1 00:00:03,410 --> 00:00:07,730 Sean Aylmer: Welcome to the Fear and Greed Daily Interview. I'm Sean Aylmer. 40% 2 00:00:07,820 --> 00:00:11,170 Sean Aylmer: of consumer payments made by Australians are processed by the 3 00:00:11,170 --> 00:00:15,850 Sean Aylmer: Commonwealth Bank. With consumer data covering 2. 5 million households, 4 00:00:16,170 --> 00:00:20,020 Sean Aylmer: the Bank has an incredible insight into household financial habits. 5 00:00:20,270 --> 00:00:22,970 Sean Aylmer: Every month, Commonwealth Bank has used that data to prepare 6 00:00:23,120 --> 00:00:26,759 Sean Aylmer: its Household Spending Intentions report. But this week, the Bank has 7 00:00:26,760 --> 00:00:30,530 Sean Aylmer: launched a new Household Spending Intentions index showing a strong 8 00:00:30,530 --> 00:00:34,220 Sean Aylmer: recovery in consumer spending in October. Belinda Allen is Senior 9 00:00:34,290 --> 00:00:37,919 Sean Aylmer: Economist at the Commonwealth Bank and co- author of the report. Belinda, 10 00:00:37,920 --> 00:00:38,850 Sean Aylmer: welcome to Fear and Greed. 11 00:00:39,159 --> 00:00:40,620 Belinda Allen: Thanks very much for having me, Sean. 12 00:00:41,240 --> 00:00:44,360 Sean Aylmer: So why launch the new index? The report itself on 13 00:00:44,360 --> 00:00:46,610 Sean Aylmer: Household Spending Intentions has been coming out for quite some 14 00:00:46,610 --> 00:00:47,990 Sean Aylmer: time. Why the index? 15 00:00:48,479 --> 00:00:51,739 Belinda Allen: It's a really great question. So I think we wanted our 16 00:00:51,790 --> 00:00:56,380 Belinda Allen: clients, the businesses in Australia, consumers to have one number 17 00:00:56,380 --> 00:00:59,770 Belinda Allen: that they could relate to every month. But to do 18 00:00:59,770 --> 00:01:04,920 Belinda Allen: that, we really wanted a more comprehensive coverage of what 19 00:01:04,920 --> 00:01:08,140 Belinda Allen: consumers were spending on. So not only did we introduce 20 00:01:08,319 --> 00:01:13,209 Belinda Allen: the HSI index, but we also enhanced the spending categories 21 00:01:13,209 --> 00:01:17,620 Belinda Allen: that were included. So prior to the release on 9th 22 00:01:17,660 --> 00:01:22,429 Belinda Allen: November, we had around 55% coverage in the HSI seven 23 00:01:22,430 --> 00:01:26,580 Belinda Allen: categories. So what we have done now is we've introduced 24 00:01:26,580 --> 00:01:30,290 Belinda Allen: five new categories, so there's now 12 in total, and 25 00:01:30,290 --> 00:01:34,580 Belinda Allen: that's taken coverage to what consumers spend on to almost 26 00:01:34,880 --> 00:01:39,330 Belinda Allen: all of household consumption. So we've done that and we've also introduced the 27 00:01:39,380 --> 00:01:42,880 Belinda Allen: index, which will really give us a great indication of 28 00:01:42,880 --> 00:01:45,030 Belinda Allen: how I think Australians are coming out of lockdown, a 29 00:01:45,030 --> 00:01:46,500 Belinda Allen: really timely release. 30 00:01:46,760 --> 00:01:50,040 Sean Aylmer: That's a huge amount of data. You've obviously been using 31 00:01:50,040 --> 00:01:54,410 Sean Aylmer: internal resources and data, but you've also used Google Trends 32 00:01:54,660 --> 00:01:55,620 Sean Aylmer: information. Is that right? 