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Sean Aylmer: Welcome to Fear and Greed the week Ahead. I'm Sean Almer,

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Sean Aylmer: and as always I'm joined by economist Stephen Koukoulas. You'll

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Sean Aylmer: find him at TheKouk.com, t h e k o u

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Sean Aylmer: k dot com and on X using the handle @TheKouk. Stephen.

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Sean Aylmer: Good morning.

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Stephen Koukoulas: A very good morning to you, Sean.

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Stephen Koukoulas: Very very exciting fortnite, or say, we had budgets last week,

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Stephen Koukoulas: monthly inflation figures this week, we've got Reserve bank, retail sales,

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Stephen Koukoulas: house prices. We're going to elections in the middle. Well

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Stephen Koukoulas: not in the middle of it, but you know, election

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Stephen Koukoulas: announcements very exciting. Let's start with last week. What did

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Stephen Koukoulas: you make in short of the budget and the monthly

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Stephen Koukoulas: inflation figures?

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Stephen Koukoulas: Yeah, in short, look, the budget was fine. You know,

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Stephen Koukoulas: it was not exciting. But in a funny way, that's

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Stephen Koukoulas: always a good thing to say about economic policy, because

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Stephen Koukoulas: when policy is generally exciting, there's only about a ten

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Stephen Koukoulas: percent chance that excitement's good a ninety percent chance that

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Stephen Koukoulas: policy is bad, a bit like the Trump tariffs. You know,

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Stephen Koukoulas: I don't want to hear that sort of thing, but look,

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Stephen Koukoulas: it's a fair effort. Yes, we step back into a

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Stephen Koukoulas: small deficit, but if that's the price we pay for

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Stephen Koukoulas: two and a half percent GDP growth, four and a

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Stephen Koukoulas: quarter unemployment rates, A little bit of reform in terms

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Stephen Koukoulas: of you know, smallish small tax cuts and some other Medicare, healthcare,

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Stephen Koukoulas: defense spending not bad. Arguably the more important use for

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Stephen Koukoulas: markets and policymakers was the inflation number, which came in

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Stephen Koukoulas: nice and low two point four annual for the headline

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Stephen Koukoulas: inflation rate the year to February trimmed mean two point

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Stephen Koukoulas: seven percent. They're both now, you know, pretty much well

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Stephen Koukoulas: entrenched in the target band. And gosh, that's why I

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Stephen Koukoulas: think the RBA, when they meet tomorrow or make the

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Stephen Koukoulas: announcement tomorrow, should be thinking about rate cut alas I'm

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Stephen Koukoulas: probably the lone ranger on that score I can.

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Sean Aylmer: So what is it that the Reserve Bank will be

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Sean Aylmer: Why why wouldn't they cut rates if you've got inflation

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Sean Aylmer: within the band?

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Stephen Koukoulas: I think that there's still some residual concern about the

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Stephen Koukoulas: tightness of the labor market, even though that in other

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Stephen Koukoulas: news we've had wages growth decelerating. But you know, and

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Stephen Koukoulas: even though we had a very weak employment report last time,

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Stephen Koukoulas: the unemployment rate's still four point one percent, So it's

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Stephen Koukoulas: still relatively low. There's still a little bit of anecdotal

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Stephen Koukoulas: evidence that labor is hard to find, and you know,

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Stephen Koukoulas: there's a concern that wages could easily spike again if

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Stephen Koukoulas: we get a little bit more upside growth. So I

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Stephen Koukoulas: think that's probably why they're a bit concerned. They're a

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Stephen Koukoulas: little bit concerned too about services inflation, which of course

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Stephen Koukoulas: is linked to the wages side. But whatever they announce tomorrow,

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Stephen Koukoulas: I'm pretty sure it'll have what we describe as dubbish undertones,

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Stephen Koukoulas: and that is, Look, we didn't adjust interstrates, but we

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Stephen Koukoulas: are in the mindset to do so. If, for example,

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Stephen Koukoulas: the March core inflation numbers which come out at the

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Stephen Koukoulas: end of April are nice and low, and if there's

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Stephen Koukoulas: any more evidence of a softening in labor market conditions,

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Stephen Koukoulas: the game on for the rate cut.

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Sean Aylmer: So May is a real possibility.

