1 00:00:08,130 --> 00:00:11,429 Jennifer Duke: Welcome to Fear and Greed - The Week Ahead. I'm Jennifer Duke and I'm 2 00:00:11,429 --> 00:00:14,759 Jennifer Duke: joined by economist Stephen Koukoulas. You'll find him at thekouk. 3 00:00:14,759 --> 00:00:17,070 Jennifer Duke: com, that's T- H- E- K- O- U- K. com, 4 00:00:17,309 --> 00:00:19,440 Jennifer Duke: and on X, using the handle TheKouk. Stephen, good morning. 5 00:00:19,440 --> 00:00:20,910 Stephen Koukoulas: And a very good morning to you, Jen. 6 00:00:20,909 --> 00:00:26,159 Jennifer Duke: First off, what happened last week? What sort of data were we seeing? 7 00:00:26,160 --> 00:00:27,569 Jennifer Duke: And any big trends? 8 00:00:27,870 --> 00:00:30,779 Stephen Koukoulas: There was really important data last week relating to the 9 00:00:30,780 --> 00:00:33,718 Stephen Koukoulas: labor force. In no particular order, we had, well, the 10 00:00:33,719 --> 00:00:36,598 Stephen Koukoulas: employment numbers, which showed a bit of a disappointing pullback 11 00:00:36,600 --> 00:00:40,890 Stephen Koukoulas: in employment. Employment fell by about 14, 600 people. The 12 00:00:40,890 --> 00:00:44,820 Stephen Koukoulas: unemployment rate ticked up to 3. 7% from 3. 5%. 13 00:00:46,110 --> 00:00:48,690 Stephen Koukoulas: And in a way, it's one of those things that was going to 14 00:00:48,690 --> 00:00:52,440 Stephen Koukoulas: happen because the economy has been slowing down since the 15 00:00:52,440 --> 00:00:55,229 Stephen Koukoulas: start of this year. We know that retail spending, GDP, 16 00:00:55,740 --> 00:00:58,890 Stephen Koukoulas: business investment have all been tapering a little bit lower. 17 00:00:58,890 --> 00:01:01,680 Stephen Koukoulas: So it was inevitable that the labor market would weaken 18 00:01:01,770 --> 00:01:03,599 Stephen Koukoulas: a bit, and here we are. We're starting to see 19 00:01:03,599 --> 00:01:06,479 Stephen Koukoulas: that come through. So, that was an important issue. It 20 00:01:06,480 --> 00:01:08,399 Stephen Koukoulas: sort of fits with the narrative that the Reserve Bank's 21 00:01:08,400 --> 00:01:11,100 Stephen Koukoulas: been going on about in terms of the weakening in 22 00:01:11,100 --> 00:01:13,438 Stephen Koukoulas: the labor market. And that's coming through loud and clear. 23 00:01:13,438 --> 00:01:18,240 Stephen Koukoulas: So, that's one thing, and it's an important part of the adjustment to low inflation. Well, nobody likes 24 00:01:18,240 --> 00:01:22,560 Stephen Koukoulas: higher unemployment. From a macromanagement perspective, well, it's what was 25 00:01:22,830 --> 00:01:26,219 Stephen Koukoulas: anticipated and, frankly, what's needed to sort of ensure that 26 00:01:26,219 --> 00:01:28,890 Stephen Koukoulas: the economy is slowing down. The other really big news 27 00:01:29,250 --> 00:01:32,819 Stephen Koukoulas: was the Wage Price Index. And that was, well, I'll call 28 00:01:32,819 --> 00:01:35,430 Stephen Koukoulas: it disappointing in that it was only a 0. 8% 29 00:01:35,819 --> 00:01:40,770 Stephen Koukoulas: quarterly increase. The annual increase eased back from 3. 7% to 3.6%. 30 00:01:42,599 --> 00:01:45,359 Stephen Koukoulas: So, again, in line with perhaps with these softening labor- 31 00:01:45,360 --> 00:01:48,870 Stephen Koukoulas: market numbers, that that wage price spiral that the Reserve 32 00:01:48,870 --> 00:01:52,680 Stephen Koukoulas: Bank was worrying about is not coming through. Rather we've 33 00:01:52,680 --> 00:01:54,960 Stephen Koukoulas: got a bit of a pickup in wages growth from 34 00:01:54,960 --> 00:01:56,609 Stephen Koukoulas: where we were a year or two ago, and that's 35 00:01:56,610 --> 00:01:59,340 Stephen Koukoulas: a good thing, but we're not having that problematic wage 36 00:01:59,340 --> 00:02:01,230 Stephen Koukoulas: increase that would feed into higher inflation. 