1 00:00:08,700 --> 00:00:12,210 Sean Aylmer: Welcome to Fear and Greed, The Week Ahead. This is where we take a look at the big 2 00:00:12,210 --> 00:00:14,750 Sean Aylmer: events, reports and releases coming up this week that give 3 00:00:14,750 --> 00:00:17,500 Sean Aylmer: insight into the economy and a look back at what happened 4 00:00:17,500 --> 00:00:20,270 Sean Aylmer: last week too. I'm Sean Aylmer and every Monday I'm 5 00:00:20,270 --> 00:00:23,329 Sean Aylmer: joined for the week ahead by economist, Stephen Koukoulas. You'll 6 00:00:23,329 --> 00:00:26,210 Sean Aylmer: find him at thekouk. com, T- H- E- K- O- U- K . 7 00:00:26,650 --> 00:00:29,840 Sean Aylmer: com and on Twitter using the handle @ TheKouk. Stephen, good morning. 8 00:00:30,080 --> 00:00:30,590 Stephen Koukoulas: Good morning, Sean. 9 00:00:31,210 --> 00:00:33,270 Sean Aylmer: Well, what a week last week was. You must have had 10 00:00:33,270 --> 00:00:37,470 Sean Aylmer: a great time. We had business confidence, consumer sentiment. We 11 00:00:37,470 --> 00:00:39,870 Sean Aylmer: had employment figures and we had the Reserve Bank on 12 00:00:39,870 --> 00:00:41,330 Sean Aylmer: climate change. Crazy week. 13 00:00:41,330 --> 00:00:45,979 Stephen Koukoulas: There was a lot to digest. And on balance, there 14 00:00:45,979 --> 00:00:49,740 Stephen Koukoulas: was just a hint of optimism coming through in the data. Now, 15 00:00:49,950 --> 00:00:52,550 Stephen Koukoulas: we know the labour force numbers were very weak. Employment 16 00:00:52,550 --> 00:00:56,460 Stephen Koukoulas: fell sharply. The unemployment rate stated basically four and a half. 17 00:00:56,460 --> 00:00:59,630 Stephen Koukoulas: It was 4.6%. But again, there's lots of quirks in 18 00:00:59,950 --> 00:01:02,650 Stephen Koukoulas: the sharp drop in the participation rate and all these 19 00:01:02,650 --> 00:01:05,720 Stephen Koukoulas: other things. In a sense, it's just about impossible to 20 00:01:05,720 --> 00:01:09,120 Stephen Koukoulas: read those numbers, other than to say the hours worked 21 00:01:09,160 --> 00:01:12,200 Stephen Koukoulas: edged up in the month. And of course, these figures 22 00:01:12,200 --> 00:01:14,840 Stephen Koukoulas: were for the month of September when over half of 23 00:01:14,840 --> 00:01:17,650 Stephen Koukoulas: the country was in severe lockdown, so you wouldn't expect 24 00:01:17,650 --> 00:01:20,690 Stephen Koukoulas: them to be stronger. But then what made my reading 25 00:01:20,690 --> 00:01:22,880 Stephen Koukoulas: of the economy just a little more or optimistic was 26 00:01:22,880 --> 00:01:25,789 Stephen Koukoulas: the fact that consumer sentiment was reasonably firm. Again, we're 27 00:01:25,790 --> 00:01:29,730 Stephen Koukoulas: not euphoric but generally given the lockdowns are starting to end. 28 00:01:29,730 --> 00:01:33,209 Stephen Koukoulas: There's some optimism there. And arguably the most important number 29 00:01:33,209 --> 00:01:36,290 Stephen Koukoulas: for me last week was in the business conditions survey, where 30 00:01:36,760 --> 00:01:42,120 Stephen Koukoulas: we had this big divergence. Business conditions actual were pretty soft. 31 00:01:42,170 --> 00:01:45,990 Stephen Koukoulas: Not horrendous, but pretty soft. But the expectations, which of 32 00:01:45,990 --> 00:01:48,010 Stephen Koukoulas: course is what businesses are thinking about the future, were 33 00:01:48,010 --> 00:01:50,090 Stephen Koukoulas: very buoyant. So it says to me that when these 34 00:01:50,090 --> 00:01:54,470 Stephen Koukoulas: lockdowns continue to be wound back across the eastern states 35 00:01:54,470 --> 00:01:57,440 Stephen Koukoulas: and perhaps some of the interstate borders reopen, we've got 36 00:01:57,510 --> 00:01:59,670 Stephen Koukoulas: a lot of optimism, a lot of pent- up demand 37 00:01:59,690 --> 00:02:00,810 Stephen Koukoulas: that's got to be satisfied. 