1 00:00:08,130 --> 00:00:10,289 Sean Aylmer: Welcome to Fear and Greed, The Week Ahead. I'm Sean 2 00:00:10,289 --> 00:00:14,400 Sean Aylmer: Aylmer, and, as always, I'm joined by economist Stephen Koukoulas. 3 00:00:14,400 --> 00:00:16,829 Sean Aylmer: You will find him at thekouk. com and on Twitter 4 00:00:16,829 --> 00:00:19,470 Sean Aylmer: using the handle # thekouk, T- H- E- K- O- U- 5 00:00:19,470 --> 00:00:23,130 Sean Aylmer: K. Stephen, you are coming to us today not from 6 00:00:23,130 --> 00:00:24,840 Sean Aylmer: your normal office. Is that right? 7 00:00:25,290 --> 00:00:28,620 Stephen Koukoulas: That's correct. I'm at the Melbourne International Flower and Garden 8 00:00:28,620 --> 00:00:33,240 Stephen Koukoulas: Show, having a wonderful time here. And this is my 9 00:00:33,240 --> 00:00:35,729 Stephen Koukoulas: side hustle, I suppose you could call it. 10 00:00:35,729 --> 00:00:35,730 Sean Aylmer: Yeah. 11 00:00:35,731 --> 00:00:39,690 Stephen Koukoulas: Flowers in the background, it's called Pink Pear. It's the extravagant 12 00:00:39,690 --> 00:00:42,479 Stephen Koukoulas: fruit sculptures. And just as we are talking, the police 13 00:00:42,479 --> 00:00:43,890 Stephen Koukoulas: are coming to take me away, I think. 14 00:00:44,310 --> 00:00:49,140 Sean Aylmer: Excellent. So pinkpear. com. au. I have been browsing. Fantastic, 15 00:00:49,320 --> 00:00:53,130 Sean Aylmer: fantastic. Look, it's all about the Reserve Bank board meeting 16 00:00:53,190 --> 00:00:56,400 Sean Aylmer: this week, obviously, but just before we jump into that 17 00:00:56,400 --> 00:00:59,400 Sean Aylmer: and so all relevant to it, couple of pretty interesting 18 00:00:59,400 --> 00:01:03,630 Sean Aylmer: figures out last week. One was the CPI February number 19 00:01:03,840 --> 00:01:05,670 Sean Aylmer: and the other was job vacancies. 20 00:01:06,090 --> 00:01:08,910 Stephen Koukoulas: Sean, it was a really interesting week last week because 21 00:01:08,910 --> 00:01:11,970 Stephen Koukoulas: the inflation numbers did confirm what we've all been hoping 22 00:01:11,970 --> 00:01:15,569 Stephen Koukoulas: for, and that is a deceleration in inflation. So the 23 00:01:15,569 --> 00:01:19,319 Stephen Koukoulas: inflation rate in annual terms went from 8. 4% in 24 00:01:19,319 --> 00:01:21,959 Stephen Koukoulas: the year to December down to 6. 8. So at 25 00:01:21,959 --> 00:01:24,840 Stephen Koukoulas: face value, it was still an elevated inflation rate. But 26 00:01:24,840 --> 00:01:26,520 Stephen Koukoulas: if you're looking at the run rate, you're looking at 27 00:01:26,520 --> 00:01:29,520 Stephen Koukoulas: the slowdown in the economy, you can see that inflation 28 00:01:29,520 --> 00:01:32,040 Stephen Koukoulas: pressures are starting to abate. And as you alluded to 29 00:01:32,040 --> 00:01:35,520 Stephen Koukoulas: the job vacancy series, another small fall, it wasn't a 30 00:01:35,520 --> 00:01:38,250 Stephen Koukoulas: free fall, but the demand for labor appears to be 31 00:01:38,250 --> 00:01:41,520 Stephen Koukoulas: topping out and that's an important part of the inflation 32 00:01:41,520 --> 00:01:44,190 Stephen Koukoulas: equation as well. So both of those figures say to 33 00:01:44,190 --> 00:01:45,810 Stephen Koukoulas: me that the Reserve Bank's going to be on hold. 34 00:01:46,440 --> 00:01:48,090 