37 00:02:02,009 --> 00:02:04,920 Jennifer Duke: How does this tie into the RBA's meeting minutes? 38 00:02:05,580 --> 00:02:08,910 Stephen Koukoulas: Oh, look, I think it would probably just reinforce what 39 00:02:08,910 --> 00:02:10,710 Stephen Koukoulas: they've done for the last two months, because that's a 40 00:02:10,710 --> 00:02:12,960 Stephen Koukoulas: really good point because we know that for the last 41 00:02:12,960 --> 00:02:16,319 Stephen Koukoulas: two months, the Reserve Bank has held rates steady. They've 42 00:02:16,320 --> 00:02:20,010 Stephen Koukoulas: been debating whether to go another 25-point hike or keep them steady, and they've obviously 43 00:02:20,070 --> 00:02:24,630 Stephen Koukoulas: opted for the rates- on- hold decision. And the minutes 44 00:02:25,169 --> 00:02:27,870 Stephen Koukoulas: still will probably have that bias. Inflation is still high. 45 00:02:27,930 --> 00:02:30,960 Stephen Koukoulas: Yes, it's coming down, but there's this debate about how 46 00:02:30,960 --> 00:02:32,939 Stephen Koukoulas: quickly will it get back to the target. And of 47 00:02:32,940 --> 00:02:36,030 Stephen Koukoulas: course, around the world, there are generally higher interest rates 48 00:02:36,030 --> 00:02:38,369 Stephen Koukoulas: than here in Australia. We're at 4. 1% cash rate. 49 00:02:38,460 --> 00:02:40,229 Stephen Koukoulas: In the US and New Zealand, for example, it's around 50 00:02:40,230 --> 00:02:44,070 Stephen Koukoulas: about 5.5%, just by way of example. So, put it this 51 00:02:44,070 --> 00:02:45,870 Stephen Koukoulas: way. If there is a right move in interest rates 52 00:02:45,870 --> 00:02:47,250 Stephen Koukoulas: in the next couple of months, it'll be up not 53 00:02:47,250 --> 00:02:49,410 Stephen Koukoulas: down. It's still way, way, way too early to talk 54 00:02:49,410 --> 00:02:52,349 Stephen Koukoulas: about interest- rate cuts. But the debate about rate hike 55 00:02:52,349 --> 00:02:55,140 Stephen Koukoulas: has being watered down with almost every data release, and 56 00:02:55,200 --> 00:02:57,569 Stephen Koukoulas: the data we saw last week on wages and employment, 57 00:02:57,570 --> 00:02:59,969 Stephen Koukoulas: as we were just discussing, says to me that the 58 00:02:59,969 --> 00:03:02,668 Stephen Koukoulas: next board meeting in early September will be on hold 59 00:03:02,669 --> 00:03:03,929 Stephen Koukoulas: again for a third month in a row. 60 00:03:05,399 --> 00:03:07,440 Jennifer Duke: So, now I want just to turn to housing because the 61 00:03:07,440 --> 00:03:09,990 Jennifer Duke: other big thing happening last week was the government's national 62 00:03:09,990 --> 00:03:12,689 Jennifer Duke: cabinet agreement on housing. What did you make of the 1. 63 00:03:12,900 --> 00:03:15,750 Jennifer Duke: 2 million home building over five year target? 64 00:03:16,380 --> 00:03:19,440 Stephen Koukoulas: A great objective, but I think it's going to be 65 00:03:20,010 --> 00:03:22,200 Stephen Koukoulas: problematic. There's a lot of issues. I'll put it this 66 00:03:22,200 --> 00:03:24,239 Stephen Koukoulas: way. There's not a lot of flesh on the bones 67 00:03:24,240 --> 00:03:27,209 Stephen Koukoulas: of that 1. 2 million target. Great target. I like the target. 68 00:03:27,570 --> 00:03:29,340 Stephen Koukoulas: It's a bit like my New Year's resolutions to lose 69 00:03:29,340 --> 00:03:32,069 Stephen Koukoulas: weight, to exercise more. It lasts for a little while 70 00:03:32,070 --> 00:03:34,169 Stephen Koukoulas: and then it's peters out. So I'm wondering whether it's 71 00:03:34,169 --> 00:03:37,320 Stephen Koukoulas: going to be like that. But the 1. 