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Fear & Greed, Fear and Greed

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.

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Jennifer Duke: Welcome to Fear and Greed – The Week Ahead. I’m Jennifer

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Jennifer Duke: Duke and I’m joined by economist Stephen Koukoulas. You’ll find

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Jennifer Duke: him at thekouk. com, that’s T- H- E- K- O- U- K.

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Jennifer Duke: com, and on X using the handle TheKouk. Stephen, good morning.

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Stephen Koukoulas: Good morning. After a fabulous weekend of football grand finals,

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Stephen Koukoulas: what a way to kick off a new week.

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Jennifer Duke: That is true. But last week was a massive one,

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Jennifer Duke: and I first of all want to talk to you

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Jennifer Duke: about the inflation figures because things got pretty heated online

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Jennifer Duke: for you last week. Can you talk us through what

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Jennifer Duke: happened with that data?

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Stephen Koukoulas: Yes. The inflation numbers did show a little bit of

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Stephen Koukoulas: an upturn in the annual inflation rating. It was 4.

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Stephen Koukoulas: 9% in the year to July. The August numbers showed

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Stephen Koukoulas: an increase to 5. 2%, which was actually pretty much

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Stephen Koukoulas: bang on market expectations because we know oil prices, petrol

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Stephen Koukoulas: prices increased by about 9% in the month. So there were no

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Stephen Koukoulas: surprises there. All I was alluding to is that first

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Stephen Koukoulas: of all, that on any economic or even market trend,

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Stephen Koukoulas: it’s not a straight line month after month after month,

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Stephen Koukoulas: going the same direction. There’s always zigs and zags, but

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Stephen Koukoulas: the trend is still very much for lower inflation, so

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Stephen Koukoulas: don’t get too upset about it. Then the other thing,

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Stephen Koukoulas: which had a few people hot under the collar, let’s

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Stephen Koukoulas: say, because inflation picked up you silly clown, is that would an

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Stephen Koukoulas: RBA rate hike really force the Saudis to increase their

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Stephen Koukoulas: production of oil to push the oil price down? The

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Stephen Koukoulas: short answer is no.
For anybody as old as me

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Stephen Koukoulas: or has studied what happened in the mid- seventies oil

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Stephen Koukoulas: price shock is that central banks shouldn’t be hiking interest

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Stephen Koukoulas: rates in response to something that are not interest rate

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Stephen Koukoulas: sensitive. In Australia, we’ve learned that with cyclones impacting banana

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Stephen Koukoulas: prices, floods impacting lettuce prices, and now globally oil prices.

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Stephen Koukoulas: Yes, look, it’s feeding into inflation. There’s no doubt about

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Stephen Koukoulas: that. It is. However, just as quickly as the oil

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Stephen Koukoulas: price has gone from $ 70 a barrel to $ 90, $ 95

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Stephen Koukoulas: a barrel, it could easily come back down. Wouldn’t you

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Stephen Koukoulas: look silly as a central banker if you hiked interest

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Stephen Koukoulas: rates if that happened?

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Jennifer Duke: It’s a very good point. Now, we also had a lot

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Jennifer Duke: of other data out last week that I think the RBA will be

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Jennifer Duke: looking at pretty closely as well. Can you go through

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Jennifer Duke: what some of those statistics were?

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Stephen Koukoulas: Yes, and they were really important data and they were

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Stephen Koukoulas: generally weak. So that fits with the story, just putting

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Stephen Koukoulas: the month on month volatility inflation aside, goodness me. But

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Stephen Koukoulas: we had weakness coming through in job vacancies, obviously a

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Stephen Koukoulas: really important leading indicator for future employment trends. The ABS

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Stephen Koukoulas: measure fell actually 9% in the three months to August,

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Stephen Koukoulas: so it was a very big decline, and it’s down

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Stephen Koukoulas: 18% from the peak 15 months ago. So, demand for

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Stephen Koukoulas: labor is starting to cool in line with the weakening

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Stephen Koukoulas: in the economy. That goes without saying I think, but

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Stephen Koukoulas: it’s nice to see these trends confirmed in the economic

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Stephen Koukoulas: slowdown.
The other thing was retail sales, which came in

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Stephen Koukoulas: at only plus 0. 2% for the month. People were

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Stephen Koukoulas: thinking that it might’ve been a bit of a higher

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Stephen Koukoulas: number. The Matildas football team, there’s lots of spending on

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Stephen Koukoulas: paraphernalia, scarves, hats and eating out and celebrating their fantastic

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Stephen Koukoulas: performance through the World Cup, but alas it was only a 0.

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Stephen Koukoulas: 2% increase. If we look at things like food spending,

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Stephen Koukoulas: it actually went down in the month. So it’s really

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Stephen Koukoulas: a sign that consumers are continuing to hunker down, if

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Stephen Koukoulas: you like, responding to cost of living pressures, higher interest

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Stephen Koukoulas: rates, and even the early signs of a turning point

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Stephen Koukoulas: in the labor market by paring back their spending. So

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Stephen Koukoulas: inflation blipped up, economic growth continued to weaken, and that’s

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Stephen Koukoulas: the run rate for the economy for last week.

