This is Fear and Greed – The Week Ahead, where Sean Aylmer and Stephen Koukoulas discuss the major events, reports and releases that provide insight into the economy this week (with a look back at the events of last week too).
Find out more: https://fearandgreed.com.au
See omnystudio.com/listener for privacy information.
00:00:08,010 –> 00:00:11,009
Jennifer Duke: Welcome to Fear & Greed, The Week Ahead. I’m Jennifer Duke
2
00:00:11,010 –> 00:00:14,099
Jennifer Duke: and I’m joined by economist Stephen Koukoulas. You’ll find him
3
00:00:14,099 –> 00:00:16,739
Jennifer Duke: at the thekouk. com. That’s T- H- E- K- O- U- K.
4
00:00:16,889 –> 00:00:20,370
Jennifer Duke: com. And on X using the handle the TheKouk.
Stephen, good morning.
5
00:00:21,150 –> 00:00:22,080
Stephen Koukoulas: Very good morning, Jen.
6
00:00:22,560 –> 00:00:25,200
Jennifer Duke: So firstly, last week, take us through it, there was
7
00:00:25,200 –> 00:00:28,889
Jennifer Duke: an awful lot happening. Labor force was the big numbers
8
00:00:28,889 –> 00:00:30,869
Jennifer Duke: that were out. Can you talk us through that data?
9
00:00:31,440 –> 00:00:34,289
Stephen Koukoulas: Yeah, the labor force numbers were solid, I think it’s
10
00:00:34,289 –> 00:00:36,690
Stephen Koukoulas: fair to say. Now, we do know, and anyone who’s
11
00:00:36,690 –> 00:00:40,168
Stephen Koukoulas: looked at the Bureau of Statistics monthly labor force data
12
00:00:40,170 –> 00:00:43,140
Stephen Koukoulas: know that they are extremely volatile month- to- month. So
13
00:00:43,979 –> 00:00:47,098
Stephen Koukoulas: having had a small fall in employment the previous month,
14
00:00:47,098 –> 00:00:49,979
Stephen Koukoulas: everybody was anticipating a bounce back and they certainly got
15
00:00:49,979 –> 00:00:54,630
Stephen Koukoulas: that, plus 65,000 jobs, which was a good rebound. So
16
00:00:55,230 –> 00:00:58,560
Stephen Koukoulas: averaging a little over 30, 000 per month, which is good.
17
00:00:59,010 –> 00:01:02,220
Stephen Koukoulas: But given the size of the Australian economy, it’s interesting,
18
00:01:02,309 –> 00:01:04,469
Stephen Koukoulas: and my friends at CBA did some interesting work on
19
00:01:04,469 –> 00:01:08,039
Stephen Koukoulas: this, that we need to generate roughly 30,000 jobs per
20
00:01:08,039 –> 00:01:11,430
Stephen Koukoulas: month, coincidentally, to keep the unemployment rate steady, such is
21
00:01:11,430 –> 00:01:14,069
Stephen Koukoulas: the growth in the population in Australia. So that meant
22
00:01:14,069 –> 00:01:17,940
Stephen Koukoulas: that the unemployment rate was steady at 3. 7%. So,
23
00:01:18,510 –> 00:01:21,929
Stephen Koukoulas: a number that was not inconsistent with the economy slowing
24
00:01:21,929 –> 00:01:25,740
Stephen Koukoulas: down, but certainly a little bit of relief that some
25
00:01:25,740 –> 00:01:29,399
Stephen Koukoulas: of the chatter about per capita GDP recessions and hard
26
00:01:29,400 –> 00:01:32,550
Stephen Koukoulas: landings for the economy are probably not coming through just
27
00:01:32,550 –> 00:01:35,970
Stephen Koukoulas: yet.
Firms are still hiring at a solid pace, I
28
00:01:35,970 –> 00:01:38,520
Stephen Koukoulas: think it’s fair to say. Even though the economy is slowing
29
00:01:38,520 –> 00:01:41,789
Stephen Koukoulas: down, the unemployment rate is no longer falling. It’s starting
30
00:01:41,789 –> 00:01:45,719
Stephen Koukoulas: to inch up at this stage. But of course, everybody’s
31
00:01:45,719 –> 00:01:49,410
Stephen Koukoulas: watching closely that growth slow down, the rise in the
32
00:01:49,439 –> 00:01:52,170
Stephen Koukoulas: unemployment rate sort of scenario, that’s still probably going to
33
00:01:52,170 –> 00:01:54,000
Stephen Koukoulas: be unfolding over the next six to 12 months.
