1 00:00:05,430 --> 00:00:07,710 Sean Aylmer: Welcome to Fear and Greed, The Week Ahead. I'm Sean 2 00:00:07,710 --> 00:00:11,520 Sean Aylmer: Aylmer, and as always, I'm joined by economist Stephen Koukoulas. 3 00:00:11,520 --> 00:00:15,090 Sean Aylmer: You'll find him at thekouk. com, T- H- E- K- O- UK. 4 00:00:15,330 --> 00:00:18,660 Sean Aylmer: com, and on X using the handle TheKouk. Stephen, good morning. 5 00:00:19,140 --> 00:00:19,920 Stephen Koukoulas: Good morning, Sean. 6 00:00:20,460 --> 00:00:24,419 Sean Aylmer: Now, Stephen, you were at the Mumbrella Retail Conference over 7 00:00:24,420 --> 00:00:27,089 Sean Aylmer: the past week or so, and one of our great 8 00:00:27,090 --> 00:00:29,969 Sean Aylmer: listeners, Shellyce, she sent us, I think it was on 9 00:00:30,059 --> 00:00:33,870 Sean Aylmer: Instagram, a pic of you presenting. Said you were great. 10 00:00:34,260 --> 00:00:35,068 Sean Aylmer: No surprises. 11 00:00:35,309 --> 00:00:38,100 Stephen Koukoulas: Oh, that's kind of that listener. But look, I was 12 00:00:38,100 --> 00:00:41,668 Stephen Koukoulas: at the Mumbrella retail function, giving a chat about the 13 00:00:41,670 --> 00:00:45,780 Stephen Koukoulas: cautious consumer, where retailing's at the moment, and also more 14 00:00:45,780 --> 00:00:49,079 Stephen Koukoulas: importantly, where it's going. So a fabulous event, great to 15 00:00:49,080 --> 00:00:51,809 Stephen Koukoulas: talk about, a really narrow topic if you like, so 16 00:00:51,809 --> 00:00:56,550 Stephen Koukoulas: retailing. And just in 20 seconds, there's light at the 17 00:00:56,550 --> 00:00:58,830 Stephen Koukoulas: end of the tunnel. Income tax cuts from the 1st 18 00:00:58,830 --> 00:01:03,449 Stephen Koukoulas: of July, the probability of interest rate cuts, we've got 19 00:01:03,450 --> 00:01:06,420 Stephen Koukoulas: the increase in real wages starting to come through. So 20 00:01:06,750 --> 00:01:10,199 Stephen Koukoulas: retailers doing it tough now, might be seeing a better 21 00:01:10,199 --> 00:01:11,550 Stephen Koukoulas: second half of 2024. 22 00:01:12,000 --> 00:01:14,340 Sean Aylmer: That's good news. Very good news. We've got a big 23 00:01:14,340 --> 00:01:17,310 Sean Aylmer: week coming up. Just quickly about last week, we had 24 00:01:17,310 --> 00:01:20,429 Sean Aylmer: NAB and Westpac surveys out with consumer and business, but 25 00:01:20,429 --> 00:01:22,709 Sean Aylmer: we also had Jim Chalmers out talking about the budget. 26 00:01:23,520 --> 00:01:25,679 Stephen Koukoulas: Yeah, the business and consumer sentiment numbers were pretty much 27 00:01:25,679 --> 00:01:27,959 Stephen Koukoulas: went straight through to the keeper. They were only up 28 00:01:27,959 --> 00:01:30,750 Stephen Koukoulas: a tick or two. They weren't big moves in consumer 29 00:01:30,750 --> 00:01:34,140 Stephen Koukoulas: or business confidence. So in a sense, it didn't really 30 00:01:34,140 --> 00:01:36,990 Stephen Koukoulas: add anything to the upside or downside to the economy. 