1 00:00:06,200 --> 00:00:08,280 Speaker 1: Welcome to Fear and Greed Q and A, where we 2 00:00:08,320 --> 00:00:11,959 Speaker 1: ask and answer questions about business, investing, economics, politics and more. 3 00:00:12,000 --> 00:00:14,480 Speaker 1: I'm Michael Thompson and every Monday morning we're joined by 4 00:00:14,520 --> 00:00:17,120 Speaker 1: economists Stephen Coo cool Is to look at the week ahead. 5 00:00:17,160 --> 00:00:19,599 Speaker 1: You'll find him at the kouk dot com. That's t 6 00:00:19,920 --> 00:00:23,279 Speaker 1: g ko uk dot com and on X using the 7 00:00:23,360 --> 00:00:28,200 Speaker 1: handle the kuk. Stephen, Good morning and welcome back choo. 8 00:00:28,840 --> 00:00:32,319 Speaker 2: Great to be back. And holidays are wonderful, but back 9 00:00:32,360 --> 00:00:35,760 Speaker 2: to the harsh reality of the Australian economy and financial markets, 10 00:00:35,760 --> 00:00:38,600 Speaker 2: which of course are almost as exciting as having a 11 00:00:38,600 --> 00:00:39,919 Speaker 2: look at the UFIZI in Florence. 12 00:00:40,200 --> 00:00:42,800 Speaker 1: Well, this is the thing. You've had six weeks, six 13 00:00:42,840 --> 00:00:50,400 Speaker 1: weeks a fantastic holiday throughout traveling Italy, and I was 14 00:00:50,440 --> 00:00:53,440 Speaker 1: looking at what's happened in the six weeks while while 15 00:00:53,479 --> 00:00:56,800 Speaker 1: you've been gone, We've had RBA meeting, We've had September 16 00:00:56,880 --> 00:01:00,280 Speaker 1: quarter inflation, the US government has been shut down for 17 00:01:00,320 --> 00:01:03,400 Speaker 1: the entire time you were gone. We had the Melbourne 18 00:01:03,440 --> 00:01:07,360 Speaker 1: Cup about all of these things. When you are an economist, 19 00:01:07,400 --> 00:01:10,920 Speaker 1: when you live and breathe this, do you pay attention 20 00:01:10,959 --> 00:01:15,720 Speaker 1: to it? While you are there sipping on your what 21 00:01:15,760 --> 00:01:16,400 Speaker 1: were you drinking? 22 00:01:16,400 --> 00:01:20,160 Speaker 2: Mostly lovely kiante of course from the Tuscan region. And 23 00:01:20,160 --> 00:01:22,319 Speaker 2: then there's a little sort of a freshman at a 24 00:01:22,360 --> 00:01:26,280 Speaker 2: campari soda which is really lovely. But yes, I do 25 00:01:26,360 --> 00:01:28,720 Speaker 2: pay attention. It's one of those ones where look during 26 00:01:28,760 --> 00:01:31,920 Speaker 2: the course of the day and they're like, no, I 27 00:01:31,959 --> 00:01:35,360 Speaker 2: don't really look very closely. But there's always that sort 28 00:01:35,360 --> 00:01:37,680 Speaker 2: of time at the end of the day or quiet, 29 00:01:37,720 --> 00:01:40,880 Speaker 2: if it's raining or something. You check a few emails, 30 00:01:40,920 --> 00:01:43,840 Speaker 2: and of course the newsfeed. You get the newspapers on 31 00:01:43,880 --> 00:01:46,240 Speaker 2: your phone now and of course I listen to Fear 32 00:01:46,280 --> 00:01:49,360 Speaker 2: and Greed every morning and night just to get the 33 00:01:49,400 --> 00:01:52,520 Speaker 2: load down on what's happening in the economy, and so 34 00:01:52,560 --> 00:01:55,920 Speaker 2: I kept up to date with it all. And yes, 35 00:01:56,280 --> 00:01:59,080 Speaker 2: the world, the world and Australia has changed in that 36 00:01:59,160 --> 00:01:59,760 Speaker 2: six weeks. 