33 00:01:55,970 --> 00:01:59,480 Belinda Allen: That's correct. So we wanted an idea about not only 34 00:01:59,480 --> 00:02:02,890 Belinda Allen: what consumers are spending their money on now, but also 35 00:02:02,890 --> 00:02:06,610 Belinda Allen: what they intend to spend their money on. So to 36 00:02:06,610 --> 00:02:10,270 Belinda Allen: do that, we also include publicly available Google Trends data, 37 00:02:10,600 --> 00:02:14,910 Belinda Allen: and we've found that that does actually enhance our predictive 38 00:02:15,060 --> 00:02:19,120 Belinda Allen: capabilities to look at how consumption is tracking. So on 39 00:02:19,120 --> 00:02:24,119 Belinda Allen: average, including the Google Trends data, lifts the forecasting ability 40 00:02:24,120 --> 00:02:25,390 Belinda Allen: by around 15%. 41 00:02:25,660 --> 00:02:28,800 Sean Aylmer: Right, okay. Nothing like having data to tell you how 42 00:02:28,800 --> 00:02:32,540 Sean Aylmer: much your forecasting ability is improving life. You are an 43 00:02:32,540 --> 00:02:33,679 Sean Aylmer: economist, Belinda. There's no doubt. 44 00:02:34,060 --> 00:02:34,660 Belinda Allen: That's so true. 45 00:02:34,660 --> 00:02:39,760 Sean Aylmer: Now, let's jump into it. Travel was the one that really jumped out in terms of over the last month, 46 00:02:40,280 --> 00:02:43,600 Sean Aylmer: the per cent change. Now explain to me exactly what the 53% 47 00:02:43,600 --> 00:02:44,470 Sean Aylmer: is saying to me. 48 00:02:44,740 --> 00:02:48,720 Belinda Allen: So it's saying that what Australian households spent on travel 49 00:02:48,720 --> 00:02:54,410 Belinda Allen: went up by 52.7% in October compared to September. 50 00:02:54,600 --> 00:02:55,720 Sean Aylmer: I'm part of that, Belinda. 51 00:02:55,950 --> 00:02:56,151 Belinda Allen: You are. 52 00:02:56,151 --> 00:02:56,700 Sean Aylmer: Absolutely. Are you? 53 00:02:59,650 --> 00:03:00,570 Belinda Allen: I am actually. 54 00:03:00,730 --> 00:03:00,761 Sean Aylmer: There you go. 55 00:03:00,761 --> 00:03:04,510 Belinda Allen: I am, there you go. So I think what we've seen definitely with that 56 00:03:04,510 --> 00:03:07,810 Belinda Allen: travel category is if you look at some of the detail, we 57 00:03:07,810 --> 00:03:11,130 Belinda Allen: did see a big lift in spending on travel agents 58 00:03:11,130 --> 00:03:14,339 Belinda Allen: and airlines, obviously from a very low base. But what 59 00:03:14,340 --> 00:03:19,420 Belinda Allen: that travel category really is aimed at measuring is tourism. 60 00:03:19,830 --> 00:03:22,210 Belinda Allen: Because we also have the transport category, which is really 61 00:03:22,210 --> 00:03:25,560 Belinda Allen: reflective of our day- to- day movements. But what is pleasing 62 00:03:25,560 --> 00:03:27,590 Belinda Allen: is with borders reopening, I think there's a lot of 63 00:03:27,590 --> 00:03:30,299 Belinda Allen: excitement out there to be able to travel, which I think we can 64 00:03:30,300 --> 00:03:33,410 Belinda Allen: count both of us as very keen travellers in the future. 65 00:03:34,090 --> 00:03:38,790 Sean Aylmer: That's right. So transport includes plane travel as well as 66 00:03:38,790 --> 00:03:39,550 Sean Aylmer: public transport? 67 00:03:39,890 --> 00:03:44,260 Belinda Allen: So transport covers things like fuel, car washes, tolls, taxis. 68 00:03:44,260 --> 00:03:46,900 Belinda Allen: So think about it more as your day-to- day mobility. 69 00:03:47,100 --> 00:03:47,630 Sean Aylmer: Yes, okay. 70 00:03:47,670 --> 00:03:49,700 Belinda Allen: So that was up in October, I think just with 71 00:03:49,700 --> 00:03:53,300 Belinda Allen: an easing of restrictions, but still lower compared to a 72 00:03:53,300 --> 00:03:55,940 Belinda Allen: year ago level. And I think that's really just from 73 00:03:56,320 --> 00:03:58,010 Belinda Allen: a lot more people still working at home. 74 00:03:58,400 --> 00:04:01,110 Sean Aylmer: Okay. The other big jump, and I'd imagine that over 75 00:04:01,110 --> 00:04:04,520 Sean Aylmer: time, some of these monthly rises won't be quite as 76 00:04:04,520 --> 00:04:09,850 Sean Aylmer: high as travel for example. We won't get 53% or 52.7% all the time. Household 77 00:04:09,850 --> 00:04:12,110 Sean Aylmer: services was the other one that jumped out, up 24% 78 00:04:12,110 --> 00:04:12,810 Sean Aylmer: for the month. 