34
00:01:54,720 –> 00:01:57,360
Jennifer Duke: And we also had some NAB business confidence data out
35
00:01:57,360 –> 00:02:00,210
Jennifer Duke: and some consumer sentiment data and they both seem to
36
00:02:00,210 –> 00:02:02,489
Jennifer Duke: be pointing in different directions. Can you talk us through
37
00:02:02,490 –> 00:02:02,850
Jennifer Duke: this a little bit?
38
00:02:02,850 –> 00:02:09,090
Stephen Koukoulas: They’re diverse. They’re really quite incredible how different they are. Get
39
00:02:09,090 –> 00:02:11,250
Stephen Koukoulas: into the business side first, because the business sector, the
40
00:02:11,250 –> 00:02:16,230
Stephen Koukoulas: consumer confidence were pretty good, that businesses are telling, the
41
00:02:16,320 –> 00:02:19,139
Stephen Koukoulas: respondents to the surveys are telling us that the business
42
00:02:19,139 –> 00:02:22,138
Stephen Koukoulas: sector is doing quite well. While there is a slowdown
43
00:02:22,139 –> 00:02:24,870
Stephen Koukoulas: occurring in the economy that it’s not troubling for the
44
00:02:24,870 –> 00:02:29,460
Stephen Koukoulas: business sector.
Profitability, sales, forward orders, while they’re sort of
45
00:02:30,419 –> 00:02:33,960
Stephen Koukoulas: middling, they’re certainly not all that week. They’re consistent with
46
00:02:33,960 –> 00:02:37,138
Stephen Koukoulas: the economy continuing to grow. And as we saw recently
47
00:02:37,139 –> 00:02:39,809
Stephen Koukoulas: with the CapEx numbers, the business investment numbers that came
48
00:02:39,809 –> 00:02:42,539
Stephen Koukoulas: out a couple of weeks ago, the business sector is
49
00:02:42,540 –> 00:02:45,780
Stephen Koukoulas: still investing and that’s a good thing. It’s one reason
50
00:02:45,780 –> 00:02:48,960
Stephen Koukoulas: why we’re very unlikely to have a nasty recession in
51
00:02:48,960 –> 00:02:51,300
Stephen Koukoulas: the economy anytime soon. So that was the business sector
52
00:02:51,480 –> 00:02:56,099
Stephen Koukoulas: doing pretty well.
Consumers, on the other hand, whoa dear,
53
00:02:56,099 –> 00:03:00,119
Stephen Koukoulas: we are gloomy. Us consumers, everybody listening and you and
54
00:03:00,119 –> 00:03:03,120
Stephen Koukoulas: me and everybody else, we’re feeling really pessimistic. And I
55
00:03:03,120 –> 00:03:05,850
Stephen Koukoulas: guess it’s this cost of living pressure, which is still
56
00:03:05,850 –> 00:03:08,550
Stephen Koukoulas: there. We’ve still got wages growth increasing by less than
57
00:03:08,550 –> 00:03:11,610
Stephen Koukoulas: the rate of inflation, so real wages falling. Obviously, even
58
00:03:11,610 –> 00:03:13,439
Stephen Koukoulas: though interest rates have been held steady for the last
59
00:03:13,440 –> 00:03:17,250
Stephen Koukoulas: three months, there’s still the pressure on budgets from people
60
00:03:17,250 –> 00:03:21,000
Stephen Koukoulas: with mortgages, particularly big mortgages.
And I think just recently
61
00:03:21,419 –> 00:03:24,240
Stephen Koukoulas: this spike in petrol prices, which of course is a
62
00:03:24,570 –> 00:03:27,030
Stephen Koukoulas: very high profile issue, you can walk down the street,
63
00:03:27,030 –> 00:03:28,590
Stephen Koukoulas: you can drive down the street and you can see $2. 20, $2.
64
00:03:29,340 –> 00:03:33,059
Stephen Koukoulas: 30 for a liter of petrol, my goodness. And I
65
00:03:33,059 –> 00:03:35,369
Stephen Koukoulas: think that just sort of feeds into the negative psychology
66
00:03:35,369 –> 00:03:38,280
Stephen Koukoulas: of consumers.
We do know that when consumers are feeling
67
00:03:38,280 –> 00:03:42,450
Stephen Koukoulas: gloomy they tend to hunker down and limit their spending
68
00:03:42,450 –> 00:03:45,179
Stephen Koukoulas: and that was showing up in the broad household consumption
69
00:03:45,179 –> 00:03:48,180
Stephen Koukoulas: numbers. So, a very mixed picture between the business sector
70
00:03:48,389 –> 00:03:52,439
Stephen Koukoulas: doing pretty well, doing reasonably and us consumers really gloomy.
