 00:07:54,680 Stephen Koukoulas: so up to the month of June, job ads were 160 00:07:54,680 --> 00:07:59,270 Stephen Koukoulas: absolutely booming. We had the anecdotes of skill shortages, it's 161 00:07:59,270 --> 00:08:02,480 Stephen Koukoulas: hard to get labour. These sorts of things were quite apparent, 162 00:08:02,660 --> 00:08:04,689 Stephen Koukoulas: and that was being reflected in what was a real 163 00:08:04,690 --> 00:08:08,070 Stephen Koukoulas: boom in job advertisements. So again, are we seeing, or 164 00:08:08,070 --> 00:08:10,400 Stephen Koukoulas: will we see with the job ads this week, a 165 00:08:10,400 --> 00:08:12,960 Stephen Koukoulas: little bit of an air pocket in the economy and 166 00:08:12,960 --> 00:08:14,360 Stephen Koukoulas: that when we get to the end of this, we 167 00:08:14,360 --> 00:08:16,610 Stephen Koukoulas: see the rebound occurring? But for right now, we're in 168 00:08:16,610 --> 00:08:19,700 Stephen Koukoulas: the eye of the storm, so to speak. Optimists are 169 00:08:19,700 --> 00:08:22,720 Stephen Koukoulas: looking to the beginning of 2022, when we're vaccinated and 170 00:08:22,720 --> 00:08:25,070 Stephen Koukoulas: the economy's opened up for a recovery, and that's going 171 00:08:25,070 --> 00:08:26,340 Stephen Koukoulas: to be a lot of the debate this week. 172 00:08:26,679 --> 00:08:27,540 Sean Aylmer: Stephen, have a great week. 173 00:08:27,900 --> 00:08:28,480 Stephen Koukoulas: Thanks Sean. 174 00:08:28,770 --> 00:08:31,550 Sean Aylmer: That was economist, Stephen Koukoulas, better known as The Kouk. You 175 00:08:31,550 --> 00:08:33,990 Sean Aylmer: can find him at thekouk.com and follow him on Twitter 176 00:08:33,990 --> 00:08:36,730 Sean Aylmer: using the handle, @TheKouk. I'm Sean Aylmer, and this is 177 00:08:36,730 --> 00:08:38,250 Sean Aylmer: Fear and Greed, The Week Ahead.