1 00:00:03,090 --> 00:00:06,350 Sean Aylmer: Welcome to the Fear and Greed Daily interview, I'm Sean Aylmer. 2 00:00:06,590 --> 00:00:09,260 Sean Aylmer: With so many Australians in lockdown, the hit to the 3 00:00:09,260 --> 00:00:14,120 Sean Aylmer: economy continues to grow. And unfortunately, the COVID-19 case numbers 4 00:00:14,330 --> 00:00:17,930 Sean Aylmer: show no signs of abating, which means our two largest 5 00:00:17,930 --> 00:00:21,710 Sean Aylmer: economic hubs, Sydney and Melbourne, will likely stay in hibernation 6 00:00:21,710 --> 00:00:24,919 Sean Aylmer: until vaccine levels hit at least 70 per cent. I 7 00:00:24,920 --> 00:00:27,470 Sean Aylmer: wanted to get a clearer picture of what this all means, 8 00:00:27,470 --> 00:00:30,319 Sean Aylmer: where we might be heading and whether there's any cause 9 00:00:30,320 --> 00:00:33,409 Sean Aylmer: for optimism. Gareth Aird is the Head of Australian Economics 10 00:00:33,409 --> 00:00:36,050 Sean Aylmer: at the Commonwealth Bank. Gareth, welcome to Fear and Greed. 11 00:00:36,680 --> 00:00:37,340 Gareth Aird: G'day Sean, how are you? 12 00:00:37,860 --> 00:00:40,070 Sean Aylmer: I'm well. Now tell me, just how big is the 13 00:00:40,070 --> 00:00:43,370 Sean Aylmer: economic impact with all the lockdowns? The ACT, of course, is in lockdown too. 14 00:00:44,940 --> 00:00:47,180 Gareth Aird: Well, it's big and it seems to be getting bigger based on the number 15 00:00:47,180 --> 00:00:49,730 Gareth Aird: of people that are locked down. In a way, you 16 00:00:49,729 --> 00:00:51,710 Gareth Aird: can sort of think about the economic hit as being 17 00:00:51,710 --> 00:00:53,930 Gareth Aird: a function of the number of people in the country 18 00:00:53,930 --> 00:00:57,020 Gareth Aird: who are in lockdown. And that number has been growing 19 00:00:57,020 --> 00:00:59,420 Gareth Aird: and more than half the population at the moment is 20 00:00:59,750 --> 00:01:02,480 Gareth Aird: in lockdown. So what we're going to find is that 21 00:01:02,480 --> 00:01:05,660 Gareth Aird: the hit to GDP in the third quarter of this 22 00:01:05,660 --> 00:01:08,030 Gareth Aird: year is very, very big. It's going to be conditional 23 00:01:08,030 --> 00:01:10,910 Gareth Aird: on what happens with the lockdown from here. But I 24 00:01:10,910 --> 00:01:13,550 Gareth Aird: think we're looking at a really significant hit now to 25 00:01:13,550 --> 00:01:16,759 Gareth Aird: the economy, both from a production and also an employment perspective. 26 00:01:17,090 --> 00:01:19,610 Gareth Aird: And I think in New South Wales, we're going to 27 00:01:19,610 --> 00:01:21,800 Gareth Aird: be in lockdown here in Sydney until the middle of 28 00:01:21,800 --> 00:01:24,560 Gareth Aird: the fourth quarter. So it's not just an economic hit 29 00:01:24,560 --> 00:01:27,080 Gareth Aird: that's going to occur over the September quarter. I think 30 00:01:27,080 --> 00:01:29,060 Gareth Aird: it's carrying on to the last quarter of the year. 31 00:01:29,440 --> 00:01:32,690 Sean Aylmer: OK, so this third quarter, the current one, are you 32 00:01:32,690 --> 00:01:36,259 Sean Aylmer: looking at a contraction of what sort of level? And 33 00:01:36,260 --> 00:01:38,020 Sean Aylmer: then what are you thinking about the unemployment rate? 34 00:01:38,569 --> 00:01:41,870 Gareth Aird: So in late July, I put out some updated economic 35 00:01:41,870 --> 00:01:45,440 Gareth Aird: forecasts and in there an underpinning assumption was that New 36 00:01:45,440 --> 00:01:48,470 Gareth Aird: South Wales or Greater Sydney, rather, was in lockdown until 37 00:01:48,470 --> 00:01:51,500 Gareth Aird: the middle of