Welcome to Fear and Greed The Week Ahead. I'm Sean Aylmer and as always at this time on a Monday morning, I'm joined by economist Stephen Koukoulas. You'll find him at thekouk.com and on X using the handle @TheKouk. Stephen, good morning.

Welcome to Fear and Greed The Week Ahead. I'm Sean Aylmer and as always at this time on a Monday morning, I'm joined by economist Stephen Koukoulas. You'll find him at thekouk.com and on X using the handle @TheKouk. Stephen, good morning.

Good morning, Sean.

Good morning, Sean.

Cracking week coming up. We've got the budget, but before we get there, before we do. We're titillating people at the moment on that one. Aren't we? We better just quickly mentioned labour force last week because that was a bit of a shock.

Cracking week coming up. We've got the budget, but before we get there, before we do. We're titillating people at the moment on that one. Aren't we? We better just quickly mentioned labour force last week because that was a bit of a shock.

It was a shock. Minus fifty three thousands for employment. Nobody got that, and I think the range that Bloomberg survey about thirty market economists and others, and I think the lowest was plus fifteen thousand. So to say it was a shock is an understatement, however, and it's an important however in economics, we've always got to have a few howevers to justify erroneous forecasts.

It was a shock. Minus fifty three thousands for employment. Nobody got that, and I think the range that Bloomberg survey about thirty market economists and others, and I think the lowest was plus fifteen thousand. So to say it was a shock is an understatement, however, and it's an important however in economics, we've always got to have a few howevers to justify erroneous forecasts.

Yes.

Yes.

There was a big drop in the participation rate, so the unemployment rate didn't move. So it was one of those numbers that you know, I hate to say, there's always volatility in the monthly seasonally adjusted labour force survey, but there's always volatility in the monthly seasonally adjusted labour force survey. So and it followed, look a year basically of really strong employment gains and the unemployment rate has been steady at plus and minus a few ticks around four percent. So the four point one was seen as an okay number. You know, the economy is still moderate and all these other adjectives that we can use for it. And you know, we saw last week I think some job ads series was down a couple of percent. So, yeah, the economy is still moderate or muddling, whatever that adjective is, and the labour market is still probably going to soften a little bit more.

There was a big drop in the participation rate, so the unemployment rate didn't move. So it was one of those numbers that you know, I hate to say, there's always volatility in the monthly seasonally adjusted labour force survey, but there's always volatility in the monthly seasonally adjusted labour force survey. So and it followed, look a year basically of really strong employment gains and the unemployment rate has been steady at plus and minus a few ticks around four percent. So the four point one was seen as an okay number. You know, the economy is still moderate and all these other adjectives that we can use for it. And you know, we saw last week I think some job ads series was down a couple of percent. So, yeah, the economy is still moderate or muddling, whatever that adjective is, and the labour market is still probably going to soften a little bit more.

Okay, before we get to the budget. I'm excited. Inflation figures. We've got monthly inflation figures this week, which funnily enough, have become very, very important.

Okay, before we get to the budget. I'm excited. Inflation figures. We've got monthly inflation figures this week, which funnily enough, have become very, very important.

They are, particularly with the RBA meeting next week. This is the last bit of information that they need. While it's only a slight probability in the futures markets of a rate cut on the first of April, I guess if we saw a stonkingly low inflation number come out on top of those labour force numbers and the like. They might they might give a very dovish tone to what they're going to be saying, but that's next week. But bottom line is that we know that the inflation rate has been cooling over the last year or two. I think the market expectation for the headline inflation number in annual terms for the month of February is about sort of two and a half two point five two point six, and the trimmed mean sort of holding around that two point seven two point eight, so in the target band, and that's the consensus. But as we saw with the labour force numbers, you know, we might not even hit the dartboard with those forecasts.

They are, particularly with the RBA meeting next week. This is the last bit of information that they need. While it's only a slight probability in the futures markets of a rate cut on the first of April, I guess if we saw a stonkingly low inflation number come out on top of those labour force numbers and the like. They might they might give a very dovish tone to what they're going to be saying, but that's next week. But bottom line is that we know that the inflation rate has been cooling over the last year or two. I think the market expectation for the headline inflation number in annual terms for the month of February is about sort of two and a half two point five two point six, and the trimmed mean sort of holding around that two point seven two point eight, so in the target band, and that's the consensus. But as we saw with the labour force numbers, you know, we might not even hit the dartboard with those forecasts.

