1 00:00:07,950 --> 00:00:10,500 Jennifer Duke: Welcome to Fear and Greed - The Week Ahead. I'm Jennifer 2 00:00:10,500 --> 00:00:13,589 Jennifer Duke: Duke and I'm joined by economist Stephen Koukoulas. You'll find 3 00:00:13,590 --> 00:00:16,200 Jennifer Duke: him at thekouk. com. That's T- H- E- K- O- U- K. 4 00:00:16,320 --> 00:00:19,710 Jennifer Duke: com, and on X using the handle TheKouk. Stephen, good morning. 5 00:00:20,310 --> 00:00:21,060 Stephen Koukoulas: Good morning, Jen. 6 00:00:21,630 --> 00:00:23,730 Jennifer Duke: So firstly, last week was a huge one. Can you 7 00:00:23,730 --> 00:00:25,739 Jennifer Duke: talk us through what happened? I think we kicked off 8 00:00:25,739 --> 00:00:26,849 Jennifer Duke: with the RBA meeting. 9 00:00:27,780 --> 00:00:30,330 Stephen Koukoulas: Yeah, they meeting for the third month in a row. 10 00:00:30,389 --> 00:00:32,640 Stephen Koukoulas: They held rate steady, the official cash rate at 4. 11 00:00:32,940 --> 00:00:38,280 Stephen Koukoulas: 1% and it's not necessarily what they did that caused 12 00:00:38,280 --> 00:00:40,200 Stephen Koukoulas: the great deal of interest, it's what they were sort 13 00:00:40,200 --> 00:00:43,680 Stephen Koukoulas: of describing about the economy. And it was, I won't 14 00:00:43,680 --> 00:00:45,449 Stephen Koukoulas: say it's dubbish because they've still got a bias to 15 00:00:45,450 --> 00:00:47,490 Stephen Koukoulas: tighten. They still said that effectively if there is a 16 00:00:47,490 --> 00:00:49,259 Stephen Koukoulas: move in interest rates in the months ahead will be up 17 00:00:49,348 --> 00:00:53,669 Stephen Koukoulas: not down. But having said that, I think the general 18 00:00:53,670 --> 00:00:57,660 Stephen Koukoulas: consensus and interpretation of their comments is that we're in 19 00:00:57,660 --> 00:00:59,910 Stephen Koukoulas: the early stages of what will probably be an extended 20 00:00:59,910 --> 00:01:02,010 Stephen Koukoulas: period with rates on hold and by an extended period 21 00:01:02,010 --> 00:01:05,520 Stephen Koukoulas: I think we could probably look well into the middle 22 00:01:05,520 --> 00:01:07,740 Stephen Koukoulas: of next year and still be talking about a 4. 23 00:01:08,009 --> 00:01:11,279 Stephen Koukoulas: 1% cash rate. Now, the reasons are all very important 24 00:01:11,279 --> 00:01:15,690 Stephen Koukoulas: of course, and it is because inflation is decelerating. It's 25 00:01:15,690 --> 00:01:17,880 Stephen Koukoulas: been confirmed in the recent numbers that we chatted about 26 00:01:17,880 --> 00:01:21,510 Stephen Koukoulas: a week or so back that inflation's continuing to decline. 27 00:01:21,510 --> 00:01:24,270 Stephen Koukoulas: So that's good. And they also noted that there's still the 28 00:01:24,270 --> 00:01:27,059 Stephen Koukoulas: full effects of the 400 basis points of rate hikes 29 00:01:27,059 --> 00:01:30,569 Stephen Koukoulas: that they've delivered between May last year and June this 30 00:01:30,569 --> 00:01:33,479 Stephen Koukoulas: year to fully impact on the economy. And they're even 31 00:01:33,480 --> 00:01:37,800 Stephen Koukoulas: detecting that and acknowledging, I should say, that the wage 32 00:01:37,860 --> 00:01:41,399 Stephen Koukoulas: concerns that they might've had about a wage price spiral 33 00:01:41,880 --> 00:01:44,580 Stephen Koukoulas: simply weren't coming to fruition. That the wage numbers that 34 00:01:44,580 --> 00:01:47,789 Stephen Koukoulas: we've seen are decent, but not at that level that 35 00:01:47,789 --> 00:01:49,770 Stephen Koukoulas: causes a concern about higher inflation. 