79 00:04:13,570 --> 00:04:15,940 Belinda Allen: Yes, definitely. So that's one of our new categories. So 80 00:04:15,940 --> 00:04:22,360 Belinda Allen: that includes items such as childcare, household cleaning, landscaping, electrical 81 00:04:22,360 --> 00:04:26,419 Belinda Allen: contractors, anyone coming into your house to do work. But 82 00:04:26,420 --> 00:04:28,580 Belinda Allen: also as I said, that childcare as well. So I 83 00:04:28,580 --> 00:04:31,260 Belinda Allen: think that's really reflective once again of an easing of 84 00:04:31,260 --> 00:04:33,810 Belinda Allen: restrictions. You can now have more people in your home, 85 00:04:34,339 --> 00:04:36,730 Belinda Allen: just people getting ready to entertain. So that, as you 86 00:04:36,730 --> 00:04:40,440 Belinda Allen: said, went up 24.1% for the month and is up over 87 00:04:40,440 --> 00:04:41,370 Belinda Allen: the year as well. 88 00:04:41,940 --> 00:04:43,760 Sean Aylmer: Okay. On the other side of the ledger, home buying was the biggest drop. What's that mean? 89 00:04:43,760 --> 00:04:51,730 Belinda Allen: It was. So what we're seeing with home buying is we've 90 00:04:51,730 --> 00:04:54,860 Belinda Allen: seen home loan applications up a little bit in October, 91 00:04:55,089 --> 00:04:58,330 Belinda Allen: but so the fall in the month was actually driven 92 00:04:58,330 --> 00:05:01,420 Belinda Allen: by a decline in Google searches for things like property 93 00:05:01,420 --> 00:05:05,560 Belinda Allen: inspections and appraisals. So what we've seen over the last 94 00:05:05,560 --> 00:05:09,330 Belinda Allen: few months is home lending, this is in the broad economy, 95 00:05:09,330 --> 00:05:13,140 Belinda Allen: come off a little bit. Some question marks around changes 96 00:05:13,140 --> 00:05:17,920 Belinda Allen: to interest rate serviceability, buffer from APRA, housing affordability. We've 97 00:05:17,920 --> 00:05:20,320 Belinda Allen: seen first home buyers come out of the market. So 98 00:05:20,589 --> 00:05:24,370 Belinda Allen: it's probably just reflective of those broader conditions where we 99 00:05:24,400 --> 00:05:28,050 Belinda Allen: have seen house price growth come off. Still up over 100 00:05:28,050 --> 00:05:31,909 Belinda Allen: the year, still up 12.4% over the year. But definitely, 101 00:05:31,910 --> 00:05:33,930 Belinda Allen: we are starting to see maybe just a little bit 102 00:05:33,930 --> 00:05:37,120 Belinda Allen: of a slow down in the momentum in the housing market, 103 00:05:37,120 --> 00:05:38,760 Belinda Allen: which we've seen in other indicators as well. 104 00:05:38,760 --> 00:05:41,460 Sean Aylmer: And the other one I'll just pick out, and this 105 00:05:41,460 --> 00:05:44,580 Sean Aylmer: is primarily because of the 12 month rate, is motor vehicle. 106 00:05:44,580 --> 00:05:44,580 Belinda Allen: Yes. 107 00:05:44,580 --> 00:05:45,230 Sean Aylmer: That's up by more than anything else over the full year. 108 00:05:47,950 --> 00:05:51,510 Belinda Allen: It's large, isn't it? So our motor vehicle spending intention. 