Okay, the federal budget. Do you have favourite federal budget like I'm guessing I don't know, but you've probably been involved in the federal budget for thirty plus years? Is that being unkind?

Okay, the federal budget. Do you have favourite federal budget like I'm guessing I don't know, but you've probably been involved in the federal budget for thirty plus years? Is that being unkind?

Something like that. From different perspectives too. I think my favorite ones was when I was absolutely a junior operative, if I can call it that, working treasury in the mid to late nineteen eighties and Paul Keating was treasurer and even though I was the poor sucker, we had the spreadsheets out and ticking off numbers, checking every number in the budget paper, so not involved at all in the decision making process. The highlight was the budget night binge where we went to the old Canberra Workers Club after the budget speech. We had the odd beer or two. But the highlight was when treasurer Paul Keating came along and sort of gave a bit of a rah rah speech to us treasury officials. So, yeah, but you gotta love the budget. There's so much information there.

Something like that. From different perspectives too. I think my favorite ones was when I was absolutely a junior operative, if I can call it that, working treasury in the mid to late nineteen eighties and Paul Keating was treasurer and even though I was the poor sucker, we had the spreadsheets out and ticking off numbers, checking every number in the budget paper, so not involved at all in the decision making process. The highlight was the budget night binge where we went to the old Canberra Workers Club after the budget speech. We had the odd beer or two. But the highlight was when treasurer Paul Keating came along and sort of gave a bit of a rah rah speech to us treasury officials. So, yeah, but you gotta love the budget. There's so much information there.

Yeah, I just I can't imagine the Canberra Workers and Paul Keating were together that often, really, am I right in saying that?

Yeah, I just I can't imagine the Canberra Workers and Paul Keating were together that often, really, am I right in saying that?

I think you're right saying that. It's been bulldozed now. I think there's some sort of car park there or something now. But it was a place that we... don't forget back in the day, and you know, this is something for the, okay, boomer set out there. I was getting paid about eighteen thousand bucks a year as a graduate in Treasury and so yeah, we didn't have a lot of money back then. So the Workers Club, I think we got this deal where you get a jug for about two dollars eighty.

I think you're right saying that. It's been bulldozed now. I think there's some sort of car park there or something now. But it was a place that we... don't forget back in the day, and you know, this is something for the, okay, boomer set out there. I was getting paid about eighteen thousand bucks a year as a graduate in Treasury and so yeah, we didn't have a lot of money back then. So the Workers Club, I think we got this deal where you get a jug for about two dollars eighty.

The equivalent of the Reserve Bank where I sort of came through was the New South Wales Leagues Club. Actually, same deal. We should move on though. Tell me tomorrow night, what are we going to get from Jim Chalmers.

The equivalent of the Reserve Bank where I sort of came through was the New South Wales Leagues Club. Actually, same deal. We should move on though. Tell me tomorrow night, what are we going to get from Jim Chalmers.

I think Jim Chalmers, the Treasurer, gave a speech last week's which basically put a lot of the flesh on what the big picture parameters are. So the economy will be picking up a bit of momentum, so GDP growth probably from that one point three percent we saw at the end of last year to sort of two and a half, probably confirming the inflations in the two to three range, which is good news. Probably confirming that wages grows at three to three and a half percent, so a little bit of real wage increases there. So they're the sort of macro parameters and a budget deficit, which, yeah, the debate is are they spending too much or is it appropriate given that the private sector is so weak. That's a debate that I think will be more political rather than economic. But at this stage I think it'll be the government sort of keeping within those broad parameters and a budget deficit around about one percent of GDP, so it's still a pretty, pretty solid result when the economy has been weak, clearly with the election only what five or six weeks away now, there'll be some issues there for cost of living pressures. They're going to clearly extend the electricity subsidies possibly if you have the bits and bobs to make us voters feel a bit more happy, but not big ticket, big reform items in the budget.

I think Jim Chalmers, the Treasurer, gave a speech last week's which basically put a lot of the flesh on what the big picture parameters are. So the economy will be picking up a bit of momentum, so GDP growth probably from that one point three percent we saw at the end of last year to sort of two and a half, probably confirming the inflations in the two to three range, which is good news. Probably confirming that wages grows at three to three and a half percent, so a little bit of real wage increases there. So they're the sort of macro parameters and a budget deficit, which, yeah, the debate is are they spending too much or is it appropriate given that the private sector is so weak. That's a debate that I think will be more political rather than economic. But at this stage I think it'll be the government sort of keeping within those broad parameters and a budget deficit around about one percent of GDP, so it's still a pretty, pretty solid result when the economy has been weak, clearly with the election only what five or six weeks away now, there'll be some issues there for cost of living pressures. They're going to clearly extend the electricity subsidies possibly if you have the bits and bobs to make us voters feel a bit more happy, but not big ticket, big reform items in the budget.