37 00:02:00,120 --> 00:02:03,200 Speaker 1: Yeah, yeah, it certainly has. And we've got a lot 38 00:02:03,280 --> 00:02:05,000 Speaker 1: that we want to talk about this coming up this week. 39 00:02:05,120 --> 00:02:06,600 Speaker 1: Before we get to that, I want to talk to 40 00:02:06,600 --> 00:02:09,400 Speaker 1: you about last week, because last week was a bump 41 00:02:09,400 --> 00:02:11,959 Speaker 1: a week. It felt like the headline was the labor 42 00:02:11,960 --> 00:02:15,320 Speaker 1: force data. We had Unemployment dropped from four and a 43 00:02:15,320 --> 00:02:18,639 Speaker 1: half percent in September to four point three percent in October. 44 00:02:19,040 --> 00:02:22,359 Speaker 1: The RBA had talked about the facts that the labor 45 00:02:22,400 --> 00:02:28,679 Speaker 1: market was indeed very strong. This was perhaps stronger than expected, though. 46 00:02:29,080 --> 00:02:32,240 Speaker 2: Yeah, look probably broadly as expected. It's one of those 47 00:02:32,240 --> 00:02:33,920 Speaker 2: ones where the monthly numbers, as we know, are very 48 00:02:34,000 --> 00:02:36,080 Speaker 2: volatile and choppy, and if we sort of look at 49 00:02:36,080 --> 00:02:38,720 Speaker 2: the moving average or what was happening a few months before, 50 00:02:38,720 --> 00:02:40,760 Speaker 2: where we did have a couple of soft employment numbers, 51 00:02:40,800 --> 00:02:43,600 Speaker 2: there's no doubt about that, and that's why the RBA 52 00:02:43,760 --> 00:02:47,080 Speaker 2: in their November State My Montary Policy, had a smidge 53 00:02:47,360 --> 00:02:50,880 Speaker 2: upward revision to their unemployment forecast and this number, you know, 54 00:02:50,960 --> 00:02:53,320 Speaker 2: to two decimal places, looking at the last two months together, 55 00:02:53,400 --> 00:02:56,239 Speaker 2: is about where they were expecting. So in a sense, 56 00:02:56,360 --> 00:03:00,720 Speaker 2: it's a sign of resilience in the economy. Two thousand 57 00:03:00,800 --> 00:03:02,919 Speaker 2: jobs with more than all of them full time. There's 58 00:03:02,919 --> 00:03:04,880 Speaker 2: a bit of a dip in part time employment, so 59 00:03:05,680 --> 00:03:08,400 Speaker 2: when you're looking at these numbers, and again aside from 60 00:03:08,400 --> 00:03:11,320 Speaker 2: the monthly volatility, yes we're well aware of that, but 61 00:03:11,360 --> 00:03:16,000 Speaker 2: it's nice to see the economy remain resilient and resilient 62 00:03:16,120 --> 00:03:18,679 Speaker 2: enough to create employment to stop that unemployment rate from 63 00:03:18,919 --> 00:03:21,720 Speaker 2: moving high, which was something that I feared still due 64 00:03:21,720 --> 00:03:24,840 Speaker 2: to some extent, but really feared. With the economy just 65 00:03:24,880 --> 00:03:27,880 Speaker 2: looking to be growing at an okay pace but not 66 00:03:27,919 --> 00:03:28,760 Speaker 2: particularly strong. 67 00:03:29,840 --> 00:03:33,399 Speaker 1: I want to look at what those labor force figures 68 00:03:33,440 --> 00:03:36,760 Speaker 1: mean from two perspectives. One is what it means then 69 00:03:36,800 --> 00:03:39,960 Speaker 1: for the RBA and the potential for interest rate cuts, 70 00:03:39,960 --> 00:03:42,760 Speaker 1: where that's entirely off the table. We'll get to that 71 00:03:42,800 --> 00:03:47,200 Speaker 1: one in a second. But first, small businesses or businesses, 72 00:03:47,240 --> 00:03:51,440 Speaker 1: anyone out there who might be looking for staff, what 73 00:03:51,480 --> 00:03:53,839 Speaker 1: does this actually mean? How does this then play out? 74 00:03:53,920 --> 00:03:56,920 Speaker 1: And are they going to find it harder? Is it 75 00:03:56,960 --> 00:04:00,880 Speaker 1: taking longer to get people into a job? Is there 76 00:04:00,960 --> 00:04:03,680 Speaker 1: more competition? What's it actually mean on the ground. 