109 00:05:51,510 --> 00:05:55,010 Belinda Allen: So we use our own internal loan data as well 110 00:05:55,010 --> 00:05:59,820 Belinda Allen: as Google searches. That was down 1% in October. So 111 00:05:59,820 --> 00:06:03,080 Belinda Allen: we know there's a lot of difficulty buying a new 112 00:06:03,080 --> 00:06:05,839 Belinda Allen: car in Australia at the moment. So some supply chain 113 00:06:05,839 --> 00:06:09,830 Belinda Allen: constraints impacting on your ability to actually secure a new car. 114 00:06:10,710 --> 00:06:13,539 Belinda Allen: So that's one of the major thematics we're seeing in 115 00:06:13,540 --> 00:06:16,570 Belinda Allen: the broader global economy at the moment, and that's really 116 00:06:17,100 --> 00:06:20,540 Belinda Allen: pointed in the motor vehicle section. So very strong over 117 00:06:20,540 --> 00:06:23,229 Belinda Allen: the year. We've seen a big pickup in demand for cars. 118 00:06:23,230 --> 00:06:26,240 Belinda Allen: I think given the pandemic, people wanted a second car, 119 00:06:26,610 --> 00:06:31,300 Belinda Allen: used public transport less, so very strong demand. But certainly, 120 00:06:31,300 --> 00:06:34,109 Belinda Allen: some supply constraints, meaning it is a lot more difficult 121 00:06:34,110 --> 00:06:35,970 Belinda Allen: to actually secure a car at the moment. 122 00:06:36,250 --> 00:06:38,190 Sean Aylmer: Stay with me, Belinda. We'll be back in a minute. 123 00:06:43,279 --> 00:06:45,940 Sean Aylmer: My guest today is Belinda Allen, Director of Economics at 124 00:06:45,940 --> 00:06:48,900 Sean Aylmer: the Commonwealth Bank and co- author of the Household Spending 125 00:06:48,930 --> 00:06:53,230 Sean Aylmer: Intentions report. As you go through the 12 different categories, were there any other 126 00:06:53,230 --> 00:06:55,010 Sean Aylmer: major surprises to you, Belinda? 127 00:06:55,010 --> 00:06:58,810 Belinda Allen: Not real surprises, but it is pleasing to see where 128 00:06:58,810 --> 00:07:02,229 Belinda Allen: we hoped consumers would start to spend again, as restrictions are eased. 129 00:07:02,890 --> 00:07:05,990 Belinda Allen: We are seeing it, so big lifts in retail. So people 130 00:07:05,990 --> 00:07:10,460 Belinda Allen: getting out and about at department stores, smaller shops. We're 131 00:07:10,460 --> 00:07:13,530 Belinda Allen: seeing a pickup there. Entertainment, so we certainly saw a 132 00:07:13,530 --> 00:07:15,700 Belinda Allen: lot more people spend on eating out. I think we're 133 00:07:15,700 --> 00:07:17,850 Belinda Allen: all sick of our own cooking. I know I am. 134 00:07:19,390 --> 00:07:21,590 Belinda Allen: But also taking advantage of being able to go out 135 00:07:21,590 --> 00:07:24,880 Belinda Allen: to the movies and also see live shows at the 136 00:07:24,880 --> 00:07:28,490 Belinda Allen: moment. So that was really interesting. And then some of 137 00:07:28,490 --> 00:07:32,570 Belinda Allen: our other indexes that you wouldn't expect to see. Big moves 138 00:07:32,570 --> 00:07:35,320 Belinda Allen: month to month, such as insurance and utilities are just 139 00:07:35,560 --> 00:07:37,960 Belinda Allen: kind of tracking as you would expect them to see. 140 00:07:38,290 --> 00:07:41,410 Sean Aylmer: What I did like about it when I sort of glanced at it first was that 141 00:07:41,510 --> 00:07:46,340 Sean Aylmer: things that cost me money. Utilities, finance, insurance costs, they 142 00:07:46,490 --> 00:07:52,070 Sean Aylmer: were going down. And the things that I get a lot of value out of, fun out of. Retail, entertainment, travel, 143 00:07:52,360 --> 00:07:52,850 Sean Aylmer: they were going up. 144 00:07:53,400 --> 00:07:55,620 Belinda Allen: That's right. So that's an interesting way to think about 145 