36 00:01:50,820 --> 00:01:54,480 Jennifer Duke: And we also had GDP growth and the outgoing governor, 37 00:01:54,480 --> 00:01:56,700 Jennifer Duke: Phil Lowe gave a speech. What are they sort of telling 38 00:01:56,700 --> 00:01:57,840 Jennifer Duke: us about the future of the economy? 39 00:01:58,080 --> 00:02:01,139 Stephen Koukoulas: Yeah, the GDP numbers were, well, it's one of these 40 00:02:01,139 --> 00:02:04,710 Stephen Koukoulas: funny ones, it's something for everybody that the headline figure at 0. 41 00:02:04,710 --> 00:02:08,250 Stephen Koukoulas: 4% GDP growth isn't bad when the economy had to 42 00:02:08,250 --> 00:02:11,100 Stephen Koukoulas: slow to get this inflation rate down. And the annual 43 00:02:11,100 --> 00:02:14,250 Stephen Koukoulas: figure 2.1% in the year through to June was again, 44 00:02:14,309 --> 00:02:17,639 Stephen Koukoulas: not bad considering that we've had a slowing economy, however, 45 00:02:18,059 --> 00:02:20,219 Stephen Koukoulas: scratch the surface. And that's where I think a lot 46 00:02:20,219 --> 00:02:23,160 Stephen Koukoulas: of the concerns were starting to come through. In per 47 00:02:23,160 --> 00:02:27,419 Stephen Koukoulas: capita terms GDP has gone backwards in the last two 48 00:02:27,419 --> 00:02:30,060 Stephen Koukoulas: quarters. So this per capita recession some people may have 49 00:02:30,060 --> 00:02:32,819 Stephen Koukoulas: been reading about in the media is certainly there because 50 00:02:33,270 --> 00:02:35,250 Stephen Koukoulas: one of the only reasons why we had the economy 51 00:02:35,309 --> 00:02:38,489 Stephen Koukoulas: expanding at all is because of population growth, high immigration, 52 00:02:38,490 --> 00:02:42,209 Stephen Koukoulas: foreign students coming back to Australia and they're good things, 53 00:02:42,538 --> 00:02:45,690 Stephen Koukoulas: but it masks what's probably an underlying weakness in the 54 00:02:45,690 --> 00:02:49,230 Stephen Koukoulas: economy. So that was something of a concern. We know 55 00:02:49,230 --> 00:02:52,049 Stephen Koukoulas: that household saving ratio fell to its lowest level in 56 00:02:52,050 --> 00:02:56,008 Stephen Koukoulas: almost 15 years so that savings buffer that the Reserve 57 00:02:56,008 --> 00:02:59,579 Stephen Koukoulas: Bank had been talking about in the aftermath of the 58 00:02:59,579 --> 00:03:02,250 Stephen Koukoulas: pandemic that we saved money rather than spent it because 59 00:03:02,250 --> 00:03:05,130 Stephen Koukoulas: we're all locked up at home, that's now being sort 60 00:03:05,130 --> 00:03:07,620 Stephen Koukoulas: of eroded. So the savings buffer is a little bit 61 00:03:07,620 --> 00:03:10,380 Stephen Koukoulas: less. And of course that's higher interest rates and cost 62 00:03:10,380 --> 00:03:12,780 Stephen Koukoulas: of living pressures that are feeding into that. So all 63 00:03:12,780 --> 00:03:16,288 Stephen Koukoulas: up in