77 00:04:04,280 --> 00:04:06,520 Speaker 2: Yeah, Look, that's a really important point. That's what one 78 00:04:06,560 --> 00:04:09,480 Speaker 2: reason why the unemployment rate matters to the business sector. 79 00:04:09,480 --> 00:04:11,720 Speaker 2: Obviously matters to the individual, but for the business sector, 80 00:04:12,440 --> 00:04:14,960 Speaker 2: we shouldn't ignore the fact that the unemployment rate has 81 00:04:15,120 --> 00:04:18,280 Speaker 2: crept up from where it was roughly eighteen months ago. 82 00:04:18,400 --> 00:04:21,760 Speaker 2: The labor market was extremely tight. That you know, the 83 00:04:22,680 --> 00:04:26,200 Speaker 2: various surveys of the business sector, small, medium, and large 84 00:04:26,240 --> 00:04:29,359 Speaker 2: were sort of focused on how difficult is it for 85 00:04:29,400 --> 00:04:32,560 Speaker 2: you to find suitable labor for your business, and of 86 00:04:32,600 --> 00:04:35,080 Speaker 2: course that was off the charts. It was very, very difficult. 87 00:04:35,120 --> 00:04:39,000 Speaker 2: But the tick upwards in the unemployment rate over that 88 00:04:39,360 --> 00:04:42,520 Speaker 2: eighteen month period, plus the fact that we've got high immigration, 89 00:04:42,680 --> 00:04:45,720 Speaker 2: which is actually feeding into the supply of labor, there 90 00:04:45,720 --> 00:04:48,920 Speaker 2: are other issues associated with that, of course, means that 91 00:04:48,920 --> 00:04:53,600 Speaker 2: that timeness in the labor markets eased a bit or 92 00:04:53,600 --> 00:04:56,799 Speaker 2: in some instances quite a lot. There are still labor 93 00:04:56,800 --> 00:04:59,520 Speaker 2: and skill shortages, particularly in construction and these sorts of 94 00:04:59,560 --> 00:05:02,920 Speaker 2: things that we really desperately want to see recovery and 95 00:05:02,960 --> 00:05:05,719 Speaker 2: important for productivity and those sorts of things. But the 96 00:05:05,800 --> 00:05:08,719 Speaker 2: labor market, again is one of those ones where I'm 97 00:05:08,720 --> 00:05:11,840 Speaker 2: still loing for this adjective to describe something that's sort 98 00:05:11,880 --> 00:05:15,520 Speaker 2: of not burming, not busting, that's in the middle. And 99 00:05:15,560 --> 00:05:18,120 Speaker 2: so the labor market is in that groove. We're in 100 00:05:18,120 --> 00:05:20,960 Speaker 2: the gray area. You know, it's not as tight as 101 00:05:20,960 --> 00:05:22,960 Speaker 2: it was, but we certainly haven't got a whole lot 102 00:05:22,960 --> 00:05:24,839 Speaker 2: of slack in the labor market. It's just sort of 103 00:05:24,880 --> 00:05:28,520 Speaker 2: like that one where it's in a solid position, not 104 00:05:28,720 --> 00:05:32,840 Speaker 2: easy to find staff, but easier than it was a 105 00:05:32,920 --> 00:05:33,640 Speaker 2: year or two ago. 106 00:05:34,000 --> 00:05:37,000 Speaker 1: Okay, all right, And from the other side, from the 107 00:05:37,360 --> 00:05:41,039 Speaker 1: Reserve Bank and their consideration about interest rates. Also last 108 00:05:41,040 --> 00:05:44,120 Speaker 1: week we had consumer confidence turning positive for the first 109 00:05:44,120 --> 00:05:46,880 Speaker 1: time what nearly four years, business conditions at their highest 110 00:05:46,960 --> 00:05:50,359 Speaker 1: level since early last year. You add in then this 111 00:05:51,160 --> 00:05:58,080 Speaker 1: unemployment number, economy traveling along fairly steadily, it seems. Does 112 00:05:58,120 --> 00:06:00,480 Speaker 1: this mean rate cuts are off the table? 