00:07:55,620 --> 00:07:59,160 Belinda Allen: it. So you could actually break the HSI down into 146 00:07:59,160 --> 00:08:02,790 Belinda Allen: your discretionary, your fun components, but also your non- discretionary 147 00:08:02,850 --> 00:08:05,560 Belinda Allen: components as well. So I think that's why this is 148 00:08:05,560 --> 00:08:09,660 Belinda Allen: so reflective of the overall consumer spending basket. We have to 149 00:08:09,660 --> 00:08:11,850 Belinda Allen: have those things in there we don't like spending our 150 00:08:11,850 --> 00:08:15,120 Belinda Allen: money on, but it is incredibly vital, but also those 151 00:08:15,120 --> 00:08:17,470 Belinda Allen: fun things as well. And I think as we look 152 00:08:17,470 --> 00:08:21,770 Belinda Allen: into Christmas, as we look into the economy reopening, we see consumers 153 00:08:21,920 --> 00:08:25,650 Belinda Allen: wanting to spend money on and we're seeing those transactions actually 154 00:08:25,650 --> 00:08:26,670 Belinda Allen: now take place. 155 00:08:27,000 --> 00:08:29,440 Sean Aylmer: I appreciate it's hard to have a trend after one 156 00:08:29,440 --> 00:08:32,290 Sean Aylmer: month's figures. However, do you expect to see the same 157 00:08:32,290 --> 00:08:36,150 Sean Aylmer: sorts of things like travel and retail doing well in 158 00:08:36,150 --> 00:08:37,700 Sean Aylmer: the next few months in the run- up to Christmas? 159 00:08:38,179 --> 00:08:39,910 Belinda Allen: So it certainly looks like there is a lot of pent- 160 00:08:39,910 --> 00:08:43,059 Belinda Allen: up demand in the Australian economy. We can see that through 161 00:08:43,059 --> 00:08:46,309 Belinda Allen: our high frequency card spend data as well. So particularly 162 00:08:46,460 --> 00:08:50,220 Belinda Allen: with that reopening in Victoria gaining pace, you would expect 163 00:08:50,220 --> 00:08:54,309 Belinda Allen: that to flow through into November's HSI as well. We 164 00:08:54,309 --> 00:08:58,050 Belinda Allen: also know there's a huge amount of savings out there in 165 00:08:58,050 --> 00:09:01,390 Belinda Allen: the Australian economy, by households. On our number, it's around 166 00:09:01,390 --> 00:09:04,929 Belinda Allen: 230 billion by the end of this year. So households have 167 00:09:04,929 --> 00:09:07,630 Belinda Allen: the money to spend when they want to spend it. 168 00:09:07,670 --> 00:09:10,800 Belinda Allen: Our data is showing, they're getting increasingly confident to go 169 00:09:10,800 --> 00:09:13,400 Belinda Allen: out there and spend it. So it does bode well, 170 00:09:13,400 --> 00:09:15,819 Belinda Allen: as we are looking to the next few months. 171 00:09:15,920 --> 00:09:18,939 Sean Aylmer: It seems to me, one of the boom areas as 172 00:09:18,940 --> 00:09:21,939 Sean Aylmer: a result of COVID is data. And the fact that 173 00:09:21,940 --> 00:09:24,480 Sean Aylmer: people like the Commonwealth Bank and some of your competitors, 174 00:09:24,480 --> 00:09:27,939 Sean Aylmer: as well as others, are really able to produce almost 175 00:09:27,940 --> 00:09:30,240 Sean Aylmer: real time data on the economy. 