the December quarter. That felt like a 38 00:01:51,500 --> 00:01:53,390 Gareth Aird: sort of a big call at the time because there 39 00:01:53,390 --> 00:01:55,940 Gareth Aird: was still some optimism out there amongst a lot of 40 00:01:55,940 --> 00:01:58,820 Gareth Aird: people that COVID cases might come down such that New 41 00:01:58,820 --> 00:02:01,220 Gareth Aird: South Wales would be able to exit the lockdown. But 42 00:02:01,220 --> 00:02:03,590 Gareth Aird: I thought the numbers were going to keep trending the 43 00:02:03,590 --> 00:02:06,590 Gareth Aird: way they have. That means that policymakers will just not 44 00:02:06,590 --> 00:02:09,860 Gareth Aird: be willing to reopen the economy until around an 80 per 45 00:02:09,860 --> 00:02:14,090 Gareth Aird: cent vaccination rate. So I've got in there a contraction 46 00:02:14,090 --> 00:02:16,550 Gareth Aird: in GDP of two and three quarter per cent. But I 47 00:02:16,550 --> 00:02:19,760 Gareth Aird: think the risk is that numbers getting bigger because I 48 00:02:19,760 --> 00:02:22,970 Gareth Aird: wasn't thinking that Victoria would be in extended lockdown, but 49 00:02:22,970 --> 00:02:24,740 Gareth Aird: that's what's going on now. I mean, the weeks are 50 00:02:24,740 --> 00:02:27,110 Gareth Aird: all adding up. And so I think we could be 51 00:02:27,110 --> 00:02:29,750 Gareth Aird: looking at a hit to GDP of well over three 52 00:02:29,750 --> 00:02:32,600 Gareth Aird: per cent, which is a massive contraction in economic activity. 53 00:02:32,870 --> 00:02:34,070 Sean Aylmer: And that means job losses? 54 00:02:34,580 --> 00:02:37,639 Gareth Aird: Yeah, absolutely. I mean, especially here in New South Wales. 55 00:02:37,639 --> 00:02:39,380 Gareth Aird: I mean, it's worth keeping in mind that a lot 56 00:02:39,380 --> 00:02:42,560 Gareth Aird: of these jobs will come back when the economy reopens. 57 00:02:42,860 --> 00:02:45,709 Gareth Aird: But if we're not exiting lockdown in Sydney, for example, 58 00:02:45,710 --> 00:02:47,360 Gareth Aird: until the middle of the December quarter, then are a 59 00:02:47,360 --> 00:02:49,430 Gareth Aird: lot of people are going to find that they haven't 60 00:02:49,430 --> 00:02:52,430 Gareth Aird: been working for many months. And I think we're looking 61 00:02:52,430 --> 00:02:55,550 Gareth Aird: at a hit to employment of around 300,000. It's not 62 00:02:55,550 --> 00:02:57,560 Gareth Aird: going to show up in the labour force figures for July, 63 00:02:57,560 --> 00:03:00,050 Gareth Aird: which come out on Thursday. It'll be picked up in 64 00:03:00,050 --> 00:03:03,260 Gareth Aird: the August and September figures, but it's probably around one 65 00:03:03,260 --> 00:03:05,960 Gareth Aird: in 10 workers in Sydney that are stood down at 66 00:03:05,960 --> 00:03:09,080 Gareth Aird: the moment. And because we don't have the JobKeeper payment 67 00:03:09,080 --> 00:03:12,050 Gareth Aird: mechanism in play at the moment, which kept people tied 68 00:03:12,050 --> 00:03:15,800 Gareth Aird: to their employer and from a statistical perspective, it kept them, 69 00:03:16,040 --> 00:03:19,220 Gareth Aird: quote unquote, "employed". All of those people that are stood down 70 00:03:19,220 --> 00:03:22,130 Gareth Aird: at the moment will not be considered employed. So we're looking 71 00:03:22,130 --> 00:03:24,320 Gareth Aird: at a big hit to jobs. We'll get a lot 72 00:03:24,320 --> 00:03:27,170 Gareth Aird: of those back but I think that when we come 73 00:03:27,169 --> 00:03:28,550 Gareth Aird: out of this, things are going to be a little 74 00:03:28,550 --> 00:03:30,919 Gareth Aird: bit more bumpy than what a lot of people are expecting. 