113 00:06:01,080 --> 00:06:04,120 Speaker 2: They're off the table for the next few months, at least. 114 00:06:05,240 --> 00:06:08,440 Speaker 2: Nothing's ever completely off the table. Look at this gray hair. 115 00:06:08,680 --> 00:06:11,640 Speaker 2: I've been around a long time and I've seen markets 116 00:06:11,680 --> 00:06:14,560 Speaker 2: and central banks change their view when things change. And 117 00:06:14,880 --> 00:06:17,400 Speaker 2: we still have in the RBA acknowledge this a global 118 00:06:18,560 --> 00:06:22,919 Speaker 2: uncertainty the US. You mentioned the lockdowns in the US recently, 119 00:06:23,320 --> 00:06:25,360 Speaker 2: the US economy or we don't know. They haven't had 120 00:06:25,440 --> 00:06:28,560 Speaker 2: much data printed sort of see what's happening there, and 121 00:06:28,680 --> 00:06:31,080 Speaker 2: so there's still some risks there. But for the here 122 00:06:31,120 --> 00:06:34,080 Speaker 2: and now and until we get well into twenty twenty six, 123 00:06:34,320 --> 00:06:37,119 Speaker 2: the RBA will be on hold. They'll be not quite 124 00:06:37,160 --> 00:06:40,120 Speaker 2: sitting back and thinking, gee, we've done a pretty good job. Unemployments, 125 00:06:40,120 --> 00:06:43,960 Speaker 2: relatively low inflation. Yeah, it might be just as midge uncomfortable, 126 00:06:44,000 --> 00:06:47,760 Speaker 2: but it's not bad. But so that basically means that 127 00:06:48,040 --> 00:06:50,280 Speaker 2: we are on hold. The RBA is on hold for 128 00:06:50,760 --> 00:06:53,920 Speaker 2: many months to come, and like all mere mortals, they'll 129 00:06:53,920 --> 00:06:54,960 Speaker 2: be watching the data flow. 130 00:06:55,320 --> 00:06:57,440 Speaker 1: Okay, we'll get a bit of an insight into that 131 00:06:57,520 --> 00:07:00,800 Speaker 1: this week when the RBA minutes are a least. What 132 00:07:01,279 --> 00:07:03,719 Speaker 1: can we tell now from the minutes, because we've talked 133 00:07:03,760 --> 00:07:05,360 Speaker 1: in the past about the fact that we do learn 134 00:07:05,440 --> 00:07:09,560 Speaker 1: so much from the press conference after the RBA board meets. 135 00:07:09,840 --> 00:07:12,560 Speaker 1: What else can we glean then from the RBA minutes 136 00:07:12,600 --> 00:07:15,280 Speaker 1: and how much does it take on a different light 137 00:07:15,320 --> 00:07:18,200 Speaker 1: when all of a sudden you've in the time since 138 00:07:18,280 --> 00:07:21,320 Speaker 1: the RBA met, we've seen the labor force data and 139 00:07:21,400 --> 00:07:26,200 Speaker 1: maybe we will actually see that there's vindication here for 140 00:07:26,240 --> 00:07:27,040 Speaker 1: the results. 