1 00:00:08,490 --> 00:00:11,430 Sean Aylmer: Welcome to Fear and Greed: The Week Ahead. This is where we take 2 00:00:11,430 --> 00:00:13,440 Sean Aylmer: a look at the big events, reports and releases coming 3 00:00:13,440 --> 00:00:15,700 Sean Aylmer: up this week that give insight into the economy and 4 00:00:15,700 --> 00:00:18,050 Sean Aylmer: a look back at what happened last week, too. I'm 5 00:00:18,050 --> 00:00:19,940 Sean Aylmer: Sean Aylmer and every Monday I'm joined for the week 6 00:00:19,940 --> 00:00:22,989 Sean Aylmer: ahead by economist Stephen Koukoulas. You'll find him at thekouk.com, 7 00:00:23,239 --> 00:00:28,410 Sean Aylmer: t-h-e-k-o-u-k.com and on Twitter using the handle, @TheKouk. Stephen, good morning. 8 00:00:28,850 --> 00:00:29,640 Stephen Koukoulas: Good morning, Sean. 9 00:00:30,200 --> 00:00:33,920 Sean Aylmer: Last week, the Reserve Bank board meeting was, not quite 10 00:00:33,920 --> 00:00:36,360 Sean Aylmer: a damp squib, but it wasn't quite as exciting as 11 00:00:36,360 --> 00:00:37,120 Sean Aylmer: you might've liked. 12 00:00:37,740 --> 00:00:42,640 Stephen Koukoulas: No, they kept the policy settings completely unchanged, the desire 13 00:00:42,640 --> 00:00:46,140 Stephen Koukoulas: to sort of wind back their quantitative easing was still 14 00:00:46,140 --> 00:00:50,130 Stephen Koukoulas: in place. They pushed back the timing to February 2022, 15 00:00:50,130 --> 00:00:52,830 Stephen Koukoulas: but basically they didn't do much. And when you read 16 00:00:53,240 --> 00:00:57,020 Stephen Koukoulas: the commentary that they put out as well, they are 17 00:00:57,100 --> 00:01:00,520 Stephen Koukoulas: looking at this current lockdown recession, if we can call 18 00:01:00,520 --> 00:01:05,300 Stephen Koukoulas: it that, this September quarter GDP being about minus 4%, so 19 00:01:05,300 --> 00:01:08,180 Stephen Koukoulas: it seems, as just literally an air pocket that it's 20 00:01:08,510 --> 00:01:12,020 Stephen Koukoulas: for obvious reasons, people aren't spending, business investments being postponed. 21 00:01:12,680 --> 00:01:14,770 Stephen Koukoulas: But they were saying that once we get to the 22 00:01:14,770 --> 00:01:18,040 Stephen Koukoulas: kickoff in say 2022 and well and truly the lockdowns 23 00:01:18,040 --> 00:01:21,470 Stephen Koukoulas: have ended, vaccination rates are at hopefully 80% and above, 24 00:01:21,470 --> 00:01:23,810 Stephen Koukoulas: that we'll be back on that growth path that we 25 00:01:23,810 --> 00:01:25,509 Stephen Koukoulas: saw in the first half of the year. Growth will 26 00:01:25,510 --> 00:01:28,419 Stephen Koukoulas: be strong. The labour market will recover. CapEx will pick 27 00:01:28,420 --> 00:01:31,750 Stephen Koukoulas: up again and we'll be returning to this strong growth path. 28 00:01:31,750 --> 00:01:34,690 Stephen Koukoulas: That's their current view. And that's why they left policy 29 00:01:34,690 --> 00:01:38,410 Stephen Koukoulas: rates unchanged. I would note though, that unchanged policies still 30 00:01:38,410 --> 00:01:40,440 Stephen Koukoulas: means that monetary policy is extremely easy. 31 00:01:40,680 --> 00:01:43,620 Sean Aylmer: Yeah, but the point I suppose, being the bias is definitely to 32 00:01:43,620 --> 00:01:45,670 Sean Aylmer: start tightening at some point. And we're not talking about 33 00:01:45,670 --> 00:01:48,640 Sean Aylmer: interest rates here. We're talking about purchases of bonds. 