75 00:03:31,460 --> 00:03:33,560 Sean Aylmer: So could we end up with a double-dip recession, at 76 00:03:33,560 --> 00:03:35,240 Sean Aylmer: least technically a double-dip recession? 77 00:03:35,570 --> 00:03:38,000 Gareth Aird: It's probably going to be hard to end up with 78 00:03:38,000 --> 00:03:41,660 Gareth Aird: two quarters of contraction in the economy simply because the 79 00:03:41,660 --> 00:03:44,030 Gareth Aird: fall in economic activity in Q3 is going to be 80 00:03:44,030 --> 00:03:47,450 Gareth Aird: so big that as long as you get some re-opening 81 00:03:47,450 --> 00:03:50,510 Gareth Aird: occurring in Q4, you're going to get a positive growth rate. 82 00:03:50,760 --> 00:03:52,820 Gareth Aird: But I think that's sort of a little bit misleading 83 00:03:52,820 --> 00:03:56,030 Gareth Aird: in terms of what overall is going to happen. I 84 00:03:56,030 --> 00:03:58,250 Gareth Aird: think what will happen is that we get a huge 85 00:03:58,250 --> 00:04:00,800 Gareth Aird: negative hit to Q3 and we only get a partial 86 00:04:00,800 --> 00:04:04,400 Gareth Aird: rebound in the December quarter, which means the economy in 87 00:04:04,400 --> 00:04:07,520 Gareth Aird: the December quarter will be smaller than what it was 88 00:04:07,520 --> 00:04:09,950 Gareth Aird: in the June quarter. And I think if you couple 89 00:04:09,950 --> 00:04:12,350 Gareth Aird: on that all the job losses that will take place, 90 00:04:12,560 --> 00:04:15,559 Gareth Aird: I think what we're going through is effectively a recession. Again, 91 00:04:15,710 --> 00:04:17,690 Gareth Aird: it's just that we may not end up getting those 92 00:04:17,690 --> 00:04:20,270 Gareth Aird: two consecutive quarters of negative growth. 93 00:04:20,720 --> 00:04:23,480 Sean Aylmer: And, I mean, Commonwealth Bank has access to an incredible amount 94 00:04:23,480 --> 00:04:27,560 Sean Aylmer: of data around consumer spending. Is that reflecting what you're 95 00:04:27,560 --> 00:04:28,280 Sean Aylmer: talking about? 96 00:04:28,580 --> 00:04:32,600 Gareth Aird: Absolutely. And look, it's intuitive, really, if households are told 97 00:04:32,600 --> 00:04:34,549 Gareth Aird: to stay at home and a lot of businesses can't 98 00:04:34,550 --> 00:04:37,880 Gareth Aird: open because you're trying to limit the spread of COVID, 99 00:04:37,880 --> 00:04:40,460 Gareth Aird: then you're naturally going to get a hit to spending. 100 00:04:40,730 --> 00:04:43,580 Gareth Aird: And it's all showing up in the services sector. So 101 00:04:43,580 --> 00:04:47,750 Gareth Aird: our internal data suggests that spending so far in the 102 00:04:47,750 --> 00:04:50,510 Gareth Aird: September quarter and we're about six weeks in now is 103 00:04:50,510 --> 00:04:53,240 Gareth Aird: 10 per cent lower than what it was in the 104 00:04:53,240 --> 00:04:56,120 Gareth Aird: June quarter. That's a very big hit to spending. Now, 105 00:04:56,120 --> 00:04:58,190 Gareth Aird: it'll look a little bit better if Victoria can come 106 00:04:58,190 --> 00:05:01,250 Gareth Aird: out of lockdown. But if they don't and based on 107 00:05:01,250 --> 00:05:04,029 Gareth Aird: how our data has been tracking then, you know, consumer spending 108 00:05:04,029 --> 00:05:06,609 Gareth Aird: is going to be down somewhere around that magnitude, in the 109 00:05:06,610 --> 00:05:09,910 Gareth Aird: September quarter, which is a huge hit, but it's exactly 110 00:05:09,910 --> 00:05:13,750 Gareth Aird: what you'd expect given households are encouraged to stay at 111 00:05:13,750 --> 00:05:17,260 Gareth Aird: home and that automatically then limits the amount of money 112 00:05:17,260 --> 00:05:17,920 Gareth Aird: that you're spending. 