38 00:02:01,060 --> 00:02:03,640 Sean Aylmer: What about Guy Debelle, the Reserve Bank, Deputy Governor? He 39 00:02:03,640 --> 00:02:06,010 Sean Aylmer: came out and was quite strident on his views. And 40 00:02:06,010 --> 00:02:08,580 Sean Aylmer: he has held these views for a while. But given 41 00:02:08,580 --> 00:02:11,570 Sean Aylmer: the timing of his speech about climate change and the need 42 00:02:11,570 --> 00:02:13,620 Sean Aylmer: to do something now, otherwise, we'll have to do something 43 00:02:13,620 --> 00:02:17,300 Sean Aylmer: far more drastic in the future. Quite a commentary from 44 00:02:17,300 --> 00:02:17,669 Sean Aylmer: the bank. 45 00:02:18,080 --> 00:02:20,859 Stephen Koukoulas: It was. And some people have been, well in my view, 46 00:02:20,860 --> 00:02:23,430 Stephen Koukoulas: a little unkind and saying, " Well, the RBA doesn't have 47 00:02:23,430 --> 00:02:25,960 Stephen Koukoulas: a remit over climate change, so why is it commenting?" 48 00:02:26,830 --> 00:02:30,510 Stephen Koukoulas: But my view is that when they're managing economic conditions 49 00:02:30,570 --> 00:02:34,440 Stephen Koukoulas: and financial risk, and as Guy Debelle pointed out in 50 00:02:34,440 --> 00:02:37,710 Stephen Koukoulas: his speech, that there are risks for corporate Australia and 51 00:02:37,710 --> 00:02:42,470 Stephen Koukoulas: for the Australian economy, if we are subjected to the 52 00:02:42,480 --> 00:02:45,440 Stephen Koukoulas: downsides of climate change. That there's got to be implications 53 00:02:45,440 --> 00:02:50,760 Stephen Koukoulas: for investment into perhaps renewable energies or the existing dinosaur companies, 54 00:02:50,830 --> 00:02:53,010 Stephen Koukoulas: if we can call them that. And that does fit 55 00:02:53,010 --> 00:02:57,010 Stephen Koukoulas: into the RBAs remit about how they manage that financial stability, 56 00:02:57,410 --> 00:03:00,240 Stephen Koukoulas: risks to the economy. So in a sense, he was saying, " 57 00:03:00,970 --> 00:03:02,610 Stephen Koukoulas: We need to get our act together," if you like. 58 00:03:02,610 --> 00:03:06,380 Stephen Koukoulas: And that, unless we do, we are subject to more volatility, 59 00:03:06,630 --> 00:03:09,649 Stephen Koukoulas: a potential capital strike, I think. I might have used 60 00:03:09,650 --> 00:03:11,640 Stephen Koukoulas: the wrong word there, but that's something to that effect that, 61 00:03:12,160 --> 00:03:15,500 Stephen Koukoulas: if we are seen as the pariahs of the global economy, 62 00:03:15,500 --> 00:03:18,769 Stephen Koukoulas: then in a world of globalized capital markets, we might 63 00:03:18,770 --> 00:03:22,430 Stephen Koukoulas: just miss out on some of that much needed investment. Again, 64 00:03:22,430 --> 00:03:23,740 Stephen Koukoulas: it's not the sort of issue that's going to cause 65 00:03:23,740 --> 00:03:26,590 Stephen Koukoulas: the economy to be strong or weak next week, or 66 00:03:26,590 --> 00:03:28,430 Stephen Koukoulas: next quarter, or even next year. But it's something that 67 00:03:28,490 --> 00:03:32,040 Stephen Koukoulas: he's flagging as a long- term structural issue for the 68 00:03:32,050 --> 00:03:33,020 Stephen Koukoulas: RBA to look at. 69 00:03:33,210 --> 00:03:35,180 Sean Aylmer: Well that's last week. We'll be back in a moment 70 00:03:35,180 --> 00:03:36,470 Sean Aylmer: to get into the week ahead. 71 00:03:41,520 --> 00:03:45,390 Sean Aylmer: I'm with economist, Stephen Koukoulas, aka the Kouk. Stephen, there's not a lot 72 00:03:45,390 --> 00:03:47,080 Sean Aylmer: of data out this week, but I did want to 73 00:03:47,080 --> 00:03:50,140 Sean Aylmer: ask you about the lockdowns. Now, New South Wales, further 74 00:03:50,140 --> 00:03:54,260 Sean Aylmer: restrictions from today. Premier Daniel Andrews is still pushing for 75 00:03:54,360 --> 00:03:57,130 Sean Aylmer: Victoria to reopen as soon as possible, notwithstanding the number 76 00:03:57,130 --> 00:04:00,210 Sean Aylmer: of cases there. And the ACT, of course, has lifted some 77 00:04:00,210 --> 00:04:03,950 Sean Aylmer: of its restrictions. That whole feel of confidence, how important 78 00:04:03,950 --> 00:04:05,150 Sean Aylmer: is that in the economy? 