176 00:09:30,690 --> 00:09:33,440 Belinda Allen: That's right. And we know there's so much power in 177 00:09:33,440 --> 00:09:36,160 Belinda Allen: data and to have it come out very quickly as well. 178 00:09:36,160 --> 00:09:39,740 Belinda Allen: So that's one of the things that we here at CommBank kind 179 00:09:39,740 --> 00:09:42,470 Belinda Allen: of pivoted to during the pandemic is to look at 180 00:09:42,470 --> 00:09:45,400 Belinda Allen: what indicators we had internally to get us a really 181 00:09:45,400 --> 00:09:48,450 Belinda Allen: good read on the economy. Obviously, the official stats come out, 182 00:09:48,450 --> 00:09:50,300 Belinda Allen: but they come out with a lag. So it was 183 00:09:50,300 --> 00:09:53,939 Belinda Allen: how quickly can we get our own internal data to 184 00:09:53,940 --> 00:09:56,640 Belinda Allen: give us, as you said, almost a real time view 185 00:09:56,640 --> 00:10:00,339 Belinda Allen: about what's happening in the Australian economy. So we have our transactional 186 00:10:00,340 --> 00:10:03,020 Belinda Allen: and loan data, which is fantastic. We also look at 187 00:10:03,020 --> 00:10:06,420 Belinda Allen: the income flowing through into CBA bank accounts, and we 188 00:10:06,420 --> 00:10:10,309 Belinda Allen: can divide that up between wages and salaries, but government 189 00:10:10,309 --> 00:10:12,420 Belinda Allen: benefits as well, to give us a view on the 190 00:10:12,470 --> 00:10:14,930 Belinda Allen: other sites and not only what consumers are spending on, but 191 00:10:15,520 --> 00:10:18,470 Belinda Allen: what they income is doing as well. So those two 192 00:10:18,600 --> 00:10:21,370 Belinda Allen: bits of the puzzle give us a really great view 193 00:10:21,570 --> 00:10:24,110 Belinda Allen: about what's happening in the Australian economy. And particularly when 194 00:10:24,110 --> 00:10:28,870 Belinda Allen: there's turning points, just that high frequency data is incredibly important. 195 00:10:29,360 --> 00:10:31,819 Belinda Allen: So no doubt, now that we've all set this up, 196 00:10:32,380 --> 00:10:35,010 Belinda Allen: we'll continue to get much more value out of it 197 00:10:35,010 --> 00:10:35,700 Belinda Allen: going forward. 198 00:10:35,920 --> 00:10:39,100 Sean Aylmer: So the $ 64 question is of course, what is going to happen to 199 00:10:39,100 --> 00:10:42,470 Sean Aylmer: the economy? Now we have all this data, Belinda, what's your 200 00:10:42,470 --> 00:10:45,280 Sean Aylmer: take? What's the Commonwealth Bank's take on what the next 201 00:10:45,400 --> 00:10:46,630 Sean Aylmer: 12 months will be like? 202 00:10:46,910 --> 00:10:51,970 Belinda Allen: So we're optimistic. I mean the incredibly fast vaccination uptake 203 00:10:51,970 --> 00:10:55,450 Belinda Allen: here in Australia has really, I think, exceeded a lot 204 00:10:55,450 --> 00:10:59,199 Belinda Allen: of people's expectations. The fact that we've gone from being 205 00:10:59,200 --> 00:11:02,550 Belinda Allen: in lockdown to really adjusting to living with COVID a 206 00:11:02,550 --> 00:11:05,679 Belinda Allen: lot quicker than what we had expected has meant we're 207 00:11:05,679 --> 00:11:09,410 Belinda Allen: certainly a lot more upbeat on the prospects for economic growth 208 00:11:09,630 --> 00:11:13,939 Belinda Allen: as we look into 2022. So with that, though, comes 209 00:11:14,000 --> 00:11:17,150 Belinda Allen: challenges as well. So we're looking on the inflation side 210 00:11:17,150 --> 00:11:21,690 Belinda Allen: of the economy as well. Building cost pressures coming through. 211 00:11:21,690 --> 00:11:25,910 Belinda Allen: We can see that through import prices from businesses. We did 212 00:11:25,910 --> 00:11:28,850 Belinda Allen: see that stronger inflation print come through in the third 213 00:11:28,850 --> 00:11:31,700 Belinda Allen: quarter as well. So growth will be good. Inflation will 214 00:11:31,700 --> 00:11:34,600 Belinda Allen: be picking up. And that means that we do expect 215 00:11:34,600 --> 00:11:38,130 Belinda Allen: the first interest rate hike by the Reserve Bank in 12 months 216 00:11:38,130 --> 00:11:41,510 Belinda Allen: time in November, which is certainly earlier than what the Reserve 217 00:11:42,170 --> 00:11:46,059 Belinda Allen: Bank seems to be pushing against market expectations at the moment. 