34 00:01:48,860 --> 00:01:50,480 Stephen Koukoulas: Yes. They've still got that at the back of their mind. They've 35 00:01:50,480 --> 00:01:53,190 Stephen Koukoulas: just pushed it back a couple of months, basically because 36 00:01:53,190 --> 00:01:56,390 Stephen Koukoulas: of the couple of months downturn that the lockdowns are causing, 37 00:01:56,790 --> 00:01:59,950 Stephen Koukoulas: but they're upbeat. They're still looking at the tightness in 38 00:01:59,950 --> 00:02:03,010 Stephen Koukoulas: the labour market as being a factor that hopefully pushes 39 00:02:03,010 --> 00:02:05,500 Stephen Koukoulas: up wages. Obviously, they've been disappointed with that June quarter 40 00:02:05,500 --> 00:02:08,020 Stephen Koukoulas: result that we saw just recently, but what they were 41 00:02:08,020 --> 00:02:12,230 Stephen Koukoulas: saying last week was some optimism that the structure of 42 00:02:12,230 --> 00:02:15,360 Stephen Koukoulas: the economy is still sound, that policy is still easy, 43 00:02:15,870 --> 00:02:18,550 Stephen Koukoulas: and that with households having saved a lot of money, 44 00:02:18,830 --> 00:02:22,340 Stephen Koukoulas: there's pent up demand out there. And even just the 45 00:02:22,340 --> 00:02:26,270 Stephen Koukoulas: opening up of intrastate borders, but then interstate borders, hopefully 46 00:02:26,270 --> 00:02:28,980 Stephen Koukoulas: in coming months, we'll see people get in their car, 47 00:02:28,980 --> 00:02:32,100 Stephen Koukoulas: get on planes, use the gorgeous summer weather to go 48 00:02:32,100 --> 00:02:34,460 Stephen Koukoulas: out and about and spend, and at least have the domestic side 49 00:02:34,460 --> 00:02:35,480 Stephen Koukoulas: of the economy picking up. 50 00:02:35,780 --> 00:02:38,040 Sean Aylmer: And the Reserve Bank's not alone, the European Central Bank 51 00:02:38,040 --> 00:02:41,290 Sean Aylmer: last week, hinted that it... I mean, Christine Lagarde (President of the European Central Bank), the 52 00:02:41,290 --> 00:02:43,959 Sean Aylmer: head made some great comment about this lady's not for 53 00:02:43,960 --> 00:02:47,480 Sean Aylmer: tightening or something along those lines, but they're hinting at 54 00:02:47,480 --> 00:02:49,950 Sean Aylmer: heading down that path. Certainly, officials from the US Fed 55 00:02:49,950 --> 00:02:52,340 Sean Aylmer: Reserve are the same. So there is a bit of 56 00:02:52,340 --> 00:02:58,730 Sean Aylmer: a general global move away from this incredibly accommodative monetary policy. 57 00:02:58,970 --> 00:03:00,600 Sean Aylmer: They're not really doing much yet, but they're talking about 58 00:03:00,900 --> 00:03:01,450 Sean Aylmer: it at least. 59 00:03:01,660 --> 00:03:06,019 Stephen Koukoulas: Yeah. They're looking over the horizon and can see that this incredibly easy 60 00:03:06,020 --> 00:03:08,840 Stephen Koukoulas: stance of monetary policy may not be needed for another 61 00:03:08,910 --> 00:03:11,270 Stephen Koukoulas: year or two. And again, like here, it's not so 62 00:03:11,270 --> 00:03:14,639 Stephen Koukoulas: much talk of hiking official interest rates and the overnight 63 00:03:14,639 --> 00:03:18,880 Stephen Koukoulas: cash rate. It's more winding back the quantitative easing program, 64 00:03:18,880 --> 00:03:21,899 Stephen Koukoulas: which are really still very aggressive in Europe and even 65 00:03:21,900 --> 00:03:25,350 Stephen Koukoulas: in the US. The discussion now is what order is 66 00:03:25,350 --> 00:03:28,630 Stephen Koukoulas: the returning to normal