71
00:03:53,219 –> 00:03:55,199
Jennifer Duke: So that was a lot of data last week. So
72
00:03:55,199 –> 00:03:58,200
Jennifer Duke: What’s coming up this week? We’ve got some stuff happening at
73
00:03:58,200 –> 00:03:59,880
Jennifer Duke: the RBA, nothing high profile.
74
00:04:00,120 –> 00:04:04,920
Stephen Koukoulas: Well, we’ve got a new RBA governor who started today. So congratulations to Michelle Bullock She’s
75
00:04:04,920 –> 00:04:07,889
Stephen Koukoulas: the new governor taking over from Dr. Philip Lowe. She’s
76
00:04:07,889 –> 00:04:10,859
Stephen Koukoulas: got a seven- year term. She’s taking over at a
77
00:04:10,859 –> 00:04:13,560
Stephen Koukoulas: time, as we’ve been discussing, that inflation is coming down
78
00:04:13,560 –> 00:04:17,430
Stephen Koukoulas: a bit, unemployment’s flat to up and the economy’s weak
79
00:04:17,430 –> 00:04:19,529
Stephen Koukoulas: and there’s already 400 points of rate hikes in the
80
00:04:19,529 –> 00:04:22,770
Stephen Koukoulas: cycle. So it’ll be fascinating just to see over several
81
00:04:22,770 –> 00:04:25,349
Stephen Koukoulas: months, it won’t happen overnight, but over several months how
82
00:04:26,190 –> 00:04:29,730
Stephen Koukoulas: the modus operandi, if you like of the RBA will change
83
00:04:29,730 –> 00:04:32,520
Stephen Koukoulas: under her watch in terms of communications, in terms of
84
00:04:32,520 –> 00:04:36,750
Stephen Koukoulas: guidance, in terms of the revamping of the RBA forecasting
85
00:04:36,750 –> 00:04:39,419
Stephen Koukoulas: process. So that’s one big bit of news, which probably
86
00:04:39,420 –> 00:04:41,910
Stephen Koukoulas: doesn’t impact anybody today or tomorrow, but it’ll be something
87
00:04:41,910 –> 00:04:44,339
Stephen Koukoulas: to watch.
What we do have is that tomorrow we
88
00:04:44,339 –> 00:04:48,089
Stephen Koukoulas: get the RBA minutes of their September board meeting. Obviously
89
00:04:48,089 –> 00:04:51,060
Stephen Koukoulas: they held rates steady for the third straight month. Always
90
00:04:51,060 –> 00:04:54,390
Stephen Koukoulas: interesting to see why they held them steady, what were
91
00:04:54,390 –> 00:04:56,760
Stephen Koukoulas: the factors that forced them not to hike or not
92
00:04:56,760 –> 00:04:58,259
Stephen Koukoulas: to cut and these sorts of things. So we’ll be
93
00:04:58,260 –> 00:05:01,740
Stephen Koukoulas: watching that pretty closely just to see what the RBA
94
00:05:01,740 –> 00:05:05,160
Stephen Koukoulas: is thinking.
The other news, of course, is global, it’s
95
00:05:05,160 –> 00:05:08,700
Stephen Koukoulas: from the US where the FOMC meets later this week.
96
00:05:08,700 –> 00:05:11,159
Stephen Koukoulas: There’s a… Well, there’s a bit of a discussion, does
97
00:05:11,160 –> 00:05:14,160
Stephen Koukoulas: the Fed have to hike rates anymore? The broad consensus
98
00:05:14,160 –> 00:05:18,240
Stephen Koukoulas: is that probably, probably on hold, that there’s a lot
99
00:05:18,240 –> 00:05:20,159
Stephen Koukoulas: of rate hikes in the system in the US. We’ve
100
00:05:20,160 –> 00:05:23,819
Stephen Koukoulas: got the US economy still starting to ease off a
101
00:05:23,820 –> 00:05:27,060
Stephen Koukoulas: little bit. Not much, it’s been quite resilient. But for
102
00:05:27,060 –> 00:05:29,670
Stephen Koukoulas: the Fed, for the US interest rate cycle, it’s probably
103
00:05:29,670 –> 00:05:31,800
Stephen Koukoulas: on hold and rates are at this very high level.
104
00:05:32,428 –> 00:05:35,279
Jennifer Duke: Definitely. And just quickly, on the spring housing market, we’re
105
00:05:35,279 –> 00:05:38,190
Jennifer Duke: a few weeks in now, what are you noticing that’s
106
00:05:38,190 –> 00:05:40,080
Jennifer Duke: going on and what do you think we can expect?