113 00:05:18,339 --> 00:05:20,160 Sean Aylmer: Stay with me, Gareth. We'll be back in a minute. 114 00:05:25,120 --> 00:05:28,000 Sean Aylmer: My guest this morning is Gareth Aird, Head of Australian 115 00:05:28,000 --> 00:05:31,420 Sean Aylmer: Economics at Commonwealth Bank. So when it comes to monetary 116 00:05:31,420 --> 00:05:33,760 Sean Aylmer: and fiscal policy, over the last 24 hours, the minutes 117 00:05:33,760 --> 00:05:36,430 Sean Aylmer: of the Reserve Bank board meeting came and it certainly 118 00:05:36,430 --> 00:05:38,200 Sean Aylmer: has left the door open to do more on the 119 00:05:38,200 --> 00:05:41,020 Sean Aylmer: bond purchasing side to keep longer-term rates or a lid 120 00:05:41,020 --> 00:05:43,720 Sean Aylmer: on longer-term rates. But the heavy lifting has to be 121 00:05:43,720 --> 00:05:47,410 Sean Aylmer: done on fiscal policy. So do you think the government 122 00:05:47,440 --> 00:05:49,570 Sean Aylmer: will come in and have to step in and prop 123 00:05:49,570 --> 00:05:50,500 Sean Aylmer: up the economy again? 124 00:05:51,190 --> 00:05:54,070 Gareth Aird: Look, the government, both state governments and the Commonwealth are 125 00:05:54,070 --> 00:05:56,529 Gareth Aird: providing a lot of support, but I think there's scope 126 00:05:56,529 --> 00:06:00,070 Gareth Aird: to provide more than what is currently being injected, particularly 127 00:06:00,070 --> 00:06:03,760 Gareth Aird: into businesses. It's probably worth sort of thinking about the 128 00:06:03,760 --> 00:06:06,099 Gareth Aird: policy response to what we've been going through. And it 129 00:06:06,100 --> 00:06:09,339 Gareth Aird: was assumed initially that the lockdown in Sydney would only 130 00:06:09,339 --> 00:06:11,349 Gareth Aird: go on for a couple of weeks. Then that was 131 00:06:11,350 --> 00:06:15,460 Gareth Aird: rolled out. And sort of the timeframe of which policymakers 132 00:06:15,460 --> 00:06:18,940 Gareth Aird: have expected we'd be in lockdown has continued to grow. 133 00:06:19,210 --> 00:06:22,060 Gareth Aird: And so the support packages have sort of evolved. But 134 00:06:22,600 --> 00:06:25,450 Gareth Aird: to me, they're still not at the point where policy makers 135 00:06:25,750 --> 00:06:28,330 Gareth Aird: are assuming that Sydney, for example, is in lockdown and 136 00:06:28,330 --> 00:06:31,630 Gareth Aird: for several more months and similar sort of situation in Victoria. 137 00:06:31,630 --> 00:06:35,080 Gareth Aird: To the extent that each week you're in lockdown starts to add up. 138 00:06:35,080 --> 00:06:37,240 Gareth Aird: And then you look at the policy response and say, well, 139 00:06:37,540 --> 00:06:40,810 Gareth Aird: is it really appropriate now for how long the lockdown 140 00:06:40,810 --> 00:06:43,450 Gareth Aird: is actually going on for? So I think there's definitely 141 00:06:43,450 --> 00:06:46,900 Gareth Aird: scope to do more. And I would also suggest that 142 00:06:46,900 --> 00:06:50,020 Gareth Aird: businesses are going to need assistance when we come out 143 00:06:50,020 --> 00:06:53,740 Gareth Aird: of this, when the lockdowns are over, particularly here in 144 00:06:53,770 --> 00:06:58,479 Gareth Aird: New South Wales, because when the economy's finally reopened, it's 145 00:06:58,480 --> 00:07:01,180 Gareth Aird: not going to be on zero COVID cases. It's going 146 00:07:01,180 --> 00:07:04,270 Gareth Aird: to be on a vaccine threshold being met. And that 147 00:07:04,270 --> 00:07:07,089 Gareth Aird: means that COVID is going to explode. And we're going 148 00:07:07,089 --> 00:07:09,670 Gareth Aird: to be looking at a very different environment where we're 149 00:07:09,670 --> 00:07:12,580 Gareth Aird: learning to live with COVID. And I think that's going 150 00:07:12,580 --> 00:07:16,150 Gareth Aird: to mean that the snapback in spending that we've had 151 00:07:16,150 --> 00:07:19,210 Gareth Aird: coming out of previous lockdowns can't be taken for granted. 