monetary policy, if we can term 67 00:03:28,630 --> 00:03:30,880 Stephen Koukoulas: it that way, is going to be. And of course 68 00:03:31,120 --> 00:03:33,260 Stephen Koukoulas: the first thing that seems to be on most central 69 00:03:33,260 --> 00:03:36,920 Stephen Koukoulas: banks' agenda is scaling back the QE. Rate hikes are 70 00:03:36,930 --> 00:03:39,480 Stephen Koukoulas: still later, rather than sooner, but let's just end this 71 00:03:39,500 --> 00:03:42,720 Stephen Koukoulas: QE, let's stop the distortion, I suppose, of the bond 72 00:03:42,720 --> 00:03:44,880 Stephen Koukoulas: market, which actually has been very helpful in supporting the 73 00:03:44,880 --> 00:03:47,410 Stephen Koukoulas: recovery. But the global growth story is pretty good. You 74 00:03:47,410 --> 00:03:50,480 Stephen Koukoulas: look at commodity prices outside iron ore, which of course 75 00:03:50,480 --> 00:03:52,850 Stephen Koukoulas: is a special case and very dear to us here, 76 00:03:53,270 --> 00:03:57,830 Stephen Koukoulas: but other commodity prices, aluminum, copper, are really buoyant. And 77 00:03:57,830 --> 00:04:00,470 Stephen Koukoulas: that's a sign, I suspect that the global economy is starting 78 00:04:00,470 --> 00:04:01,010 Stephen Koukoulas: to pick up. 79 00:04:01,330 --> 00:04:03,370 Sean Aylmer: Well, that's last week. We'll be back in a moment 80 00:04:03,370 --> 00:04:04,610 Sean Aylmer: and get into the week ahead. 81 00:04:09,850 --> 00:04:14,000 Sean Aylmer: I'm with economist, Stephen Koukoulas, AKA The Kouk. Stephen, the 82 00:04:14,000 --> 00:04:16,110 Sean Aylmer: Reserve Bank Governor, Philip Lowe is speaking this week. 83 00:04:16,710 --> 00:04:19,520 Stephen Koukoulas: He's giving a talk at the Anika Foundation (http://www.anikafoundation.com/), his annual 84 00:04:19,760 --> 00:04:22,770 Stephen Koukoulas: talk to that wonderful charity that was set up for 85 00:04:23,080 --> 00:04:26,130 Stephen Koukoulas: dreadful circumstances, read about it on the RBA webpage, but 86 00:04:26,300 --> 00:04:28,830 Stephen Koukoulas: he's giving a talk on the economy. And it's usually 87 00:04:28,830 --> 00:04:33,159 Stephen Koukoulas: a pretty good speech that the history of governors Lowe, 88 00:04:33,160 --> 00:04:35,590 Stephen Koukoulas: Glenn Stevens speaking at this event is that they actually present 89 00:04:35,930 --> 00:04:39,490 Stephen Koukoulas: a bit of a fearless and frank discussion on their 90 00:04:39,490 --> 00:04:41,690 Stephen Koukoulas: views on the economy. They get grilled by a lot 91 00:04:41,690 --> 00:04:44,830 Stephen Koukoulas: of smart market economists as well. So it's really an 92 00:04:44,830 --> 00:04:47,010 Stephen Koukoulas: opportunity for him to put some flesh on what was 93 00:04:47,010 --> 00:04:49,620 Stephen Koukoulas: put out last week when the RBA, as we were 94 00:04:49,620 --> 00:04:52,469 Stephen Koukoulas: just saying, left rates on hold. And his assessment of 95 00:04:52,470 --> 00:04:54,630 Stephen Koukoulas: the economy, in a sense, it's not really a discussion this 96 00:04:54,630 --> 00:04:57,580 Stephen Koukoulas: time about monetary policy, but it's more about where will 97 00:04:57,580 --> 00:05:00,610 Stephen Koukoulas: the economy be when these lockdowns end. And I think 98 00:05:00,610 --> 00:05:02,779 Stephen Koukoulas: that's going to be the thing that he'll be wanting 99 00:05:02,779 --> 00:05:05,540 Stephen Koukoulas: to outline. When will the labour market be back at full employment? 