107
00:05:40,650 –> 00:05:43,890
Stephen Koukoulas: Really good question because everybody loves housing and it is
108
00:05:43,890 –> 00:05:46,860
Stephen Koukoulas: an important economic variable for policy makers and the like,
109
00:05:46,860 –> 00:05:50,639
Stephen Koukoulas: but we have seen a big increase in the number
110
00:05:50,639 –> 00:05:53,040
Stephen Koukoulas: of listings.
One of the issues that I think was evident in
111
00:05:53,370 –> 00:05:56,758
Stephen Koukoulas: the first part of 2023 was that there were not
112
00:05:56,759 –> 00:05:59,489
Stephen Koukoulas: many people listing their house for sale. So not only
113
00:05:59,490 –> 00:06:03,330
Stephen Koukoulas: was construction relatively weak, but people were sort of hunkering
114
00:06:03,330 –> 00:06:05,430
Stephen Koukoulas: down. They were sitting at home not selling their house,
115
00:06:05,430 –> 00:06:09,150
Stephen Koukoulas: happy to sit on their properties. And the absence of
116
00:06:09,150 –> 00:06:12,299
Stephen Koukoulas: new listings was one reason why we had this lift
117
00:06:12,300 –> 00:06:14,459
Stephen Koukoulas: in house prices that not many people were thinking about
118
00:06:14,969 –> 00:06:18,449
Stephen Koukoulas: at the start of the year. So that’s now being addressed. It’s speculative
119
00:06:18,449 –> 00:06:20,279
Stephen Koukoulas: at this stage, of course. We need more data. Like
120
00:06:20,279 –> 00:06:22,409
Stephen Koukoulas: all economists, I want more data before I can be
121
00:06:22,410 –> 00:06:25,650
Stephen Koukoulas: sure about these views. But this rebound in house prices
122
00:06:25,650 –> 00:06:28,139
Stephen Koukoulas: that we’re seeing pretty much across all capital cities is
123
00:06:28,139 –> 00:06:30,809
Stephen Koukoulas: probably getting people out of the woodwork, that they’re seeing
124
00:06:30,809 –> 00:06:36,178
Stephen Koukoulas: prices increasing, that their plans to either downsize or move
125
00:06:36,180 –> 00:06:39,360
Stephen Koukoulas: interstate or move to the tree change, sea change type
126
00:06:39,360 –> 00:06:41,850
Stephen Koukoulas: phenomenon are probably being enhanced by the fact that they
127
00:06:41,850 –> 00:06:45,569
Stephen Koukoulas: can see the prices going up.
Now, of course, in
128
00:06:45,570 –> 00:06:47,520
Stephen Koukoulas: time, that extra supply will probably put a bit of
129
00:06:47,520 –> 00:06:50,459
Stephen Koukoulas: a damper on house prices. So it’s one of these
130
00:06:50,460 –> 00:06:53,400
Stephen Koukoulas: wonderful things in the housing market where there’s often and
131
00:06:53,400 –> 00:06:55,859
Stephen Koukoulas: always things pushing and pulling prices up and down and
132
00:06:55,860 –> 00:06:59,190
Stephen Koukoulas: down and up. But if we do get this increase
133
00:06:59,190 –> 00:07:01,890
Stephen Koukoulas: in new listings coming through, there’s still a bit of
134
00:07:01,890 –> 00:07:04,139
Stephen Koukoulas: financial stress in the consumer side of the economy, as
135
00:07:04,139 –> 00:07:08,039
Stephen Koukoulas: we were just discussing, maybe this increase in house prices
136
00:07:08,040 –> 00:07:09,630
Stephen Koukoulas: that we’ve seen for the last six or seven months
137
00:07:09,929 –> 00:07:10,950
Stephen Koukoulas: starts to peter out.
138
00:07:11,850 –> 00:07:13,680
Jennifer Duke: Stephen, thank you so much for chatting with us. Have
139
00:07:13,680 –> 00:07:14,250
Jennifer Duke: a great week.
140
00:07:14,910 –> 00:07:16,200
Stephen Koukoulas: You too, Jen. Have a fabulous week.
141
00:07:16,500 –> 00:07:18,990
Jennifer Duke: And that was economist Stephen Koukoulas, better known as The Kouk.
142
00:07:19,380 –> 00:07:21,869
Jennifer Duke: You can find him at thekouk. com and follow him
143
00:07:21,870 –> 00:07:25,200
Jennifer Duke: on X using the handle TheKouk.
I’m Jennifer Duke, economics
144
00:07:25,200 –> 00:07:27,900
Jennifer Duke: correspondent at Capital Brief and filling in for Sean Aylmer.
145
00:07:27,900 –> 00:07:29,610
Jennifer Duke: And this is Fear & Greed, The Week Ahead.