31 00:01:36,990 --> 00:01:40,080 Stephen Koukoulas: So the market's largely ignored them. And You're right, the 32 00:01:40,080 --> 00:01:43,229 Stephen Koukoulas: Jim Chalmers, the budgets in two months time, the 14th 33 00:01:43,259 --> 00:01:48,300 Stephen Koukoulas: of May, and he's hosing down expectations for a mega 34 00:01:48,330 --> 00:01:50,310 Stephen Koukoulas: surplus. When we look at things like the iron ore 35 00:01:50,310 --> 00:01:54,330 Stephen Koukoulas: price, which has dropped about 30, 35 US dollars a ton 36 00:01:54,390 --> 00:01:57,330 Stephen Koukoulas: over the last two months, we look at the economy, 37 00:01:57,330 --> 00:01:59,880 Stephen Koukoulas: slowing down, means less revenue going into the government. He's 38 00:01:59,880 --> 00:02:03,389 Stephen Koukoulas: just being a little cautious about that, locking in, if 39 00:02:03,389 --> 00:02:05,129 Stephen Koukoulas: you like, of a big budget surplus. I think he's 40 00:02:05,129 --> 00:02:07,049 Stephen Koukoulas: still going to get a surplus, but it'll be, as 41 00:02:07,049 --> 00:02:09,781 Stephen Koukoulas: they say in the classics, wafer thin. 42 00:02:09,781 --> 00:02:13,350 Sean Aylmer: Wafer thin. What is interesting, a few years ago when under 43 00:02:13,350 --> 00:02:15,330 Sean Aylmer: the Morrison government, there was lots of spending going on 44 00:02:15,330 --> 00:02:18,450 Sean Aylmer: in response to the pandemic, one of the arguments was 45 00:02:18,450 --> 00:02:19,740 Sean Aylmer: that this is going to put us in debt for 46 00:02:19,740 --> 00:02:24,209 Sean Aylmer: decades and decades and decades. Didn't really, I mean, sorry, 47 00:02:24,209 --> 00:02:25,680 Sean Aylmer: we still have a lot of debt, so I'm not 48 00:02:25,740 --> 00:02:29,880 Sean Aylmer: arguing that, but it hasn't quite been as cataclysmic as 49 00:02:30,120 --> 00:02:30,929 Sean Aylmer: some thought. 50 00:02:31,530 --> 00:02:33,929 Stephen Koukoulas: Yeah, and look, it's a good thing. Look on the 51 00:02:33,929 --> 00:02:36,570 Stephen Koukoulas: level of debt, I'm a little agnostic about the whole 52 00:02:36,570 --> 00:02:40,319 Stephen Koukoulas: issue. We can fund our debt and deficits really comfortably, 53 00:02:40,320 --> 00:02:42,268 Stephen Koukoulas: but I am of the view that when the economy 54 00:02:42,270 --> 00:02:45,780 Stephen Koukoulas: is strong, this is in very simplistic terms, you run 55 00:02:45,780 --> 00:02:48,360 Stephen Koukoulas: a surplus, a budget surplus. When it's weak, you run 56 00:02:48,360 --> 00:02:50,219 Stephen Koukoulas: a deficit. And when you've got a pandemic or a 57 00:02:50,400 --> 00:02:53,130 Stephen Koukoulas: global financial crisis hitting your economy, you can run a very 58 00:02:53,130 --> 00:02:56,849 Stephen Koukoulas: big deficit. That's fine. And to his credit, we had 59 00:02:56,849 --> 00:02:59,429 Stephen Koukoulas: that high inflation problem that we've thought, gee we've spoken 60 00:02:59,430 --> 00:03:02,790 Stephen Koukoulas: about so much, and the economy was strong up until 61 00:03:03,030 --> 00:03:06,869 Stephen Koukoulas: the middle of last year anyway, and they did bank 62 00:03:06,870 --> 00:03:09,450 Stephen Koukoulas: the bulk of the windfall gains that came through from 63 00:03:09,450 --> 00:03:12,330 Stephen Koukoulas: a stronger economy. And of course, that commodity price, the 64 00:03:12,330 --> 00:03:16,230 Stephen Koukoulas: iron ore and coal prices, which were very elevated, saw 65 00:03:16,410 --> 00:03:19,080 Stephen Koukoulas: the big producers of those commodities paying a lot of 66 00:03:19,080 --> 00:03:21,720 Stephen Koukoulas: tax to the federal government. So they spend