100 00:05:05,540 --> 00:05:08,729 Stephen Koukoulas: When will we see wages growth start to pick up? 101 00:05:08,730 --> 00:05:12,260 Stephen Koukoulas: And importantly, is he really optimistic that inflation will return 102 00:05:12,260 --> 00:05:15,419 Stephen Koukoulas: to the 2-3% band? I don't know the answers yet, 103 00:05:15,420 --> 00:05:18,420 Stephen Koukoulas: but I'm sure I'll be watching along with many other people. 104 00:05:18,570 --> 00:05:20,440 Sean Aylmer: You mentioned the labour market there. It's a big week 105 00:05:20,440 --> 00:05:21,219 Sean Aylmer: for the labour market. 106 00:05:21,440 --> 00:05:24,940 Stephen Koukoulas: It is. We've got the August numbers coming out, and 107 00:05:25,160 --> 00:05:27,440 Stephen Koukoulas: these are the ones that I think will capture the 108 00:05:27,600 --> 00:05:31,279 Stephen Koukoulas: partial effects of these lockdowns. Gosh, it's a really tough 109 00:05:31,279 --> 00:05:34,200 Stephen Koukoulas: call to make. These monthly labour force numbers at the best 110 00:05:34,200 --> 00:05:36,339 Stephen Koukoulas: of times are a bit of a lottery, but with 111 00:05:36,339 --> 00:05:38,810 Stephen Koukoulas: what's going on in the economy now, it's pretty tough. 112 00:05:39,230 --> 00:05:41,960 Stephen Koukoulas: We do get the weekly payrolls numbers from the Bureau 113 00:05:41,960 --> 00:05:43,900 Stephen Koukoulas: of Stats. They do look at some of the tax 114 00:05:43,900 --> 00:05:46,420 Stephen Koukoulas: office data to see who's working and who's not working. 115 00:05:46,420 --> 00:05:49,190 Stephen Koukoulas: And my good mates at Westpac, actually are good at 116 00:05:49,190 --> 00:05:52,150 Stephen Koukoulas: analysing that and sort of superimposing that on the official 117 00:05:52,150 --> 00:05:56,430 Stephen Koukoulas: labour force numbers. They've got employment dropping by about 175,000 118 00:05:56,430 --> 00:05:56,900 Stephen Koukoulas: in the month. 119 00:05:56,960 --> 00:05:57,270 Sean Aylmer: Wow. 120 00:05:57,640 --> 00:06:00,010 Stephen Koukoulas: Yeah. So a big fall of course, concentrated in New 121 00:06:00,010 --> 00:06:01,830 Stephen Koukoulas: South Wales, Victoria, and to some extent in the ACT, 122 00:06:03,080 --> 00:06:06,120 Stephen Koukoulas: but it's going to be a big fall in employment. 123 00:06:06,120 --> 00:06:09,650 Stephen Koukoulas: Whether it's 100, 175 or 200, we're not sure, but it'll 124 00:06:09,650 --> 00:06:12,870 Stephen Koukoulas: really be just the labour market, responding to what is 125 00:06:12,870 --> 00:06:15,810 Stephen Koukoulas: clearly a significant lockdown across more than half of the country. 126 00:06:16,000 --> 00:06:18,640 Sean Aylmer: And the National Australia Bank Business Survey is also out. 127 00:06:19,080 --> 00:06:23,029 Stephen Koukoulas: Yes, probably going to be weak again. The optimism that we saw 128 00:06:23,029 --> 00:06:26,900 Stephen Koukoulas: in the NAB Survey back in May, June has been 129 00:06:27,010 --> 00:06:29,839 Stephen Koukoulas: replaced by, for all the obvious reasons, some weakness there. 130 00:06:30,210 --> 00:06:33,200 Stephen Koukoulas: It'll be just interesting to see how, I won't say 131 00:06:33,200 --> 00:06:36,710 Stephen Koukoulas: gloomy, but how cautious I suspect the business sector is. 132 00:06:37,220 --> 00:06:39,800 Stephen Koukoulas: And the NAB Survey do ask a few more forward- 133 00:06:39,860 --> 00:06:42,690 Stephen Koukoulas: looking questions. Will the business sector say, look, conditions now 134 00:06:42,690 --> 00:06:45,029 Stephen Koukoulas: are pretty grim, but we're optimistic about the future? I 135 00:06:45,029 --> 00:06:48,180 Stephen Koukoulas: think that's split between current conditions and the outlook will 136 00:06:48,180 --> 00:06:50,500 Stephen Koukoulas: be something that'll be worth looking at in the NAB Survey. 