152 00:07:19,540 --> 00:07:21,720 Gareth Aird: And in particular, I think that there's a concern for 153 00:07:21,730 --> 00:07:24,970 Gareth Aird: a whole lot of businesses in the CBD, for example, because we could 154 00:07:24,970 --> 00:07:27,790 Gareth Aird: come out of lockdown and restrictions are eased but a 155 00:07:27,790 --> 00:07:29,770 Gareth Aird: whole lot of workers don't want to return to the 156 00:07:29,770 --> 00:07:32,500 Gareth Aird: office because COVID circulating. And that's going to have a 157 00:07:32,500 --> 00:07:35,620 Gareth Aird: negative impact on all those businesses in the CBDs that 158 00:07:35,620 --> 00:07:38,080 Gareth Aird: rely on workers coming into the office to work. So 159 00:07:38,080 --> 00:07:40,780 Gareth Aird: I think there's definitely a case to be made that 160 00:07:40,780 --> 00:07:43,660 Gareth Aird: the government needs to not only do some more, but 161 00:07:43,660 --> 00:07:45,850 Gareth Aird: also keep it going when we come out of the lockdown. 162 00:07:46,190 --> 00:07:51,010 Sean Aylmer: I mean, that's where your view, Gareth, isn't quite consensus, because 163 00:07:51,010 --> 00:07:53,470 Sean Aylmer: so many economists at the moment are just saying there's 164 00:07:53,470 --> 00:07:55,660 Sean Aylmer: pent up demand. What happened last year will happen again 165 00:07:55,660 --> 00:07:58,540 Sean Aylmer: this year. Suddenly everyone will start spending as soon as it's 166 00:07:58,540 --> 00:08:01,630 Sean Aylmer: all over. But the point you're making is really interesting. 167 00:08:01,630 --> 00:08:04,840 Sean Aylmer: We're not coming out of this with the zero cases. 168 00:08:04,840 --> 00:08:06,270 Sean Aylmer: We're coming out of it with a new world. 169 00:08:06,640 --> 00:08:09,400 Gareth Aird: Yeah, look, it's funny as well, because through coming out 170 00:08:09,400 --> 00:08:12,040 Gareth Aird: of the lockdown last year in the economic recovery, I mean, 171 00:08:12,040 --> 00:08:14,290 Gareth Aird: the whole time we were above consensus saying that the 172 00:08:14,290 --> 00:08:17,290 Gareth Aird: rebound would be very sharp, very strong. The recovery will 173 00:08:17,290 --> 00:08:20,260 Gareth Aird: surprise people because of how much money is sitting there. 174 00:08:20,260 --> 00:08:22,210 Gareth Aird: And if we can get on top of the health outcomes, 175 00:08:22,210 --> 00:08:25,000 Gareth Aird: then you're spending outcomes and the labour market and what 176 00:08:25,000 --> 00:08:28,060 Gareth Aird: not will all look very good. But this time around, 177 00:08:28,450 --> 00:08:30,640 Gareth Aird: I'm sort of thinking that when we come out of this, 178 00:08:30,790 --> 00:08:33,400 Gareth Aird: we're coming out to a very different environment and one 179 00:08:33,400 --> 00:08:36,310 Gareth Aird: that we're not used to and I don't think households 180 00:08:36,309 --> 00:08:39,460 Gareth Aird: and businesses are really conditioned to. And that is that 181 00:08:39,460 --> 00:08:41,470 Gareth Aird: COVID will be with us and we're going to have 182 00:08:41,470 --> 00:08:44,079 Gareth Aird: to learn to live with it. And there'll be some 183 00:08:44,080 --> 00:08:47,200 Gareth Aird: teething problems, I think, with that. And we're already hearing 184 00:08:47,200 --> 00:08:49,780 