a bit 67 00:03:21,720 --> 00:03:25,410 Stephen Koukoulas: of it. NDIS funding and healthcare and aged care and 68 00:03:25,410 --> 00:03:28,139 Stephen Koukoulas: these sorts of things, child care, important issues to be 69 00:03:28,139 --> 00:03:31,889 Stephen Koukoulas: sure. But they banked the bulk of it so that 70 00:03:31,889 --> 00:03:35,100 Stephen Koukoulas: rise in debt is tapering off. So I'm very excited 71 00:03:35,100 --> 00:03:38,550 Stephen Koukoulas: about statement number 11 of the budget papers on the 72 00:03:38,550 --> 00:03:41,430 Stephen Koukoulas: 14th of May because they've got all the detail on debt and 73 00:03:42,570 --> 00:03:43,950 Stephen Koukoulas: deficit from the public sector. 74 00:03:44,429 --> 00:03:47,459 Sean Aylmer: Okay, so it's a bit going on this coming week. 75 00:03:47,790 --> 00:03:51,060 Sean Aylmer: We have both the Reserve Bank and the Federal Reserve 76 00:03:51,150 --> 00:03:53,460 Sean Aylmer: meeting, and we have labor market figures. 77 00:03:54,090 --> 00:03:56,550 Stephen Koukoulas: On the two central banks, the RBA and the US Federal 78 00:03:56,550 --> 00:03:58,620 Stephen Koukoulas: Reserve, both meeting in the middle of this week, or 79 00:03:58,680 --> 00:04:02,730 Stephen Koukoulas: RBA tomorrow, Tuesday. So we've got no change. I think 80 00:04:02,730 --> 00:04:05,070 Stephen Koukoulas: that's the easy thing. But now, and we certainly in 81 00:04:05,070 --> 00:04:06,719 Stephen Koukoulas: the case of the US, which of course is the 82 00:04:06,719 --> 00:04:09,000 Stephen Koukoulas: one which generates a lot of the market volatility here in 83 00:04:09,000 --> 00:04:13,080 Stephen Koukoulas: Australia, last week we had the CPI Consumer Price Index 84 00:04:13,080 --> 00:04:15,930 Stephen Koukoulas: and the PPI, the Producer Price Index, both being a 85 00:04:15,930 --> 00:04:18,210 Stephen Koukoulas: little more elevated than the market would like, so we 86 00:04:18,420 --> 00:04:22,379 Stephen Koukoulas: had this backup in bond yields. So what they say, 87 00:04:22,889 --> 00:04:25,380 Stephen Koukoulas: rather than what they do, will be more important. And 88 00:04:25,860 --> 00:04:28,349 Stephen Koukoulas: clearly they've been pretty, certainly the Fed in the US 89 00:04:28,350 --> 00:04:31,380 Stephen Koukoulas: has been pretty dovish the last few months, but with 90 00:04:31,380 --> 00:04:34,950 Stephen Koukoulas: this inflation rate not falling as much as they perhaps 91 00:04:34,950 --> 00:04:37,529 Stephen Koukoulas: were hoping, some of the labor market numbers in the 92 00:04:37,529 --> 00:04:39,150 Stephen Koukoulas: US being a little bit stronger than they were thinking, 93 00:04:39,360 --> 00:04:42,719 Stephen Koukoulas: markets have been pushing back expectations of the timing of 94 00:04:42,719 --> 00:04:45,750 Stephen Koukoulas: the first rate cut. And that'll probably be reinforced from 95 00:04:45,750 --> 00:04:48,390 Stephen Koukoulas: the Fed later this week. And our RBA look, they 96 00:04:48,420 --> 00:04:51,090 Stephen Koukoulas: may move to a slightly more dovish tone. We've had 97 00:04:51,720 --> 00:04:54,960 Stephen Koukoulas: good news on inflation, bad news on unemployment with our 98 00:04:54,960 --> 00:04:57,599 Stephen Koukoulas: labor force numbers recently. So they're probably going to be 99 00:04:57,690 --> 