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Stephen Koukoulas: Look, I think so, well, there's a couple of things

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Stephen Koukoulas: that happened between the April the first board meeting and

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Stephen Koukoulas: the May board meeting. That is the CPI which I

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Stephen Koukoulas: just mentioned, and that's very important. A lot of very

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Stephen Koukoulas: clever people out there are looking for a lowish, trimmed

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Stephen Koukoulas: mean quarterly result. So we had a point five in

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Stephen Koukoulas: the December quarter. If we get another point five or

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Stephen Koukoulas: point six even, I think that just locks in the

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Stephen Koukoulas: rate cut. And we've got two labor market indicators between

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Stephen Koukoulas: now and the next board meeting any lack of rebound

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Stephen Koukoulas: in that employment number and or the unemployment rate getting

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Stephen Koukoulas: to four to two four point three percent, yep, that

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Stephen Koukoulas: just makes it a lay down on this air.

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Sean Aylmer: We've also got retail sales figures and household spending indicator

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Sean Aylmer: this week kind of related in a way. I mean

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Sean Aylmer: it's sort about consumption.

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Stephen Koukoulas: Yeah, well, we know that this is probably the let

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Stephen Koukoulas: me think this is the fourth last retail sales release

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Stephen Koukoulas: that will ever happen. So I think I'll wear a

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Stephen Koukoulas: black armband the week that we have our last retail

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Stephen Koukoulas: sales number. That's been replaced by the Household Expenditure survey,

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Stephen Koukoulas: which has got retail sales plus plus plus plus US

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Stephen Koukoulas: a whole lot of consumption of services and things. So

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Stephen Koukoulas: it's a much more comprehensive indicator of household consumption spending. Look,

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Stephen Koukoulas: I think these numbers are probably going to be okay

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Stephen Koukoulas: there for February. We've got a bit more of a

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Stephen Koukoulas: lift in consumer sentiment in February. We had the rate

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Stephen Koukoulas: cut in the middle of the month. Maybe that sparked

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Stephen Koukoulas: a modest increase in By modest, I mean maybe about

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Stephen Koukoulas: arise a point four point five for both three toil

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Stephen Koukoulas: sales and household spending.

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Sean Aylmer: And we've got house price data for the month of

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Sean Aylmer: March as well.

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Stephen Koukoulas: Yes, and it's rebounding. We've had a cop months or

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Stephen Koukoulas: we did have a couple of months where house prices

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Stephen Koukoulas: were flat to slightly lower, particularly in Melbourne, but also

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Stephen Koukoulas: to some extent Sydney. We know from the core logic

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Stephen Koukoulas: numbers that there's been a little bit of a recovery,

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Stephen Koukoulas: the auction clearance rates are higher, and from their high

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Stephen Koukoulas: frequency daily data, which thankfully we see, we're probably going

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Stephen Koukoulas: to get a nationwide increase in house prices of about

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Stephen Koukoulas: point three point four percent. Melbourne's bouncing back, Sydney's bounce back.

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Stephen Koukoulas: There's still some residual strength in what were and probably

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Stephen Koukoulas: still are the boom cities Adelaide, Perth and Brisbane.

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Sean Aylmer: And we've got elections in the middle of all this.

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Stephen Koukoulas: Stephen the election. Yes, well, one thing that I hold

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Stephen Koukoulas: dear in my heart about elections is that we have

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Stephen Koukoulas: a grown up debate on the economy that we've actually

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Stephen Koukoulas: sort of seen both sides of politics sort of putting

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Stephen Koukoulas: their next on the chopping block and say, hang on,

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Stephen Koukoulas: Australia's economy is pretty good. Yeah, structurally it's in a

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Stephen Koukoulas: good shape and cyclically we're doing okay. But to maintain

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Stephen Koukoulas: that momentum, to maintain the fact that we're a high income,

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Stephen Koukoulas: high wealth economy, we need to continue reforming the economy.

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Stephen Koukoulas: It like paying me the Sydney Harvard Bridge. As soon

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Stephen Koukoulas: as you finished, you've got to start again. So we

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Stephen Koukoulas: need a I don't know, some bold policy discussions, some

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Stephen Koukoulas: policy ideas out there from both sides to be frank,

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Stephen Koukoulas: and then yes, we the electorate will decide who wins.

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Sean Aylmer: Stephen, enjoy your week, Thanks Sean. Now, as economist Stephen

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Sean Aylmer: Koukoulas better known as The Kouk, you can find him

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Sean Aylmer: at thekouk.com and follow him on X using the handle @TheKouk.

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Sean Aylmer: I'm Sean Aylmer and this is Fear and Greed, The Week Ahead