2 million, that would 72 00:03:37,320 --> 00:03:42,330 Stephen Koukoulas: be an unrelenting record number of new dwelling starts for 73 00:03:42,330 --> 00:03:45,120 Stephen Koukoulas: five consecutive years. So, to me, that makes me a 74 00:03:45,120 --> 00:03:47,730 Stephen Koukoulas: little bit nervous about " This time it's different. We're going 75 00:03:47,730 --> 00:03:51,329 Stephen Koukoulas: to be building all these houses." It doesn't really address 76 00:03:51,330 --> 00:03:55,230 Stephen Koukoulas: the major problem from housing supply, 1. 2 million new 77 00:03:55,230 --> 00:03:58,920 Stephen Koukoulas: houses, and that is zoning laws, council approval for the 78 00:03:58,920 --> 00:04:01,890 Stephen Koukoulas: building of new dwellings. And while there's a few financial 79 00:04:01,890 --> 00:04:04,740 Stephen Koukoulas: incentives that the Commonwealth's offering the state and local governments 80 00:04:05,400 --> 00:04:08,639 Stephen Koukoulas: to ramp up their building activity, you still need council 81 00:04:08,639 --> 00:04:12,299 Stephen Koukoulas: approval to build new dwellings. And that's been the bugbear 82 00:04:12,299 --> 00:04:14,790 Stephen Koukoulas: of the supply side of the housing market for a 83 00:04:14,790 --> 00:04:17,550 Stephen Koukoulas: long time. There is another issue, or rather couple of 84 00:04:17,550 --> 00:04:21,719 Stephen Koukoulas: issues, I should say, is that even now with a relatively moderate 85 00:04:21,719 --> 00:04:26,279 Stephen Koukoulas: level of housing starts, building companies are finding it hugely 86 00:04:26,279 --> 00:04:30,300 Stephen Koukoulas: difficult to find the skilled workers and the tradies needed 87 00:04:30,420 --> 00:04:33,030 Stephen Koukoulas: to build the houses. You need people who know how 88 00:04:33,120 --> 00:04:35,160 Stephen Koukoulas: electronics work and to hammer in a nail and all 89 00:04:35,160 --> 00:04:37,529 Stephen Koukoulas: these other things. So the trade is an actually vital 90 00:04:37,529 --> 00:04:40,680 Stephen Koukoulas: part of this construction side. And if we're to build 1. 91 00:04:40,889 --> 00:04:43,259 Stephen Koukoulas: 2 million dwellings over five years, we're going to need 92 00:04:43,259 --> 00:04:45,870 Stephen Koukoulas: a lot more skilled workers in the construction area. And 93 00:04:46,770 --> 00:04:48,960 Stephen Koukoulas: I don't know if we've got them. So that puts 94 00:04:49,020 --> 00:04:50,969 Stephen Koukoulas: a question mark over whether we're going to get that 1. 95 00:04:51,270 --> 00:04:53,910 Stephen Koukoulas: 2 million. A worthy objective, as I said, but there's 96 00:04:53,910 --> 00:04:55,529 Stephen Koukoulas: got to be a lot more flesh on how you 97 00:04:55,529 --> 00:04:58,529 Stephen Koukoulas: actually ramp it up from a number that's a little 98 00:04:58,529 --> 00:05:00,450 Stephen Koukoulas: bit less than a million for the last five years 99 00:05:00,450 --> 00:05:02,759 Stephen Koukoulas: to a 1.2 million target. 100 00:05:03,360 --> 00:05:05,188 Jennifer Duke: Definitely. And on that skills piece, we do have that 101 00:05:05,190 --> 00:05:08,490 Jennifer Duke: employment white paper. I think it's due in September, and 102 00:05:08,490 --> 00:05:10,049 Jennifer Duke: I wonder if there's going to be a focus on 103 00:05:10,050 --> 00:05:12,540 Jennifer Duke: tradies now in there. Is that something that you would 104 00:05:12,540 --> 00:05:13,200 Jennifer Duke: want to see? 105 00:05:13,890 --> 00:05:17,578 Stephen Koukoulas: Oh, yes, indeed. You want to see that across all 106 00:05:17,580 --> 00:05:20,880 Stephen Koukoulas: skills, actually. Education, skills and training are the fuel of 107 00:05:20,880 --> 00:05:25,349 Stephen Koukoulas: productivity increases. If you can't have people maximizing or utilizing 108 00:05:25,350 --> 00:05:29,430 Stephen Koukoulas: their potential in the workforce, you've got a substandard level of productivity. 