Gareth Aird: from some state premiers that if New South Wales comes 185 00:08:49,780 --> 00:08:53,050 Gareth Aird: out of lockdown, COVID is circulating a lot, then they 186 00:08:53,050 --> 00:08:55,900 Gareth Aird: will keep the interstate borders closed. So I think it's 187 00:08:55,900 --> 00:08:58,540 Gareth Aird: all going to be a little bit piecemeal when we 188 00:08:58,540 --> 00:09:01,720 Gareth Aird: come out of this. I think initially households, there'll be 189 00:09:01,720 --> 00:09:04,750 Gareth Aird: a decent proportion of households that are hesitant to go 190 00:09:04,750 --> 00:09:06,609 Gareth Aird: out and do things, even though a lot of people 191 00:09:06,610 --> 00:09:09,250 Gareth Aird: will be vaccinated, COVID is going to circulate and I 192 00:09:09,250 --> 00:09:11,720 Gareth Aird: think it might take us a while to get going again. 193 00:09:11,740 --> 00:09:14,020 Gareth Aird: I do think next year will be very good as 194 00:09:14,020 --> 00:09:16,690 Gareth Aird: far as the economy goes. But we're probably, I think, 195 00:09:16,690 --> 00:09:19,060 Gareth Aird: looking at a sort of three to six month period where, 196 00:09:19,240 --> 00:09:22,449 Gareth Aird: as a country, we adjust to living with COVID and what 197 00:09:22,450 --> 00:09:25,720 Gareth Aird: that means, and therefore I think there's some economic implications 198 00:09:25,720 --> 00:09:26,100 Gareth Aird: of that. 199 00:09:26,679 --> 00:09:29,530 Sean Aylmer: So transferring that to what it means for our wealth 200 00:09:29,530 --> 00:09:32,290 Sean Aylmer: and the two big areas of wealth, share markets, most 201 00:09:32,290 --> 00:09:34,300 Sean Aylmer: of us via our super funds. How do you think 202 00:09:34,300 --> 00:09:37,270 Sean Aylmer: that's going to happen? Share markets and house prices. What's 203 00:09:37,270 --> 00:09:38,590 Sean Aylmer: your take on those two areas? 204 00:09:39,040 --> 00:09:41,380 Gareth Aird: Look, it's not my domain to have a view on 205 00:09:41,380 --> 00:09:43,210 Gareth Aird: the equity market, but all I would sort of say 206 00:09:43,210 --> 00:09:45,820 Gareth Aird: there is that the equity market is very forward looking 207 00:09:45,820 --> 00:09:48,550 Gareth Aird: and is probably more focused on the medium to longer 208 00:09:48,550 --> 00:09:51,610 Gareth Aird: term picture. I think as far as the housing market goes, 209 00:09:51,610 --> 00:09:55,090 Gareth Aird: it's been incredibly resilient. And I think we're now sort 210 00:09:55,090 --> 00:09:58,630 Gareth Aird: of eight weeks or so into various lockdowns around the country. 211 00:09:58,630 --> 00:10:02,560 Gareth Aird: And prices are still rising. Lending growth is still pretty strong. 212 00:10:02,800 --> 00:10:05,020 Gareth Aird: And I think households by and large have kind of 213 00:10:05,020 --> 00:10:08,140 Gareth Aird: look through the lockdowns and they're also focused on the 214 00:10:08,140 --> 00:10:10,800 Gareth Aird: medium term. They know interest rates are very low and 215 00:10:10,809 --> 00:10:12,729 Gareth Aird: it's not, what's going on in the economy in the 216 00:10:12,730 --> 00:10:15,280 Gareth Aird: short run is not really having a negative impact on 217 00:10:15,280 --> 00:10:17,260 Gareth Aird: what people are willing to pay for a home. So I 218 00:10:17,260 --> 00:10:20,110 Gareth Aird: think by and large, property prices are going to be 219 00:10:20,110 --> 00:10:23,020 Gareth Aird: pretty much not impacted by the stuff that I was 220 00:10:23,020 --> 00:10:25,640 Gareth Aird: saying about the economy in the short run. I think 221 00:10:25,640 --> 00:10:29,120 Gareth Aird: that interest rates will remain the dominant driver of what 222 00:10:29,120 --> 00:10:30,980 Gareth Aird: people are willing to pay for a home, and because 223 00:10:30,980 --> 00:10:32,870 Gareth Aird: I think interest rates are still going to stay very, 224 00:10:32,870 --> 00:10:35,660 Gareth Aird: very low for an extended period of time, people will 225 00:10:35,660 --> 00:10:37,679 Gareth Aird: be confident to transact in the housing market. 