218 00:11:46,059 --> 00:11:49,929 Belinda Allen: So really strong recovery. Improvements in the labour market, but 219 00:11:49,929 --> 00:11:52,819 Belinda Allen: also that means interest rates will need to be adjusted. 220 00:11:53,320 --> 00:11:56,070 Sean Aylmer: What does the Reserve Bank know that the market doesn't? 221 00:11:56,500 --> 00:12:00,099 Belinda Allen: It's a great question. So when we look at how 222 00:12:00,309 --> 00:12:03,160 Belinda Allen: our thinking is different to the RBA, it really does 223 00:12:03,160 --> 00:12:08,100 Belinda Allen: come down to wages. So they think that wages growth 224 00:12:08,100 --> 00:12:12,770 Belinda Allen: will emerge much slower than what we think wages growth 225 00:12:12,770 --> 00:12:16,059 Belinda Allen: will emerge. I mean, we talk to our clients, key 226 00:12:16,059 --> 00:12:19,650 Belinda Allen: businesses and they're seeing staff shortages. They're finding it hard 227 00:12:19,650 --> 00:12:24,540 Belinda Allen: to attract staff. So the natural reaction to that is 228 00:12:24,600 --> 00:12:27,490 Belinda Allen: wages growth will have to emerge. But they seem to 229 00:12:27,490 --> 00:12:29,760 Belinda Allen: think it's going to take longer. We haven't had wages 230 00:12:29,760 --> 00:12:33,430 Belinda Allen: growth in the Australian economy really since the mid 2010s, 231 00:12:33,929 --> 00:12:38,230 Belinda Allen: so around 2014, 2015. They think the Phillips curve is flat. 232 00:12:38,290 --> 00:12:41,270 Belinda Allen: It's going to take a much lower unemployment rate than 233 00:12:41,270 --> 00:12:44,980 Belinda Allen: it currently is to generate wages growth, whereas we think 234 00:12:44,980 --> 00:12:47,460 Belinda Allen: it will come through earlier. And I think that is 235 00:12:47,460 --> 00:12:50,309 Belinda Allen: really the big difference. I think they also think some 236 00:12:50,309 --> 00:12:54,189 Belinda Allen: of the inflation pressures that have emerged will be temporary. 237 00:12:54,520 --> 00:12:58,570 Belinda Allen: We don't have the sustained price pressures that we do 238 00:12:58,570 --> 00:13:02,410 Belinda Allen: expect will generate. So it's really, that's the difference. And they're 239 00:13:02,559 --> 00:13:07,420 Belinda Allen: certainly firmly pushing against market expectations on the interest rate 240 00:13:07,420 --> 00:13:09,970 Belinda Allen: side. But I guess in time we will see who 241 00:13:09,970 --> 00:13:10,290 Belinda Allen: is right. 242 00:13:11,350 --> 00:13:11,420 Sean Aylmer: We'll find out. 243 00:13:11,421 --> 00:13:12,520 Belinda Allen: We will find out. 244 00:13:12,520 --> 00:13:13,930 Sean Aylmer: Belinda, thank you for talking to Fear and Greed. 245 00:13:14,400 --> 00:13:15,380 Belinda Allen: Thanks very much, Sean. 246 00:13:15,650 --> 00:13:18,150 Sean Aylmer: That was Belinda Allen, director of economics at the Commonwealth 247 00:13:18,150 --> 00:13:21,610 Sean Aylmer: Bank and co- author of the Household Spending Intentions report. 248 00:13:22,110 --> 00:13:24,030 Sean Aylmer: This is a Fear and Greed daily interview. Join me 249 00:13:24,030 --> 00:13:26,390 Sean Aylmer: every morning for the full Fear and Greed podcast with 250 00:13:26,390 --> 00:13:28,679 Sean Aylmer: all the business news you need to know. I'm Sean 251 00:13:28,679 --> 00:13:29,780 Sean Aylmer: Aylmer. Enjoy your day.