Sean Aylmer: Okay. Of course, that all feeds into the Reserve Bank 35 00:01:48,090 --> 00:01:51,540 Sean Aylmer: board meeting tomorrow afternoon or tomorrow morning is the meeting, 36 00:01:51,540 --> 00:01:54,390 Sean Aylmer: we get the announcement at 2: 30 tomorrow afternoon. Stephen, 37 00:01:54,390 --> 00:01:56,490 Sean Aylmer: will the Reserve Bank lift interest rates or not? 38 00:01:56,910 --> 00:01:58,920 Stephen Koukoulas: No, they're on hold. I've been of the view for 39 00:01:58,920 --> 00:02:01,410 Stephen Koukoulas: some time that they've done more than enough to cool 40 00:02:01,410 --> 00:02:04,110 Stephen Koukoulas: the economy down and with that to get the inflation 41 00:02:04,110 --> 00:02:07,200 Stephen Koukoulas: rate heading towards their target range. Obviously, they're going to be 42 00:02:07,800 --> 00:02:10,500 Stephen Koukoulas: sort of a little bit concerned that inflation's still elevated 43 00:02:10,500 --> 00:02:13,470 Stephen Koukoulas: and, yes, at 6. 8, it is still quite high. But 44 00:02:13,470 --> 00:02:15,600 Stephen Koukoulas: the momentum is one of the things that's important in 45 00:02:15,600 --> 00:02:19,230 Stephen Koukoulas: economics, turning points are important in economics. And the turning 46 00:02:19,230 --> 00:02:23,040 Stephen Koukoulas: point in inflation, in GDP growth, and even in things 47 00:02:23,040 --> 00:02:26,190 Stephen Koukoulas: like demand for labor are all pointing to a slower 48 00:02:26,190 --> 00:02:30,210 Stephen Koukoulas: economy in the early to middle part of 2023. We 49 00:02:30,210 --> 00:02:33,600 Stephen Koukoulas: know that. We've got the inflation pressures around the globe 50 00:02:33,600 --> 00:02:36,419 Stephen Koukoulas: starting to abate. And something that is dear to my heart, and 51 00:02:36,419 --> 00:02:39,270 Stephen Koukoulas: I know we've spoken about this in past Week Ahead 52 00:02:39,270 --> 00:02:42,660 Stephen Koukoulas: discussions is the momentum in commodity prices. And if we 53 00:02:42,660 --> 00:02:45,840 Stephen Koukoulas: look at the index of commodity prices, we can see 54 00:02:46,350 --> 00:02:49,709 Stephen Koukoulas: gas, oil, a lot of the energy prices are down, 55 00:02:50,010 --> 00:02:53,910 Stephen Koukoulas: some of the precious metal prices, while they're elevated, we've 56 00:02:53,910 --> 00:02:58,560 Stephen Koukoulas: got base metal prices stabilizing or edging down a little. 57 00:02:58,950 --> 00:03:01,110 Stephen Koukoulas: And when we're talking about inflation, remember it's the rate of 58 00:03:01,200 --> 00:03:05,010 Stephen Koukoulas: increase in prices. So even when prices are tracking sideways, 59 00:03:05,190 --> 00:03:07,770 Stephen Koukoulas: that means inflation is tracking sideways, not going up. 60 00:03:07,770 --> 00:03:11,430 Sean Aylmer: So that whole comparisons to last year, that's going to 61 00:03:11,430 --> 00:03:12,720 Sean Aylmer: play a bit of a role then in the next 62 00:03:12,720 --> 00:03:13,170 Sean Aylmer: little bit. 63 00:03:13,860 --> 00:03:15,990 Stephen Koukoulas: Oh, indeed it is. And, in fact, a lot of 64 00:03:15,990 --> 00:03:19,380 Stephen Koukoulas: the 6. 