141 00:07:27,320 --> 00:07:30,920 Speaker 2: Well, you're quite right that two hours after the interest 142 00:07:30,960 --> 00:07:34,800 Speaker 2: rate announcement back on the fourth of November, the governor 143 00:07:34,840 --> 00:07:38,320 Speaker 2: gave her talk and she was asked, quite appointedly, did 144 00:07:38,320 --> 00:07:40,520 Speaker 2: you consider a rate cup No? Did you consider a 145 00:07:40,600 --> 00:07:43,240 Speaker 2: rate hike? No. All we did was discuss the fact 146 00:07:43,280 --> 00:07:45,880 Speaker 2: that rates were on hold, and we analyzed the economy. 147 00:07:46,000 --> 00:07:49,320 Speaker 2: So it wasn't really a shall we change interestrates discussion? 148 00:07:49,360 --> 00:07:51,760 Speaker 2: It was more we're pretty content with rates of where 149 00:07:51,800 --> 00:07:56,160 Speaker 2: they are, and as we've just discussed on inflation, on unemployment, 150 00:07:56,200 --> 00:07:58,880 Speaker 2: on growth, on productivity, which of course is one of 151 00:07:58,880 --> 00:08:03,520 Speaker 2: the breaks on the economy right now, they were pretty content, 152 00:08:03,600 --> 00:08:05,800 Speaker 2: So the minutes will probably just reflect that. They'll talk 153 00:08:05,840 --> 00:08:10,000 Speaker 2: about some of the risks. They'll talk about uncertainty. I'm 154 00:08:10,000 --> 00:08:13,320 Speaker 2: not quite sure the word count for uncertainty in the minutes, 155 00:08:13,360 --> 00:08:16,440 Speaker 2: but in recent times it's been a lot, and fair 156 00:08:16,560 --> 00:08:19,239 Speaker 2: enough too, because we've got this sort of gray area 157 00:08:19,280 --> 00:08:22,360 Speaker 2: in the economy that's unfolding. So the ladder bit it'll 158 00:08:22,360 --> 00:08:26,800 Speaker 2: be a sort of a sanitized version of the RBA thinking, 159 00:08:26,840 --> 00:08:29,720 Speaker 2: but always worth a read, always worth just getting a 160 00:08:29,760 --> 00:08:32,280 Speaker 2: bit more information. Because of course these minutes WI also 161 00:08:32,400 --> 00:08:36,360 Speaker 2: incorporate the release of the updated forecasts and the statement 162 00:08:36,400 --> 00:08:39,240 Speaker 2: of monetary policy that occurred too, so they might just 163 00:08:39,280 --> 00:08:42,000 Speaker 2: sort of put a little bit more flesh on some 164 00:08:42,040 --> 00:08:45,160 Speaker 2: of those updated forecasts, particularly for inflation which was revised 165 00:08:45,240 --> 00:08:47,959 Speaker 2: up and unemployment, which as we said, was revised up 166 00:08:48,000 --> 00:08:50,280 Speaker 2: just to smite in those forecasts. 167 00:08:51,040 --> 00:08:54,480 Speaker 1: The other big thing this week is wages. Now, I 168 00:08:54,520 --> 00:08:57,240 Speaker 1: want you to explain this to me why. I mean, 169 00:08:58,240 --> 00:09:00,600 Speaker 1: as employees, we all love to get a pay rise. 170 00:09:00,640 --> 00:09:03,160 Speaker 1: We all want to wage increase, But why from an 171 00:09:03,200 --> 00:09:06,440 Speaker 1: economic perspective are we so scared about booming wages? 172 00:09:07,880 --> 00:09:10,160 Speaker 2: Really good question, and yes, these wage numbers that come 173 00:09:10,160 --> 00:09:12,599 Speaker 2: out in the middle of the week are really important. 