109 00:05:29,430 --> 00:05:33,268 Stephen Koukoulas: So, skills and training are really important. And one of the 110 00:05:33,270 --> 00:05:35,368 Stephen Koukoulas: things too, this is probably more from... just rather than 111 00:05:35,370 --> 00:05:39,960 Stephen Koukoulas: a week ahead, but the decade ahead, we need talented 112 00:05:39,960 --> 00:05:42,359 Stephen Koukoulas: workers. And in a sense, you've got the unemployment rate below 4%, 113 00:05:43,049 --> 00:05:46,170 Stephen Koukoulas: even though it might go above that in the next few months. Let's embrace 114 00:05:46,170 --> 00:05:48,270 Stephen Koukoulas: this low unemployment rate. One way to do that is 115 00:05:48,270 --> 00:05:52,859 Stephen Koukoulas: to structurally change the talent, the skills, the learning of 116 00:05:52,860 --> 00:05:56,310 Stephen Koukoulas: your workforce. And trades and training, a vital part of that. 117 00:05:57,120 --> 00:05:58,859 Jennifer Duke: We need to Fear and Greed the year ahead, I 118 00:05:58,860 --> 00:06:04,320 Jennifer Duke: think. So, coming up over this week, what are you expecting to see? Is there 119 00:06:04,320 --> 00:06:05,100 Jennifer Duke: much data coming out? 120 00:06:06,120 --> 00:06:07,650 Stephen Koukoulas: No, there's not a lot of local data. It's one 121 00:06:07,650 --> 00:06:10,289 Stephen Koukoulas: of those weeks where we've got a bit of a 122 00:06:10,290 --> 00:06:12,660 Stephen Koukoulas: pause. And, oh, look, the week's going to be kicking 123 00:06:12,660 --> 00:06:16,379 Stephen Koukoulas: off with market concerns, which we've been brewing over the 124 00:06:16,379 --> 00:06:18,600 Stephen Koukoulas: last few weeks. In fact, about the slowdown in the 125 00:06:18,600 --> 00:06:22,080 Stephen Koukoulas: Chinese economy. The Aussie dollar has been thumped in the 126 00:06:22,080 --> 00:06:25,109 Stephen Koukoulas: last week. We were struggling around about 64 cents, give 127 00:06:25,110 --> 00:06:27,270 Stephen Koukoulas: or take, one of the lowest levels in a couple 128 00:06:27,270 --> 00:06:29,339 Stephen Koukoulas: of years. We've fallen against the cross rate. So it's 129 00:06:29,339 --> 00:06:31,799 Stephen Koukoulas: not a US dollar story this time because we're very 130 00:06:31,799 --> 00:06:33,988 Stephen Koukoulas: weak against the Euro, the British pound and the like. 131 00:06:33,990 --> 00:06:36,389 Stephen Koukoulas: So it's an Aussie dollar story this time around. So, 132 00:06:36,389 --> 00:06:38,310 Stephen Koukoulas: I think the focus will be not so much on 133 00:06:38,310 --> 00:06:41,070 Stephen Koukoulas: the economic hard data, because there isn't much, it'll be 134 00:06:41,070 --> 00:06:43,380 Stephen Koukoulas: more on, " Well, what's happening in financial markets now? What's 135 00:06:43,380 --> 00:06:46,290 Stephen Koukoulas: happening to the Chinese economy? Are commodity prices starting to 136 00:06:46,290 --> 00:06:49,919 Stephen Koukoulas: weaken." And for Australia, with China taking roughly a third 137 00:06:49,920 --> 00:06:52,950 Stephen Koukoulas: of our goods exports, we don't want China to have 138 00:06:53,369 --> 00:06:55,920 Stephen Koukoulas: an economic hard landing because that would spell trouble for us. 139 00:06:56,460 --> 00:06:58,650 Jennifer Duke: That's a great point. And we've also got the intergenerational 140 00:06:58,650 --> 00:07:00,539 Jennifer Duke: report, I