79 00:04:05,550 --> 00:04:11,420 Stephen Koukoulas: Oh, it's vital. And I think this lockdown ending month, 80 00:04:11,420 --> 00:04:13,600 Stephen Koukoulas: I suppose we could call it. And again, there's different 81 00:04:13,600 --> 00:04:16,860 Stephen Koukoulas: restrictions and there's local government areas in different states and 82 00:04:16,860 --> 00:04:21,690 Stephen Koukoulas: the ACT are going to be confronting slightly different restriction changes, 83 00:04:21,690 --> 00:04:24,970 Stephen Koukoulas: if I can call it that. But basically, what I've been reading 84 00:04:24,970 --> 00:04:27,779 Stephen Koukoulas: of the announcements, they're coming out thick and fast, on Friday, 85 00:04:27,779 --> 00:04:31,750 Stephen Koukoulas: on the weekend. There's these new announcements coming about how 86 00:04:32,040 --> 00:04:36,489 Stephen Koukoulas: the lockdown ending will unfold. But suffice to say, my 87 00:04:36,490 --> 00:04:40,510 Stephen Koukoulas: reading of it suggests that come certainly the 1st of November, 88 00:04:40,510 --> 00:04:44,130 Stephen Koukoulas: but then the 1st of December, so not that far away, 89 00:04:44,339 --> 00:04:48,290 Stephen Koukoulas: we will be pretty much open for business. Shops will 90 00:04:48,290 --> 00:04:51,630 Stephen Koukoulas: be opened. A lot of the interstate borders, not all 91 00:04:51,630 --> 00:04:53,390 Stephen Koukoulas: of them, but a lot of them will be open, 92 00:04:53,390 --> 00:04:57,600 Stephen Koukoulas: so domestic travel can resume. The hospitality sector is going 93 00:04:57,600 --> 00:04:59,839 Stephen Koukoulas: to be bouncing back. Crowds will be allowed to go 94 00:04:59,839 --> 00:05:03,460 Stephen Koukoulas: to movie theatres, sporting events. It's something dear to my heart, 95 00:05:03,460 --> 00:05:05,520 Stephen Koukoulas: as you know. The racing industry's going to have a 96 00:05:05,520 --> 00:05:08,260 Stephen Koukoulas: few crowds at them. And so, we are going to 97 00:05:08,260 --> 00:05:10,970 Stephen Koukoulas: be getting back to this normal. And from what we 98 00:05:10,970 --> 00:05:14,190 Stephen Koukoulas: know about how the consumer, the household sector is positioned, 99 00:05:14,490 --> 00:05:16,300 Stephen Koukoulas: they've got a lot of cash. They've saved a lot 100 00:05:16,300 --> 00:05:18,910 Stephen Koukoulas: of money during the lockdowns. They've saved a lot of 101 00:05:18,910 --> 00:05:21,989 Stephen Koukoulas: money from mortgage interest rates being where they are. We've 102 00:05:21,990 --> 00:05:24,360 Stephen Koukoulas: got this pent- up demand and you just, in a sense, 103 00:05:24,360 --> 00:05:25,940 Stephen Koukoulas: have to look at the cues that were there at 104 00:05:25,940 --> 00:05:28,890 Stephen Koukoulas: some of the department stores, at hairdressers. And I think 105 00:05:28,890 --> 00:05:31,300 Stephen Koukoulas: it was even beauty salons, that people have got money 106 00:05:31,300 --> 00:05:33,940 Stephen Koukoulas: to spend. They want to spend it. Again, it just 107 00:05:33,940 --> 00:05:38,550 Stephen Koukoulas: feeds into this tone, that lockdowns ending is good for 108 00:05:38,550 --> 00:05:40,850 Stephen Koukoulas: the economy and good for the economic recovery. 109 00:05:41,230 --> 00:05:44,370 Sean Aylmer: Yeah. The RBA minutes, of course, are out. Do you expect anything in 110 00:05:44,370 --> 00:05:45,650 Sean Aylmer: that that you didn't know already? 111 00:05:45,920 --> 00:05:49,360 Stephen Koukoulas: No. RBA minutes will be pretty much a straight bath. 112 00:05:49,660 --> 00:05:51,609 Stephen Koukoulas: They're looking at the end of the lockdown too. In 113 00:05:51,610 --> 00:05:53,900 Stephen Koukoulas: a sense, I'll say there's nothing there other than perhaps 114 00:05:53,900 --> 00:05:57,230 Stephen Koukoulas: a cursory comment on the housing market and that restriction 115 00:05:57,230 --> 00:05:59,060 Stephen Koukoulas: that we saw from APRA a few weeks ago on 116 00:05:59,060 --> 00:06:00,640 Stephen Koukoulas: the lending criteria. 117 00:06:01,010 --> 00:06:02,130 Sean Aylmer: Have a great week, Stephen. 118 00:06:02,380 --> 00:06:03,580 Stephen Koukoulas: Thank you, Sean. All the best to you. 119 00:06:03,940 --> 00:06:06,310 Sean Aylmer: That was economist Stephen Koukoulas, better known as the Kouk. 120 00:06:06,370 --> 00:06:08,670 Sean Aylmer: You can find him at thekouk. com and follow him 121 00:06:08,670 --> 00:06:12,089 Sean Aylmer: on Twitter, using the handle @ TheKouk. I'm Sean Aylmer. And 122 00:06:12,089 --> 00:06:13,770 Sean Aylmer: this is Fear and Greed, The Week Ahead.