8% annual inflation rate that's caused some people 65 00:03:19,380 --> 00:03:22,140 Stephen Koukoulas: to have some concern about whether inflation's falling quickly enough 66 00:03:22,560 --> 00:03:24,690 Stephen Koukoulas: includes a lot of the price increases that were in 67 00:03:24,690 --> 00:03:28,290 Stephen Koukoulas: the middle of 2022. So by definition, the year- on- 68 00:03:28,290 --> 00:03:31,620 Stephen Koukoulas: year increase for February included data from March, April, May, 69 00:03:31,620 --> 00:03:34,169 Stephen Koukoulas: June, July, et cetera and so we know that they were 70 00:03:34,169 --> 00:03:36,540 Stephen Koukoulas: the high price increases, we know they were the reasons why 71 00:03:36,540 --> 00:03:40,890 Stephen Koukoulas: the RBA hiked previously. We shouldn't double count those increases 72 00:03:40,890 --> 00:03:43,620 Stephen Koukoulas: and, instead, be looking at the very recent data and, 73 00:03:43,620 --> 00:03:46,770 Stephen Koukoulas: in fact, trying to project where the momentum on inflation, 74 00:03:47,010 --> 00:03:50,940 Stephen Koukoulas: economic activity is starting to go. And clearly, it's slower 75 00:03:50,940 --> 00:03:53,791 Stephen Koukoulas: growth and a deceleration in inflation's coming through. 76 00:03:53,791 --> 00:03:57,870 Sean Aylmer: Okay. Now that is good news. What about house prices? 77 00:03:57,870 --> 00:04:00,420 Sean Aylmer: We'll get figures for the month of March on house 78 00:04:00,420 --> 00:04:04,440 Sean Aylmer: prices. Across the country, they're down 10 or 11% thus far. A 79 00:04:04,440 --> 00:04:08,130 Sean Aylmer: little more in Sydney, little less most other places. What 80 00:04:08,130 --> 00:04:10,140 Sean Aylmer: do you think we'll see this week? 81 00:04:10,350 --> 00:04:12,600 Stephen Koukoulas: This is the interesting thing. We know from the daily 82 00:04:12,600 --> 00:04:15,600 Stephen Koukoulas: CoreLogic numbers because they published their numbers on a high 83 00:04:15,600 --> 00:04:18,930 Stephen Koukoulas: frequency basis, prices, hold onto your hat, are going up, 84 00:04:19,410 --> 00:04:23,130 Stephen Koukoulas: that we've had this strong demand coming from this incredible 85 00:04:23,130 --> 00:04:26,160 Stephen Koukoulas: population increase. Last week in particular, there was a lot 86 00:04:26,160 --> 00:04:30,240 Stephen Koukoulas: of information written about the increase in immigration, foreign students 87 00:04:30,240 --> 00:04:33,900 Stephen Koukoulas: coming to Australia, the extremely tight rental market, which is 88 00:04:33,900 --> 00:04:38,279 Stephen Koukoulas: still apparent. That's spilling over into demand for the, I'd 89 00:04:38,279 --> 00:04:41,040 Stephen Koukoulas: say, the bottom half in terms of pricing in housing. 90 00:04:41,400 --> 00:04:44,100 Stephen Koukoulas: Sydney's now edged up a little bit in the month 91 00:04:44,490 --> 00:04:47,010 Stephen Koukoulas: of March. We've got Melbourne prices edging up a bit. 92 00:04:47,010 --> 00:04:49,049 Stephen Koukoulas: And as you put into context, yes, it's after some 93 00:04:49,050 --> 00:04:51,660 Stephen Koukoulas: pretty big falls, but we're going to be seeing when 94 00:04:51,660 --> 00:04:54,420 Stephen Koukoulas: the numbers come out later today, we're going to be 95 00:04:54,420 --> 00:04:58,290 Stephen Koukoulas: seeing that house prices have ticked up and that's unusual, 96 00:04:58,290 --> 00:05:02,100 Stephen Koukoulas: particularly with interest rates having increased right through to March. 