So the thing that we can take away from it in terms of what it means for rates and things like that almost 'steady as she goes' it sounds Stephen, what you're saying in a way.

So the thing that we can take away from it in terms of what it means for rates and things like that almost 'steady as she goes' it sounds Stephen, what you're saying in a way.

Yes, look, I think so. And to the extent that there has been a surge in public demand, both at the state and local and also the federal level, and lots of hiring of people in the service base industries which the government, the federal government wanted to do. They wanted to have nurses in age care homes, they wanted to ramp up in NDIS although there's reforms going on there as well, education healthcare. So they've employed a lot of people or indirectly employed a lot of people through some of their measures that they've put in place, and so that's part of what they've done that's sort of come to an end. And as we've seen in gosh, even going back to those old enough on this podcast, remember the John Houston Fightback policy. You know, the days of big reforming budgets are rare, and when you've got the budget a couple of weeks before the election even rarer still. Maybe next budget, whoever wins, whichever side wins the election, might be wanting to do something a bit more exciting, adventurous and reforming in the next budget. For this one, it'll be a solid one. I think it's going to be one of those ones where it's not going to ruffle any feathers.

Yes, look, I think so. And to the extent that there has been a surge in public demand, both at the state and local and also the federal level, and lots of hiring of people in the service base industries which the government, the federal government wanted to do. They wanted to have nurses in age care homes, they wanted to ramp up in NDIS although there's reforms going on there as well, education healthcare. So they've employed a lot of people or indirectly employed a lot of people through some of their measures that they've put in place, and so that's part of what they've done that's sort of come to an end. And as we've seen in gosh, even going back to those old enough on this podcast, remember the John Houston Fightback policy. You know, the days of big reforming budgets are rare, and when you've got the budget a couple of weeks before the election even rarer still. Maybe next budget, whoever wins, whichever side wins the election, might be wanting to do something a bit more exciting, adventurous and reforming in the next budget. For this one, it'll be a solid one. I think it's going to be one of those ones where it's not going to ruffle any feathers.

And if you, if any listener wants to listen to Stephen's take on it Wednesday morning, tune in to Fear and Greed, our interview, where you're our guest. We will be doing it the night after the budget. You get around on budget night, Stephen and the next morning as well. You've got a bit on?

And if you, if any listener wants to listen to Stephen's take on it Wednesday morning, tune in to Fear and Greed, our interview, where you're our guest. We will be doing it the night after the budget. You get around on budget night, Stephen and the next morning as well. You've got a bit on?

Bit on next week, yes, there. So I'll be cruising around the scene a bit of media and a couple of presentations to a few different groups, which will be a lot of fun, but it's really just what's the budget mean? And as I said, I'll be up all night not having fun, but rather looking through the myriad of budget papers to see if there's any gems there, and really, as I said, looking at the key economic parameters, what's the budget bottom line, the budget deficit numbers and the like, what's the borrowing requirement? How much is government debt going up by coming down by those sorts of things and then trying to overlay that on, well, what's it mean for interest rates and the macroeconomy more generally. So, a fun time.

Bit on next week, yes, there. So I'll be cruising around the scene a bit of media and a couple of presentations to a few different groups, which will be a lot of fun, but it's really just what's the budget mean? And as I said, I'll be up all night not having fun, but rather looking through the myriad of budget papers to see if there's any gems there, and really, as I said, looking at the key economic parameters, what's the budget bottom line, the budget deficit numbers and the like, what's the borrowing requirement? How much is government debt going up by coming down by those sorts of things and then trying to overlay that on, well, what's it mean for interest rates and the macroeconomy more generally. So, a fun time.

Enjoy it, Steven, enjoy it.

Enjoy it, Steven, enjoy it.

Will do. Talk to you next week.

Will do. Talk to you next week.

That was economist Stephen Koukoulas, better known as The Kouk. You can find him at thekouk.com and follow him on X using the handle @TheKouk. I'm Sean Aylmer and this is Fear and Greed The week Ahead.

That was economist Stephen Koukoulas, better known as The Kouk. You can find him at thekouk.com and follow him on X using the handle @TheKouk. I'm Sean Aylmer and this is Fear and Greed The week Ahead.