summary, I guess it was showing a slower 64 00:03:16,288 --> 00:03:19,320 Stephen Koukoulas: economy as it should, but it was probably a little 65 00:03:19,320 --> 00:03:22,020 Stephen Koukoulas: bit weaker than the headline people would suggest. And as 66 00:03:22,020 --> 00:03:27,210 Stephen Koukoulas: you mentioned, Dr. Lowe, his farewell speech to society. Look, 67 00:03:27,210 --> 00:03:29,099 Stephen Koukoulas: he sort of defended a lot of what he said. 68 00:03:29,099 --> 00:03:30,809 Stephen Koukoulas: He acknowledged a lot of his errors and took a 69 00:03:30,809 --> 00:03:33,119 Stephen Koukoulas: bit of a swipe at the media and victory all 70 00:03:33,120 --> 00:03:36,539 Stephen Koukoulas: against him and in a sense it didn't really say 71 00:03:36,539 --> 00:03:38,880 Stephen Koukoulas: terribly much about his tenure as governor. And I think 72 00:03:38,940 --> 00:03:41,700 Stephen Koukoulas: we'll see a lot more about how well did Dr. 73 00:03:41,700 --> 00:03:43,860 Stephen Koukoulas: Lowe do when he actually pulls up stumps in the 74 00:03:43,860 --> 00:03:44,699 Stephen Koukoulas: next week or two. 75 00:03:45,480 --> 00:03:47,820 Jennifer Duke: So over the next week, what do we have coming 76 00:03:47,820 --> 00:03:49,650 Jennifer Duke: up? I think there might be some labor force data 77 00:03:49,650 --> 00:03:50,099 Jennifer Duke: coming out. 78 00:03:50,969 --> 00:03:53,970 Stephen Koukoulas: Labor force, yes, that's it. That's the big one. And 79 00:03:54,900 --> 00:03:58,500 Stephen Koukoulas: as we know, the employment unemployment numbers are the critical 80 00:03:58,500 --> 00:04:01,110 Stephen Koukoulas: ones for the health of the economy and indeed the 81 00:04:01,110 --> 00:04:04,560 Stephen Koukoulas: RBA. So you might recall last month we had that 82 00:04:04,590 --> 00:04:06,780 Stephen Koukoulas: little bit of a dip in employment. It fell 14, 83 00:04:06,780 --> 00:04:10,590 Stephen Koukoulas: 000 and the unemployment rate went from 3. 5% to 3. 84 00:04:10,980 --> 00:04:15,150 Stephen Koukoulas: 7%. The monthly numbers are incredibly volatile. They do bounce 85 00:04:15,150 --> 00:04:17,580 Stephen Koukoulas: around. They're just a survey from the Bureau of Statistics, 86 00:04:17,580 --> 00:04:20,550 Stephen Koukoulas: so it can be a bit hazardous trying to forecast 87 00:04:20,550 --> 00:04:23,070 Stephen Koukoulas: a month on month change in employment and the unemployment 88 00:04:23,070 --> 00:04:26,759 Stephen Koukoulas: rate. However, we do know that with those slower economic 89 00:04:26,759 --> 00:04:30,120 Stephen Koukoulas: numbers that we were just talking about for the GDP release 90 00:04:30,570 --> 00:04:33,840 Stephen Koukoulas: that we're probably in the early stages of a trend 91 00:04:33,930 --> 00:04:36,868 Stephen Koukoulas: upturned in the unemployment rate, that it's probably easy to 92 00:04:36,870 --> 00:04:38,758 Stephen Koukoulas: forecast where unemployment will be in the middle of next 93 00:04:38,759 --> 00:04:41,669 Stephen Koukoulas: year than it'll be later this week because it'll be higher. 