1 00:00:05,120 --> 00:00:07,760 Speaker 1: Welcome to Fear and Greed the Week Ahead. I'm Adam 2 00:00:07,840 --> 00:00:11,520 Speaker 1: Lang and as always we're joined by economists Stephen Kokulis. 3 00:00:11,680 --> 00:00:14,240 Speaker 1: You'll find him at the kouk dot com and on 4 00:00:14,320 --> 00:00:17,319 Speaker 1: excusing to handle the kook. Steven A very good morning to. 5 00:00:17,360 --> 00:00:19,200 Speaker 2: You and lovely to talk to you, Adam. 6 00:00:19,680 --> 00:00:22,639 Speaker 1: Let's have a look back at last week. Firstly, those 7 00:00:22,800 --> 00:00:26,000 Speaker 1: monthly inflation figures. What did you think of those? 8 00:00:26,720 --> 00:00:30,400 Speaker 3: Look At a time when we and the Reserve Bank 9 00:00:30,440 --> 00:00:33,080 Speaker 3: and the government and business and consumers have been hankering 10 00:00:33,640 --> 00:00:36,760 Speaker 3: for lower inflation, we've got a little bit more evidence 11 00:00:36,960 --> 00:00:40,760 Speaker 3: that inflation's back on trap. We had the headline result 12 00:00:40,800 --> 00:00:43,839 Speaker 3: in angle turns down to two point one percent, so 13 00:00:44,040 --> 00:00:46,600 Speaker 3: recalling that the target range is between two and three percent, 14 00:00:46,640 --> 00:00:48,800 Speaker 3: so it's actually quite near the bottom of the target range. 15 00:00:49,120 --> 00:00:51,080 Speaker 3: But the other one that the Reserve Bank love to 16 00:00:51,120 --> 00:00:53,440 Speaker 3: focus on, the trimmed mean, because the headline figure can 17 00:00:53,479 --> 00:00:56,920 Speaker 3: get distorted by you know, swings in petrol prices and 18 00:00:57,040 --> 00:00:59,520 Speaker 3: say the energy subsidy that the government's paid out to 19 00:00:59,520 --> 00:01:02,640 Speaker 3: consumers recently. So the trim me takes those sorts of 20 00:01:02,720 --> 00:01:05,399 Speaker 3: things out of the headline inflation rate. But even it's 21 00:01:05,480 --> 00:01:08,720 Speaker 3: two point four percent, so basically at the midpoint of 22 00:01:08,760 --> 00:01:12,000 Speaker 3: the RBA target range. So finally I think we've got 23 00:01:12,000 --> 00:01:15,959 Speaker 3: some good news on inflation. The market interpreted that way, 24 00:01:16,280 --> 00:01:19,000 Speaker 3: and next week, next Tuesday, when the Reserve Bank Monetary 25 00:01:19,000 --> 00:01:22,960 Speaker 3: Policy Board meets, there's a well, never say one hundred 26 00:01:23,000 --> 00:01:26,560 Speaker 3: percent certain, because in economics, market's nothing certain, but there's 27 00:01:26,920 --> 00:01:30,440 Speaker 3: an extremely high probability that they're going to deliver another 28 00:01:30,560 --> 00:01:31,640 Speaker 3: twenty five point rate cut. 29 00:01:32,240 --> 00:01:34,960 Speaker 1: Stephen, it's been a while now since we've been receiving 30 00:01:35,000 --> 00:01:37,440 Speaker 1: these monthly figures. You know, it takes some time to 31 00:01:37,440 --> 00:01:39,679 Speaker 1: get used to them. How do you think the pattern 32 00:01:39,720 --> 00:01:42,000 Speaker 1: of monthly releases is playing out? Do you enjoy it? 33 00:01:42,600 --> 00:01:42,720 Speaker 3: Oh? 34 00:01:42,720 --> 00:01:45,560 Speaker 2: Look, I love it when too much information is never enough. Yeah. 35 00:01:45,560 --> 00:01:47,960 Speaker 3: One of the things, well, think about why the Bureau 36 00:01:48,000 --> 00:01:51,800 Speaker 3: of Statistics did start to release monthly rather than just 37 00:01:51,920 --> 00:01:54,440 Speaker 3: quarterly numbers, because you do get little bits of information 38 00:01:54,560 --> 00:01:56,920 Speaker 3: in say April, May and June before you get the 39 00:01:57,000 --> 00:01:59,960 Speaker 3: June quarter number, and those bits of information can really 40 00:02:00,280 --> 00:02:03,320 Speaker 3: to get things that are important for the inflation reading 41 00:02:03,480 --> 00:02:08,400 Speaker 3: dwelling rent insurance prices, food prices, services prices, you got 42 00:02:08,560 --> 00:02:10,560 Speaker 3: housing costs. There's a whole lot of stuff that's in 43 00:02:10,600 --> 00:02:14,000 Speaker 3: these monthly numbers, which is very useful. Now, the RBA 44 00:02:14,280 --> 00:02:16,480 Speaker 3: and the markets still prefer the quarterly number. It is 45 00:02:16,520 --> 00:02:20,160 Speaker 3: all encompassing and it is still the most comprehensive read 46 00:02:20,400 --> 00:02:23,080 Speaker 3: on where the inflation rate is. But these monthly numbers, 47 00:02:23,200 --> 00:02:26,600 Speaker 3: the markets are warming to them. We are alert to 48 00:02:26,680 --> 00:02:30,520 Speaker 3: what's in and not in the monthly numbers that are 49 00:02:30,560 --> 00:02:32,519 Speaker 3: in the quarterly numbers. So there's a little bit of 50 00:02:32,520 --> 00:02:35,200 Speaker 3: a caveat imposed when we see these monthly numbers, But 51 00:02:35,240 --> 00:02:38,000 Speaker 3: at the end of the day, they're really useful, and 52 00:02:38,040 --> 00:02:40,120 Speaker 3: I think the RBA will be looking at last week's 53 00:02:40,120 --> 00:02:42,639 Speaker 3: result for the month of May and thinking, gee, we've 54 00:02:42,680 --> 00:02:45,000 Speaker 3: got to get something going very very wrong for the 55 00:02:45,080 --> 00:02:48,400 Speaker 3: Dune quarter number to be way out of expectations. 56 00:02:49,040 --> 00:02:51,560 Speaker 1: Stephen. On top of that, later in the week, we 57 00:02:51,639 --> 00:02:54,000 Speaker 1: had job vacancy data. How did you see that? 58 00:02:54,320 --> 00:02:56,959 Speaker 3: Yeah, sort of encouraging. We had a two point nine 59 00:02:57,040 --> 00:02:59,840 Speaker 3: percent increase in the number of job vacancies in the 60 00:02:59,840 --> 00:03:03,480 Speaker 3: three months to May, but recall the prior three months 61 00:03:03,919 --> 00:03:06,040 Speaker 3: was a minus three percent, So there's a real saw 62 00:03:06,080 --> 00:03:08,320 Speaker 3: tooth up and down and up and down for the 63 00:03:08,360 --> 00:03:11,640 Speaker 3: last four quarters in fact, but basically what we had 64 00:03:12,160 --> 00:03:14,639 Speaker 3: prior to that was a sharp fall in job vacancies, 65 00:03:14,800 --> 00:03:17,960 Speaker 3: but it stabilized over the last year. So that resilience 66 00:03:18,000 --> 00:03:19,840 Speaker 3: that we're seeing in the labor market in the hard 67 00:03:20,040 --> 00:03:22,000 Speaker 3: labor force numbers, it's sort of now showing up in 68 00:03:22,000 --> 00:03:25,400 Speaker 3: the job vacancy series. So while it's weaker than it was, 69 00:03:25,480 --> 00:03:29,520 Speaker 3: say two two and a half years ago, it's quite resilient. 70 00:03:29,560 --> 00:03:32,519 Speaker 3: And that's something that the RBA has part of its subjective. 71 00:03:33,040 --> 00:03:35,960 Speaker 3: It's got the dual objective of both inflation and full employment. 72 00:03:36,360 --> 00:03:38,600 Speaker 3: So it'll be slightly encouraged I think by the fact 73 00:03:38,640 --> 00:03:40,640 Speaker 3: that job vacancies are no longer in free fall, and 74 00:03:40,720 --> 00:03:44,920 Speaker 3: if anything, it works just a little against aggressive rate cuts. 75 00:03:44,960 --> 00:03:47,120 Speaker 3: The rate cut's still there because inflation is low, but 76 00:03:47,160 --> 00:03:50,240 Speaker 3: the labor market, if it remains resilient, just goes against 77 00:03:50,240 --> 00:03:52,920 Speaker 3: some of these very very bullish views that rates will 78 00:03:52,960 --> 00:03:54,600 Speaker 3: be below three percent by the end of the year. 79 00:03:55,080 --> 00:03:58,080 Speaker 1: So let's turn to this very weak house prices. That 80 00:03:58,160 --> 00:04:01,120 Speaker 1: important data is out tomorrow. What are you expecting to see. 81 00:04:01,440 --> 00:04:04,840 Speaker 3: Yeah, we know from cotality formally call logic that they've 82 00:04:04,840 --> 00:04:07,520 Speaker 3: got their high frequency numbers coming out and it looks 83 00:04:07,560 --> 00:04:10,760 Speaker 3: like about a point six percent increase month on month 84 00:04:10,800 --> 00:04:14,040 Speaker 3: for the A capital cities. Obviously we get more regional 85 00:04:14,240 --> 00:04:16,680 Speaker 3: house price data which can just impact that numbers slightly, 86 00:04:16,960 --> 00:04:18,880 Speaker 3: but let's call it around about a point five point 87 00:04:18,920 --> 00:04:22,240 Speaker 3: six percent rise in house prices in annual terms, that 88 00:04:22,279 --> 00:04:26,320 Speaker 3: translates to about three and a half percent. So house prices, 89 00:04:26,320 --> 00:04:27,520 Speaker 3: which had a bit of a lull at the end 90 00:04:27,560 --> 00:04:29,920 Speaker 3: of last year and in the first month of this year, 91 00:04:30,120 --> 00:04:33,360 Speaker 3: are coming back. And it's interesting, Adam that the weakest 92 00:04:33,400 --> 00:04:37,000 Speaker 3: cities six months ago, Melbourne in particular, but also Sydney 93 00:04:37,000 --> 00:04:39,239 Speaker 3: had a bit of a soft patch. They're roaring back 94 00:04:39,400 --> 00:04:41,920 Speaker 3: and coming back very strongly. And the boom cities, if 95 00:04:41,960 --> 00:04:45,360 Speaker 3: we can call them that, Perth, Adelaide and Brisbane still growing, 96 00:04:45,560 --> 00:04:47,680 Speaker 3: but the rate of increase is slowing in terms of 97 00:04:47,720 --> 00:04:49,040 Speaker 3: the house prices in those cities. 98 00:04:49,600 --> 00:04:53,040 Speaker 1: And looking ahead to some of the four data building approvals, 99 00:04:53,200 --> 00:04:54,599 Speaker 1: what are you expecting to see there? 100 00:04:54,760 --> 00:04:58,080 Speaker 3: Oh yeah, well that was my I've been really disappointed 101 00:04:58,080 --> 00:04:59,960 Speaker 3: the last two months on building approvals because the last 102 00:05:00,120 --> 00:05:03,280 Speaker 3: months we've had a cumulative fall of thirteen percent in 103 00:05:03,360 --> 00:05:05,840 Speaker 3: building approvals, and that was after a really nice recovery 104 00:05:05,839 --> 00:05:08,120 Speaker 3: through the course of last year, so we're looking for 105 00:05:08,160 --> 00:05:09,839 Speaker 3: some sort of bounce back. You know, the number of 106 00:05:10,040 --> 00:05:12,960 Speaker 3: high rise apartments approved any month can lead to volatility 107 00:05:12,960 --> 00:05:15,360 Speaker 3: in these numbers. So we'd love to see a plus 108 00:05:15,400 --> 00:05:18,240 Speaker 3: five percent on building approvals. And as you and I 109 00:05:18,240 --> 00:05:21,120 Speaker 3: have discussed, and Sean and I have discussed, and Michael 110 00:05:21,120 --> 00:05:24,240 Speaker 3: and I have discussed, the solutions to this housing problem, 111 00:05:24,680 --> 00:05:29,119 Speaker 3: the affordability problem is more supply. What's more supply, build 112 00:05:29,160 --> 00:05:32,479 Speaker 3: more houses. So we're hoping to see an upturn in 113 00:05:32,480 --> 00:05:34,920 Speaker 3: the number of building approvals later this week. 114 00:05:35,480 --> 00:05:38,600 Speaker 1: Stephen somewhat linked to that, but a little bit different 115 00:05:38,680 --> 00:05:41,080 Speaker 1: and very important in his household spending. We're going to 116 00:05:41,080 --> 00:05:42,920 Speaker 1: get some new data this week. What are you expecting 117 00:05:42,920 --> 00:05:43,360 Speaker 1: to see. 118 00:05:43,600 --> 00:05:45,440 Speaker 2: Yeah, at the end of the week, it's we consumers. 119 00:05:45,520 --> 00:05:49,400 Speaker 2: We're still look, we're still hunkering down. We haven't really 120 00:05:49,560 --> 00:05:52,240 Speaker 2: taken advantage of these interestrate cuts, well there's only been 121 00:05:52,279 --> 00:05:54,760 Speaker 2: two so far. We're not really taking advantage of the 122 00:05:54,760 --> 00:05:57,360 Speaker 2: fact that inflation is lower and our wages are now 123 00:05:57,360 --> 00:05:59,279 Speaker 2: increasing a little bit above the rate of inflation, so 124 00:05:59,320 --> 00:06:02,320 Speaker 2: giving us a bit of real wage increase. So again, 125 00:06:02,480 --> 00:06:05,960 Speaker 2: like those curling approvals numbers, we and the markets looking 126 00:06:06,000 --> 00:06:09,080 Speaker 2: for about a point five percent rebound in household spending 127 00:06:09,520 --> 00:06:11,760 Speaker 2: in