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Jennifer Duke: We’ve also obviously got that Reserve Bank meeting coming up

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Jennifer Duke: this week. What’s your expectation of what they might do?

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Stephen Koukoulas: Yes, RBA, no change, I think that’s pretty much locked

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Stephen Koukoulas: in. The evolution of events since their last meeting, which

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Stephen Koukoulas: they held rates steady. In fact, the last three meetings

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Stephen Koukoulas: that they’ve held rates steady has been, just as we

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Stephen Koukoulas: said, the economy’s slowing, so it had to slow down

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Stephen Koukoulas: in one sense. So the RBA would be content to

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Stephen Koukoulas: see the growth momentum of the economy panning out pretty

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Stephen Koukoulas: much as expected. Look, they’d be looking at the commodity

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Stephen Koukoulas: price, the oil price, blip in inflation, and they’ll be

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Stephen Koukoulas: canvassing what that means. I think that’ll be a very

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Stephen Koukoulas: important paragraph in their statement that comes out after their

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Stephen Koukoulas: meeting. So to see just how they’re interpreting the oil

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Stephen Koukoulas: price move of the last few months. But, no change.

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Stephen Koukoulas: They’ll probably have the bias if there is a move

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Stephen Koukoulas: in the next few months, it’ll be up, not down,

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Stephen Koukoulas: that sort of title cliche. But there’s really no change

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Stephen Koukoulas: expected. The economy’s weakening, and yes, there’s already, as they

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Stephen Koukoulas: keep saying, the yet to be felt effects of the

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Stephen Koukoulas: rate hikes that they’ve already delivered.

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Jennifer Duke: And what other data reports are we expecting to see

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Jennifer Duke: over the week?

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Stephen Koukoulas: Yeah, good news. Again, we’re going to get a little

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Stephen Koukoulas: bit more information on how this economy’s going. House prices,

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Stephen Koukoulas: the CoreLogic numbers come out. They will almost inevitably show

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Stephen Koukoulas: an increase of about 1%, another 1% monthly increase in

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Stephen Koukoulas: house prices in the month of September. We know from

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Stephen Koukoulas: their partial data that Sydney, Adelaide and Perth are increasing

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Stephen Koukoulas: by more than that, about 1. 25% percent. So that’s

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Stephen Koukoulas: a really hefty increase in house prices. Melbourne is lagging

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Stephen Koukoulas: a bit. Hobart and Canberra a little bit weaker too. But

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Stephen Koukoulas: bottom line, nationwide prices up about 1%. That’s good old

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Stephen Koukoulas: supply and demand coming into play. We’ve got building approvals

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Stephen Koukoulas: numbers, and speaking of which, we need more supply. That’s

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Stephen Koukoulas: something that we’ve spoken about, Jen, in the last few

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Stephen Koukoulas: weeks, that if we tackle this house price affordability, house

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Stephen Koukoulas: rental affordability, we need more buildings. So we’re hoping that

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Stephen Koukoulas: we get a pickup in building approvals because we need

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Stephen Koukoulas: more dwellings. The supply’s got to increase. I think the market’s looking for

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Stephen Koukoulas: a small increase, but any increase is a good one

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Stephen Koukoulas: at this stage.
We’ve also got job ads, again, probably

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Stephen Koukoulas: consistent with the job vacancy series. There’s slightly different coverage

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Stephen Koukoulas: in those two series, probably trending lower again. Really importantly,

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Stephen Koukoulas: on Friday, we have the RBA releasing their financial stability

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Stephen Koukoulas: report, which is an assessment of the financial health of

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Stephen Koukoulas: the household sector. Obviously, that’s probably going to be flagging

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Stephen Koukoulas: some negative aspects as this cost of living pressures increase.

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Stephen Koukoulas: Is there any material increase in provisioning for bad and

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Stephen Koukoulas: doubtful debts of people falling behind in their ePayments? But

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Stephen Koukoulas: it also looks at the small and big business sector

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Stephen Koukoulas: too, because of course they’re suffering from the economic slowdown.

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Stephen Koukoulas: Indeed, many businesses have borrowing debt, overdrafts, and they’re paying

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Stephen Koukoulas: a higher interest rate as well. So that’ll be more

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Stephen Koukoulas: of one to mull over, over a few days rather

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Stephen Koukoulas: than an instant effect on the economy. But a lot

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Stephen Koukoulas: of news coming out this week after a lot of

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Stephen Koukoulas: news last week.

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Jennifer Duke: Yeah, it’s a big one after a long weekend. Stephen,

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Jennifer Duke: have a great week.

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Stephen Koukoulas: Thanks, Jen. All the best to you too.

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Jennifer Duke: That was economist Stephen Koukoulas, better known as The Kouk.

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Jennifer Duke: You can find him at thekouk. com and follow him

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Jennifer Duke: on X using the handle TheKouk. I’m Jennifer Duke, economics

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Jennifer Duke: correspondent at Capital Brief, and this is Fear and Greed –

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Jennifer Duke: The Week Ahead.