94 00:04:42,210 --> 00:04:44,460 Stephen Koukoulas: Whether it's a smooth path there, it's a bit of 95 00:04:44,460 --> 00:04:46,529 Stephen Koukoulas: a sore tooth pattern getting up there, I'm not sure. 96 00:04:46,529 --> 00:04:49,920 Stephen Koukoulas: But if there's any further signs of weakness, so maybe just 97 00:04:49,920 --> 00:04:53,430 Stephen Koukoulas: a very tepid increase in employment, the unemployment rate ticks up 98 00:04:53,430 --> 00:04:57,480 Stephen Koukoulas: to 3. 8%, then that'll just reinforce the market pricing 99 00:04:57,690 --> 00:05:00,570 Stephen Koukoulas: of steady interest rates. And linked to that, we've got 100 00:05:00,570 --> 00:05:04,289 Stephen Koukoulas: the consumer sentiment numbers, we consumers are still gloomy, we're 101 00:05:04,289 --> 00:05:08,070 Stephen Koukoulas: still pretty miserable. The rate hikes, cost of living are 102 00:05:08,070 --> 00:05:12,960 Stephen Koukoulas: the critical factors impacting on cost of living. And the 103 00:05:12,960 --> 00:05:15,808 Stephen Koukoulas: NAB Business Survey, gee, I love that survey. It's a 104 00:05:15,928 --> 00:05:18,660 Stephen Koukoulas: good indicator of how the business sector's feeling and the 105 00:05:18,660 --> 00:05:21,690 Stephen Koukoulas: business sector's been a lot more resilient in the last, 106 00:05:21,990 --> 00:05:24,508 Stephen Koukoulas: well, the last 12 months to be honest. And they 107 00:05:24,510 --> 00:05:26,580 Stephen Koukoulas: have been showing that some of these price pressures have 108 00:05:26,580 --> 00:05:29,460 Stephen Koukoulas: been easing. So we'll be sort of trawling through and 109 00:05:29,460 --> 00:05:32,970 Stephen Koukoulas: over the NAB Business Survey to see whether there's a 110 00:05:32,970 --> 00:05:35,309 Stephen Koukoulas: bit more resilience in the business side of the economy 111 00:05:35,309 --> 00:05:39,270 Stephen Koukoulas: and whether these price pressures, selling prices, labor costs in 112 00:05:39,270 --> 00:05:41,459 Stephen Koukoulas: the surveys are continuing to track back lower. 113 00:05:42,059 --> 00:05:43,799 Jennifer Duke: And I look forward to breaking that down with you 114 00:05:43,800 --> 00:05:46,590 Jennifer Duke: again next week. Hopefully you have a good one ahead. 115 00:05:47,250 --> 00:05:48,750 Stephen Koukoulas: It'll be a good week. Always fun to see the labor force numbers. And just 116 00:05:49,950 --> 00:05:52,860 Stephen Koukoulas: by the way, I think after last week and Collingwood's 117 00:05:52,860 --> 00:05:54,839 Stephen Koukoulas: win, consumers said it might get a little bit of 118 00:05:54,839 --> 00:05:57,779 Stephen Koukoulas: an uptick because the Mighty Magpie's won last week. 119 00:05:58,230 --> 00:06:00,059 Jennifer Duke: Oh, I think that's going to be a divisive call 120 00:06:00,059 --> 00:06:03,779 Jennifer Duke: for the week. So there you go. Thanks so much Stephen. And that was 121 00:06:03,779 --> 00:06:06,990 Jennifer Duke: economist Stephen Koukoulas, better known as The Kouk. You can find him 122 00:06:06,990 --> 00:06:09,299 Jennifer Duke: at thekouk. com and follow him on X using the 123 00:06:09,300 --> 00:06:13,139 Jennifer Duke: handle TheKouk. I'm Jennifer Duke, economics correspondent at Capital Brief 124 00:06:13,139 --> 00:06:15,058 Jennifer Duke: and filling in for Sean Aylmer, and this is Fear 125 00:06:15,059 --> 00:06:16,139 Jennifer Duke: and Greed - The Week Ahead.