00:05:00,029 Stephen Koukoulas: a little bit softer in their hawkishness. Now there's no 100 00:05:00,029 --> 00:05:02,670 Stephen Koukoulas: rate cut, but they're going to be acknowledging the fact 101 00:05:02,670 --> 00:05:03,930 Stephen Koukoulas: that the economy has slowed down. 102 00:05:04,650 --> 00:05:06,870 Sean Aylmer: We don't talk about rate hikes anymore Stephen, that's a 103 00:05:06,870 --> 00:05:08,490 Sean Aylmer: good thing because we know that the next move is 104 00:05:08,490 --> 00:05:09,150 Sean Aylmer: going to be down. 105 00:05:09,210 --> 00:05:11,910 Stephen Koukoulas: Yes. Look, I think we're pretty comfortable. I think the 106 00:05:11,910 --> 00:05:14,370 Stephen Koukoulas: market's very comfortable. No rate hikes. I think we've done 107 00:05:14,370 --> 00:05:17,969 Stephen Koukoulas: enough. And the Fed, the RBA, the European Central Bank, the Bank 108 00:05:17,969 --> 00:05:20,249 Stephen Koukoulas: of Canada, all the big central banks who have hiked 109 00:05:20,250 --> 00:05:22,560 Stephen Koukoulas: a lot over the last 18 months to two years, 110 00:05:22,889 --> 00:05:27,300 Stephen Koukoulas: all acknowledge that monetary policy is restrictive. The economies around 111 00:05:27,300 --> 00:05:29,700 Stephen Koukoulas: the world are slowing. Inflation's coming down. Again, this is 112 00:05:29,700 --> 00:05:31,890 Stephen Koukoulas: a debate about how quickly it's coming down, but rate 113 00:05:31,890 --> 00:05:34,529 Stephen Koukoulas: hikes, no. At worst, it's rates on hold for a 114 00:05:34,529 --> 00:05:36,779 Stephen Koukoulas: little bit longer before we get that first cut. 115 00:05:36,779 --> 00:05:39,120 Sean Aylmer: Okay. And the unemployment figures? 116 00:05:39,360 --> 00:05:41,609 Stephen Koukoulas: Oh, labor force numbers, yes. Oh, we've had a quirkiness 117 00:05:41,609 --> 00:05:45,150 Stephen Koukoulas: around that December, January period. The Bureau of Statistics has 118 00:05:45,150 --> 00:05:48,120 Stephen Koukoulas: a lot of trouble seasonally adjusting the monthly numbers. Putting 119 00:05:48,120 --> 00:05:51,059 Stephen Koukoulas: all that technical gumph aside for a minute, look, we're probably 120 00:05:51,059 --> 00:05:52,860 Stephen Koukoulas: going to get a bit of a rebound in job 121 00:05:52,860 --> 00:05:56,489 Stephen Koukoulas: creation plus 40,000 for the month, remembering that last month 122 00:05:56,490 --> 00:06:00,089 Stephen Koukoulas: was effectively zero. The month before that was minus 60, 000. 123 00:06:00,089 --> 00:06:02,159 Stephen Koukoulas: So put a trend line that the labor market's still 124 00:06:02,160 --> 00:06:04,650 Stephen Koukoulas: weakening and the unemployment rate's probably going to be still 125 00:06:04,740 --> 00:06:06,839 Stephen Koukoulas: at four point something. So low fours. 126 00:06:07,200 --> 00:06:08,279 Sean Aylmer: Stephen, enjoy your week. 127 00:06:08,670 --> 00:06:09,120 Stephen Koukoulas: Thanks Sean. 128 00:06:09,599 --> 00:06:12,090 Sean Aylmer: That was economist, Stephen Koukoulas, better known as the Kouk. 129 00:06:12,120 --> 00:06:14,339 Sean Aylmer: You can find him at thekouk. com and follow him 130 00:06:14,339 --> 00:06:17,519 Sean Aylmer: on X using the handle TheKouk. I'm Sean Aylmer. And this 131 00:06:17,520 --> 00:06:19,169 Sean Aylmer: is Fear and Greed, the week ahead.