the month of May after a couple of disappointing 128 00:06:11,760 --> 00:06:14,840 Speaker 2: months in March and April. I would note that those 129 00:06:14,839 --> 00:06:18,920 Speaker 2: disappointing months were also influenced by the cyclone in the 130 00:06:18,960 --> 00:06:21,400 Speaker 2: South Queensland northern New South Wales and the flooding there, 131 00:06:21,440 --> 00:06:23,320 Speaker 2: so that could be a bit of a statistical rebound 132 00:06:23,400 --> 00:06:26,760 Speaker 2: on the back of weather conditions normalize, I hope. So 133 00:06:27,720 --> 00:06:29,800 Speaker 2: let's I want to see a strong economy and the 134 00:06:29,839 --> 00:06:32,160 Speaker 2: household spending is a critical part of that. 135 00:06:32,520 --> 00:06:36,120 Speaker 1: And critically Next week, Stephen, the Reserve Bank Board meeting 136 00:06:36,200 --> 00:06:39,480 Speaker 1: is in and you've talked about that already. It's an 137 00:06:39,520 --> 00:06:40,840 Speaker 1: important meaning for all of us. 138 00:06:41,279 --> 00:06:44,360 Speaker 3: Ah, look at the eighth of July. That's a two 139 00:06:44,440 --> 00:06:46,800 Speaker 3: day meeting of the Monetary Policy Board. The announcements at 140 00:06:46,760 --> 00:06:51,760 Speaker 3: two thirty Sydney time on the eighth, So next Tuesday, look, 141 00:06:52,120 --> 00:06:54,520 Speaker 3: as I said, the market's effectively priced in a twenty 142 00:06:54,520 --> 00:06:57,039 Speaker 3: five point cut. I think that they probably have to 143 00:06:57,040 --> 00:06:59,080 Speaker 3: deliver it. The inflation numbers just last week that we 144 00:06:59,120 --> 00:07:01,599 Speaker 3: also touched on, which are so good that they've got 145 00:07:01,640 --> 00:07:04,440 Speaker 3: no real need not to move rates to a more 146 00:07:04,760 --> 00:07:08,159 Speaker 3: neutral level. The reason why the rate cut is close 147 00:07:08,200 --> 00:07:11,160 Speaker 3: to certain is that the current cash rate three point 148 00:07:11,200 --> 00:07:15,679 Speaker 3: eight five percent is still restrictive. Yeah, neutral is still 149 00:07:15,880 --> 00:07:20,080 Speaker 3: probably fifty maybe seventy five basis points away, and we 150 00:07:20,160 --> 00:07:22,120 Speaker 3: need to get to a neutral cash rate, and that's 151 00:07:22,160 --> 00:07:24,840 Speaker 3: the sort of interest rate that doesn't stimulate nor restrict 152 00:07:24,840 --> 00:07:27,480 Speaker 3: the economy. As I said, it's probably fifty points away. 153 00:07:27,840 --> 00:07:31,640 Speaker 3: So even though there's sort of some hints of activity 154 00:07:31,800 --> 00:07:33,680 Speaker 3: maybe being a bit better in some areas, and hopefully 155 00:07:33,680 --> 00:07:36,080 Speaker 3: we'll get confirmation later this week, I think the twenty 156 00:07:36,080 --> 00:07:39,440 Speaker 3: five point cuts cautious. The wording that the Governor Michelle 157 00:07:39,440 --> 00:07:42,040 Speaker 3: Bullock will use of her press conference when she announces 158 00:07:42,080 --> 00:07:44,679 Speaker 3: that will be almost as important as the act itself. 159 00:07:44,760 --> 00:07:46,520 Speaker 3: So now she sort of sees the future of the 160 00:07:46,560 --> 00:07:49,280 Speaker 3: economy is something that we economists will be sort of 161 00:07:50,160 --> 00:07:52,320 Speaker 3: crawling over to see whether any other hints about what 162 00:07:52,360 --> 00:07:53,480 Speaker 3: the RBA is worried about. 163 00:07:53,800 --> 00:07:56,560 Speaker 1: Hanging on every word, Stephen, thank you very much and 164 00:07:56,640 --> 00:07:57,360 Speaker 1: have a great week. 165 00:07:57,400 --> 00:07:58,280 Speaker 2: Thanks Adam you two. 166 00:07:58,600 --> 00:08:01,840 Speaker 1: That was economist Steven Coo Coolet, better known as the Kook. 167 00:08:02,120 --> 00:08:03,880 Speaker 1: You can find him at the cook dot com and 168 00:08:03,960 --> 00:08:06,240 Speaker 1: follow him on X using the handle of the kook. 169 00:08:06,560 --> 00:08:08,840 Speaker 1: I'm Adam Lay and this is fear and greed. The 170 00:08:08,880 --> 00:08:09,440 Speaker 1: weak ahead