226 00:10:38,420 --> 00:10:40,459 Sean Aylmer: And while I have you, Gareth, and before you go, the 227 00:10:40,460 --> 00:10:42,600 Sean Aylmer: commodity sector is a really interesting one at the moment. 228 00:10:42,600 --> 00:10:46,550 Sean Aylmer: And there's lots of M&A activity going on. Just parking that. Iron ore, 229 00:10:46,850 --> 00:10:48,530 Sean Aylmer: kind of not that it saved us, but it certainly 230 00:10:48,530 --> 00:10:51,710 Sean Aylmer: helped the Australian bottom line. That's come off. The price 231 00:10:51,710 --> 00:10:54,950 Sean Aylmer: of iron ore has come off. What's your prognosis for 232 00:10:54,950 --> 00:10:56,540 Sean Aylmer: some of those commodity plays? 233 00:10:57,320 --> 00:10:59,840 Gareth Aird: Look, it has come off a bit and it basically 234 00:10:59,840 --> 00:11:02,510 Gareth Aird: had to I mean, it was so elevated and there 235 00:11:02,510 --> 00:11:05,089 Gareth Aird: were for a variety of reasons, but the supply side 236 00:11:05,090 --> 00:11:08,540 Gareth Aird: had a big impact there. We've got a commodity strategist 237 00:11:08,540 --> 00:11:10,730 Gareth Aird: at the bank in the research team, and he's of 238 00:11:10,730 --> 00:11:13,370 Gareth Aird: the view that commodity prices are going to be trending 239 00:11:13,370 --> 00:11:16,790 Gareth Aird: down from here. You know, they're coming off very elevated levels, 240 00:11:16,790 --> 00:11:19,220 Gareth Aird: I should add. But it does mean that as they 241 00:11:19,220 --> 00:11:21,950 Gareth Aird: come down that the terms of trade comes down and 242 00:11:21,950 --> 00:11:25,070 Gareth Aird: that ultimately weighs on our national income. So to your 243 00:11:25,070 --> 00:11:27,260 Gareth Aird: point about the budget, the budget has had a complete 244 00:11:27,260 --> 00:11:29,929 Gareth Aird: windfall from what's been happening in terms of commodity prices, 245 00:11:29,929 --> 00:11:32,540 Gareth Aird: particularly iron ore. But I think we've seen the best 246 00:11:32,540 --> 00:11:34,910 Gareth Aird: of it. And I think we can expect commodity prices 247 00:11:34,910 --> 00:11:38,420 Gareth Aird: from here to trend down. And that ultimately will mean 248 00:11:38,420 --> 00:11:41,300 Gareth Aird: that we're running smaller trade surpluses and it will mean 249 00:11:41,300 --> 00:11:43,729 Gareth Aird: the windfall that the budget was getting, you know, they're still 250 00:11:43,730 --> 00:11:45,949 Gareth Aird: going to be well supported but ultimately, we've seen the 251 00:11:45,950 --> 00:11:46,439 Gareth Aird: best of it. 252 00:11:46,830 --> 00:11:47,869 Sean Aylmer: Gareth, thank you for talking to Fear and Greed. 253 00:11:48,870 --> 00:11:49,589 Gareth Aird: Nice to have a chat. 254 00:11:49,910 --> 00:11:52,369 Sean Aylmer: That was Gareth Aird, Head of Australian Economics at the 255 00:11:52,370 --> 00:11:55,430 Sean Aylmer: Commonwealth Bank. This is a Fear and Greed Daily Interview. Join 256 00:11:55,429 --> 00:11:57,980 Sean Aylmer: me every morning for the full Fear and Greed podcast 257 00:11:58,280 --> 00:12:00,679 Sean Aylmer: with all the business news you need to know. I'm Sean Aylmer. 258 00:12:01,220 --> 00:12:02,000 Sean Aylmer: Enjoy your day.