137 00:06:50,810 --> 00:06:54,669 Sean Aylmer: And the other thing, Stephen, we get some details about immigration 138 00:06:54,670 --> 00:06:55,870 Sean Aylmer: over the last few quarters. 139 00:06:56,470 --> 00:07:00,170 Stephen Koukoulas: Yes. And look, it's not normally something that economists spend 140 00:07:00,170 --> 00:07:03,040 Stephen Koukoulas: much time looking at in detail, not in the short term, 141 00:07:03,520 --> 00:07:06,660 Stephen Koukoulas: but we've seen obviously with the border closures that Australia's 142 00:07:06,660 --> 00:07:10,750 Stephen Koukoulas: population growth has been reverting almost to zero. We're still 143 00:07:10,750 --> 00:07:13,610 Stephen Koukoulas: having a few babies on average, there's still a few 144 00:07:13,610 --> 00:07:16,320 Stephen Koukoulas: more births than deaths. So natural population increase is still a 145 00:07:16,320 --> 00:07:20,010 Stephen Koukoulas: small positive, but the last few quarters have shown that 146 00:07:20,010 --> 00:07:22,780 Stephen Koukoulas: there are more people leaving Australia than are coming in. 147 00:07:22,780 --> 00:07:27,010 Stephen Koukoulas: So we've actually had the net immigration negative. So these 148 00:07:27,010 --> 00:07:29,470 Stephen Koukoulas: numbers that we'll be seeing later this week, will show, 149 00:07:29,800 --> 00:07:33,070 Stephen Koukoulas: are we still seeing net immigration turning into an outflow 150 00:07:33,070 --> 00:07:35,520 Stephen Koukoulas: of people? That you might think, well, who cares in 151 00:07:35,520 --> 00:07:38,210 Stephen Koukoulas: the sense, but it really matters in terms of underlying 152 00:07:38,210 --> 00:07:41,480 Stephen Koukoulas: demand in the economy. The supply of labour is important 153 00:07:41,480 --> 00:07:44,140 Stephen Koukoulas: because of course, we're not having any foreigners coming or 154 00:07:44,140 --> 00:07:48,480 Stephen Koukoulas: many foreigners coming into fulfill these skilled vacancies. And it 155 00:07:48,480 --> 00:07:51,210 Stephen Koukoulas: also has implications for housing. We're building a lot of 156 00:07:51,210 --> 00:07:55,690 Stephen Koukoulas: houses right now, but population growth's basically zero. When these 157 00:07:55,690 --> 00:07:57,670 Stephen Koukoulas: houses are finished, who's going to live in them? That's the 158 00:07:57,920 --> 00:08:01,290 Stephen Koukoulas: one question that I think will be added to these population data and 159 00:08:01,290 --> 00:08:02,590 Stephen Koukoulas: something that's important for housing. 160 00:08:02,810 --> 00:08:04,290 Sean Aylmer: It's a big week, Stephen, enjoy it. 161 00:08:04,710 --> 00:08:05,940 Stephen Koukoulas: A huge one. Can't wait. 162 00:08:06,230 --> 00:08:08,780 Sean Aylmer: That was economist, Stephen Koukoulas, better known as The Kouk. 163 00:08:08,800 --> 00:08:11,310 Sean Aylmer: You can find him at thekouk.com and follow him on 164 00:08:11,310 --> 00:08:14,010 Sean Aylmer: Twitter using the handle, @TheKouk. I'm Sean Aylmer, and this 165 00:08:14,010 --> 00:08:15,420 Sean Aylmer: is Fear and Greed: The Week Ahead.