174 00:09:13,080 --> 00:09:16,840 Speaker 2: And we were just discussing the availability of labor, you know, 175 00:09:16,960 --> 00:09:22,440 Speaker 2: labor shortages for the business sector. One benchmark on in fact, 176 00:09:22,640 --> 00:09:26,160 Speaker 2: arguably the most important benchmark on whether the labor market 177 00:09:26,200 --> 00:09:30,240 Speaker 2: is tight or slack or somewhere in between, is what's 178 00:09:30,240 --> 00:09:33,559 Speaker 2: happened to wages. Because if you're having trouble finding suitable 179 00:09:33,640 --> 00:09:36,560 Speaker 2: labor and you desperately need that labor, that skill, that 180 00:09:36,720 --> 00:09:39,760 Speaker 2: talent to expand your business, you'll pay up, yes, and 181 00:09:39,760 --> 00:09:42,280 Speaker 2: by that I mean you'll pay a higher wage, you'll 182 00:09:42,320 --> 00:09:45,120 Speaker 2: head hunt someone from a competitor, or you'll you'll pay 183 00:09:45,200 --> 00:09:47,640 Speaker 2: up for someone who's entering the labor market. And that 184 00:09:47,720 --> 00:09:51,120 Speaker 2: of course is higher wages growth than for the individual terrific. 185 00:09:51,600 --> 00:09:54,320 Speaker 2: But as the business person, how do you recoup that 186 00:09:54,480 --> 00:09:57,720 Speaker 2: extra cost? You put up your prices? What's that? That's inflation. 187 00:09:58,200 --> 00:10:01,400 Speaker 2: So that's the sort of thing where the NAHRU or 188 00:10:01,440 --> 00:10:05,520 Speaker 2: the full employment rate of unemployment is such an important concept, 189 00:10:05,559 --> 00:10:08,560 Speaker 2: and so that's why the wages numbers are very important. 190 00:10:08,600 --> 00:10:11,400 Speaker 2: And for the last couple of quarters that the wages 191 00:10:11,480 --> 00:10:16,000 Speaker 2: growth has moderated a bit, we're looking for a pretty 192 00:10:16,040 --> 00:10:18,520 Speaker 2: steady annual increase about three point four to three point 193 00:10:18,559 --> 00:10:21,280 Speaker 2: five percent, which is again in the groove, another one 194 00:10:21,280 --> 00:10:24,240 Speaker 2: of those in the groove numbers. Any surprise to the 195 00:10:24,320 --> 00:10:27,600 Speaker 2: high side will well and truly kill talk of rate cuts, 196 00:10:27,600 --> 00:10:30,200 Speaker 2: And then dare I say, it might even feel some 197 00:10:31,080 --> 00:10:33,679 Speaker 2: speculation about rate hikes next year. But if we get 198 00:10:33,679 --> 00:10:35,840 Speaker 2: a three point four or three point five or three 199 00:10:35,840 --> 00:10:39,640 Speaker 2: point three, then it says that the labor market tightness 200 00:10:39,720 --> 00:10:44,679 Speaker 2: is probably not as extreme as the RBA was fearing recently, 201 00:10:44,800 --> 00:10:47,240 Speaker 2: and it'll be one of those numbers that everyone will 202 00:10:47,280 --> 00:10:49,360 Speaker 2: be happy because wages are still increasing in a rate 203 00:10:49,440 --> 00:10:52,880 Speaker 2: faster than the inflation rate. So we get only by 204 00:10:52,880 --> 00:10:55,240 Speaker 2: a little bit, but we're getting real wage increases coming 205 00:10:55,240 --> 00:10:56,000 Speaker 2: through the economy. 206 00:10:56,760 --> 00:10:58,520 Speaker 1: All right, big week ahead, It was a big week 207 00:10:58,600 --> 00:11:00,760 Speaker 1: last week, and it's great to have you back, Stephen. 208 00:11:00,800 --> 00:11:02,120 Speaker 1: Thank you for talking to fear and greed. 209 00:11:02,480 --> 00:11:03,880 Speaker 2: Thank you, Michael. Great to be back. 210 00:11:04,040 --> 00:11:06,840 Speaker 1: That was economists Stephen Coo Coolers, better known as the Kook. 211 00:11:06,920 --> 00:11:08,840 Speaker 1: You can find him at the kook dot com and 212 00:11:08,880 --> 00:11:11,040 Speaker 1: follow him on X using the handle of the Kook. 213 00:11:11,320 --> 00:11:13,599 Speaker 1: I'm Michael Thompson and his Fear and Greed Q and a.