97 00:05:02,760 --> 00:05:06,450 Sean Aylmer: So Stephen, where's the economy at the moment? Is it 98 00:05:06,450 --> 00:05:09,450 Sean Aylmer: at a turning point or we've already turned perhaps? But 99 00:05:09,450 --> 00:05:12,330 Sean Aylmer: it's kind of very interestingly in terms of house prices, 100 00:05:12,330 --> 00:05:15,360 Sean Aylmer: in terms of economic growth, in terms of inflation, great 101 00:05:15,360 --> 00:05:17,490 Sean Aylmer: for the economists out there just to be watching this. 102 00:05:17,730 --> 00:05:19,469 Stephen Koukoulas: It is. One of the things that I love about 103 00:05:19,470 --> 00:05:22,979 Stephen Koukoulas: economics and, as I was saying before, are turning points. When a 104 00:05:22,980 --> 00:05:25,740 Stephen Koukoulas: economy is trending up or trending down, it's pretty easy 105 00:05:25,740 --> 00:05:27,510 Stephen Koukoulas: to work out. But when you get a turning point, 106 00:05:27,839 --> 00:05:30,750 Stephen Koukoulas: it's exciting. So that turning point in growth, which happened 107 00:05:30,750 --> 00:05:33,420 Stephen Koukoulas: around the middle of last year, when we actually look 108 00:05:33,420 --> 00:05:36,420 Stephen Koukoulas: back at the GDP momentum sort of indicators, the retail 109 00:05:36,420 --> 00:05:39,659 Stephen Koukoulas: sales numbers are softening, job vacancies are softening, the rate 110 00:05:39,660 --> 00:05:43,290 Stephen Koukoulas: of employment increase is softening. Those turning points, and they're 111 00:05:43,290 --> 00:05:45,630 Stephen Koukoulas: all consistent, they're all in the one direction, the same 112 00:05:45,630 --> 00:05:48,210 Stephen Koukoulas: direction, so it's saying to me that the economy is 113 00:05:48,210 --> 00:05:51,270 Stephen Koukoulas: slowing, inflation has had the turning point. And when I look 114 00:05:51,270 --> 00:05:54,089 Stephen Koukoulas: around the global inflation rates, while there's a little frustration 115 00:05:54,089 --> 00:05:56,850 Stephen Koukoulas: that, yes, it'd be nice to see US inflation falling 116 00:05:56,850 --> 00:05:59,609 Stephen Koukoulas: a little more rapidly, nonetheless, it's still heading down from 117 00:05:59,610 --> 00:06:03,720 Stephen Koukoulas: where it was. And the jury's out whether we've seen 118 00:06:03,720 --> 00:06:08,849 Stephen Koukoulas: the endpoint of the inflation pressures, but the available evidence 119 00:06:08,850 --> 00:06:10,620 Stephen Koukoulas: is suggesting that, yeah, we probably have. 120 00:06:11,430 --> 00:06:13,770 Sean Aylmer: Fantastic. Stephen, what's that website one more time? 121 00:06:14,520 --> 00:06:19,290 Stephen Koukoulas: Pinkpear. com. au for all of your extravagant fruit sculptures. 122 00:06:19,529 --> 00:06:21,060 Stephen Koukoulas: As I said, it's a great side hustle. 123 00:06:21,480 --> 00:06:23,040 Sean Aylmer: Fantastic. Stephen, have a great week. 124 00:06:23,520 --> 00:06:24,150 Stephen Koukoulas: Thank you, Sean. 125 00:06:24,810 --> 00:06:27,479 Sean Aylmer: That was economist Stephen Koukoulas, better known as The Kouk. You can 126 00:06:27,480 --> 00:06:29,820 Sean Aylmer: find him at thekouk. com and follow him on Twitter 127 00:06:30,060 --> 00:06:33,000 Sean Aylmer: using the handle # thekouk. I'm Sean Aylmer and this is Fear 128 00:06:33,000 --> 00:06:33,960 Sean Aylmer: and Greed, The Week Ahead.