believe, coming out. Do you have any thoughts on 141 00:07:00,540 --> 00:07:02,339 Jennifer Duke: what we might want to look out for in that one? 142 00:07:03,360 --> 00:07:05,700 Stephen Koukoulas: Yes. Well, that's another one. Maybe Fear and Greed - The 143 00:07:05,700 --> 00:07:09,238 Stephen Koukoulas: Decade Ahead- type (inaudible) , because every five years or 144 00:07:09,238 --> 00:07:11,910 Stephen Koukoulas: so, the government puts out an intergenerational report. I like 145 00:07:11,910 --> 00:07:15,360 Stephen Koukoulas: it. In a sense, it's a bit a bit of 146 00:07:15,360 --> 00:07:20,010 Stephen Koukoulas: a convoluted policy document, but it highlights things like the 147 00:07:20,010 --> 00:07:22,410 Stephen Koukoulas: aging population. We're all living longer, which I think is a 148 00:07:22,410 --> 00:07:26,340 Stephen Koukoulas: good thing, but that has implications for the budget. People 149 00:07:26,340 --> 00:07:28,650 Stephen Koukoulas: on the pension, people who are older tend to have 150 00:07:28,650 --> 00:07:32,160 Stephen Koukoulas: a higher usage of healthcare, which is very expensive, as 151 00:07:32,160 --> 00:07:33,870 Stephen Koukoulas: we know. There's aged care, which has been a hot 152 00:07:34,200 --> 00:07:36,030 Stephen Koukoulas: topic for the last few years and will continue to 153 00:07:36,030 --> 00:07:38,700 Stephen Koukoulas: be with the aging population. And in a sense, it 154 00:07:38,700 --> 00:07:41,429 Stephen Koukoulas: sort of just describes what is needed for Australia, how 155 00:07:41,429 --> 00:07:44,160 Stephen Koukoulas: are we going to cope with... in 20 or 30 years, we'll 156 00:07:44,160 --> 00:07:45,599 Stephen Koukoulas: have to wait, see what the exact numbers are now 157 00:07:45,599 --> 00:07:49,289 Stephen Koukoulas: from Treasury, but with a population currently 26.5 million, it'll 158 00:07:49,289 --> 00:07:52,920 Stephen Koukoulas: be 40-45 or 50 million in another 30 years. And where are 159 00:07:52,920 --> 00:07:55,050 Stephen Koukoulas: those people going to live? And dovetails back to that 160 00:07:55,050 --> 00:07:57,389 Stephen Koukoulas: housing debate that we were just having a moment ago. 161 00:07:57,389 --> 00:08:01,078 Stephen Koukoulas: But also from the longer- run, fiscal perspective, what are 162 00:08:01,080 --> 00:08:02,279 Stephen Koukoulas: we going to do? How are we going to pay 163 00:08:02,280 --> 00:08:05,850 Stephen Koukoulas: for these people who are going to be using public 164 00:08:05,850 --> 00:08:09,000 Stephen Koukoulas: finances for their aged care, their healthcare, and the like? It's an 165 00:08:09,000 --> 00:08:10,920 Stephen Koukoulas: issue that's got to be brought out into the open, 166 00:08:10,920 --> 00:08:14,609 Stephen Koukoulas: but it really fuels a lift in the economic debate. 167 00:08:14,610 --> 00:08:15,481 Stephen Koukoulas: So I'm looking forward to seeing it. 168 00:08:15,481 --> 00:08:19,740 Jennifer Duke: So, Stephen, a huge week ahead. Have a great time 169 00:08:19,740 --> 00:08:21,300 Jennifer Duke: over the week looking at that data. 170 00:08:21,809 --> 00:08:23,430 Stephen Koukoulas: Thanks, Jen. It should be a lot of fun. 171 00:08:23,789 --> 00:08:26,489 Jennifer Duke: So, that was economist Stephen Koukoulas, better known as TheKouk. 172 00:08:26,850 --> 00:08:29,160 Jennifer Duke: You can find him at thekouk. com and follow him 173 00:08:29,160 --> 00:08:32,490 Jennifer Duke: on X, using the handle TheKouk. I'm Jennifer Duke, economics 174 00:08:32,490 --> 00:08:35,160 Jennifer Duke: correspondent at Capital Brief, filling in for Sean Aylmer. And 175 00:08:35,160 --> 00:08:36,719 Jennifer Duke: this is Fear and Greed - The Week Ahead.