August 3, 2025 • 7 mins
Why do economists and the Reserve Bank care so much about the construction sector?
Today Sean is joined by economist Stephen Koukoulas for a look at the week ahead in the economy, including the importance of the construction sector, and why international trade figures might hold the key to the economy's weakness.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:05):
Welcome to Fearing Greed QNA, where we ask and answer
questions about business, investing, economics, politics and more. I'm Sean
Alma and every Monday morning we asked the question what's
happening in the week ahead when it comes to the economy.
I'm joined by economist Stephen Coaculis. You'll find him at
the cook dot com and on X using the handle
the Cook that's t h E K O U K Stephen.
Speaker 2 (00:26):
Good morning, top of the morning to you, Sean.
Speaker 1 (00:29):
Hell of a week last week, Steven. Let's be honest.
We had we had speeches, we had inflation data, we
had retail building, all sorts of things.
Speaker 2 (00:37):
Where to start. I think the obvious ones, that is
the inflation numbers, and I think everybody let out a
big sigh of relief because they confirmed headline inflation at
two point one percent. And yes, they are being distorted
by a whole lot of government policies. But if we
look at the trimmed mean, which is what the RBA
love to look at, it decelerated further to two point
(00:59):
six seven percent, so in the target band, and it
was in the range that the Reserve Bank have indicated
that their shock non cut decision last month was needed
to sort of put them across the line. So the
market as we sit here now is pricing in well baseball,
it's actually more than one hundred percent chance for rate
cut on the twelfth of aug. So inflation is decelerating.
(01:23):
And I guess when you stop and think about it,
when the economy has been pretty sluggish, which it has
been for the best part of eight eight months or so,
that consumers have been relatively weak, and exports have been
pretty weak, that sort of stuff, it's not surprising, and
inflations falling, it has filter in rate cut fantastic.
Speaker 1 (01:42):
Having said all that, because you dismal scientists, you economists,
there's always the other side of the coin. And there's
actually some data out last week on retail and building.
Neither of those sectors have been doing particularly well except
the data from last week.
Speaker 2 (01:56):
Except that, well, the journ retail sales numbers, and this
is the last retail released ever from the Bureau of Statistics.
They've moved household survey which is actually coming out this week,
so a more comprehensive survey of consumer spending. But that said,
the retail sales plus one point two percent month on
month in June. Now that follows, admittedly a couple of
(02:16):
sluggish months, but there was a bit of a spike
in how much we consumers were actually spending in the
retail sector in June. However, again gosh, on the one hand,
On the other hand, here I am again the June
numbers incorporated the June quarter, so the April, May and
June data in real volume terms, and they were actually
(02:38):
a little bit weak the eros byero point three percent
in the quarter. And in per capita terms, which sort
of matters for standards of living and all that stuff.
I'd a lot about per capita recessions and per capita
GDP they're like, but per capita real retail sales minus
point one percent in the court, So on average we
are all spending a smidge less, and it's really population
(02:58):
growth that spark the increase in retail spinning. Building approvals hooray.
I actually danced when I saw a plus twelve percent.
Speaker 1 (03:06):
I would I would love to see the dancing.
Speaker 2 (03:10):
Oh mate, you get it onst that goes with my
karaoke singing. It doesn't get a lot of public display.
But building approvals rose twelve percent, highest level in almost
four years, moving to an annualized rate above two hundred
thousand dwellings for the first time in almost four years.
(03:32):
And while we're still short of the run rate, we
need to get to that one point two million new
dwellings over five years to meet the supply constraints that
are front confront of the housing market. Right now, we
actually are getting some sort of recovery, so property developers,
builders are sort of getting out there and you know
that trend improvement in the supply of response to housing
(03:54):
just might be coming through. And that's that's what makes
me happy, because we need to build more dwellings if
we're to fix this housing affordability issue.
Speaker 1 (04:00):
Why do we get so hung up on building approvals
and building Why is construction so important to the Australian economy.
Speaker 2 (04:08):
Well, it's actually first, it's also an important part of GDP.
So when you think about the digging foundations, pouring cement
and hammering up the jip brock and the frames and
all this other stuff. It employs a lot of people
construction sectors about five directly five percent of employment. When
you think about the secondary effects, because each dwelling has
to be fitted with a washing machine and heaters and
(04:31):
air conditions and all those sorts of things. The effect
on retail spending is actually positive, so there's a compounding
effect through that. So that's what matters. And again, given
that our Australian obsession with housing and legitimately this question
of housing affordability that it's been around for a long
time being at renting or prices, and we've had a
very high level of immigration post COVID, that we do
(04:53):
need to focus on building more houses to supply those
dwellings and Sean economics one on one. I know you
know this really really well, and I know every one
listening knows as well. Supply and demand do work. If
you've got an extra supply relative to demand, the price falls,
and that's what we need in housing. You need to
build more dwellings.
Speaker 1 (05:12):
Okay, what about this week? You mentioned the household spending survey.
Excited about that one.
Speaker 2 (05:17):
I'm very excited because it's been coming up for a
few months now, so there's been sort of this overlap
of retail sales and household spending. The household spending survey
incorporates a lot of spending on services that were not
in the retail sales and so it's about double the size.
So it's a really good indicator of how we consumers
are responding. And given what we saw last week on
the retail sales which feed into it, of course we're
(05:39):
probably going to get another decent result on household spending.
So that's something that again RBA Deputy Governor Andrew Houserd
was talking about last week. The consumer side of the
economy is something that they've got in their forecasting outlook
as something that is behind an economic recovery. We want
to see a pretty solid number coming through on household
spending because that is still half of the GDP. So
(06:01):
looking for another decent sort of increase to sort of
put a bit more optimism into the economy. Anything else
this week, International trade, I'll just spend thirty seconds on that.
Cause's quite interesting, did you know. And I was looking
at this to think, well, why is this d economy
still not getting that traction that we wanted to the
value of exports has fallen fifteen percent in the last
(06:23):
two years, and I was sort of looking at the
volumes are actually holding up. Okay, so the tonnages of
stuff that the big exporters are selling to China and
resources and these sorts of things are okay, but the
price has fallen. So instead of getting over fifty billion
per month in export receipts for cash, it's now to
about forty two to forty three billions so per month.
(06:45):
And that's what hol on bottom line national income. And
that's sort of why perhaps the economy is a little
bit weaker than we thought. So I'm going to look
at these trade numbers to see where there's any rebound
in exports.
Speaker 1 (06:54):
So real last week, I think for its half year,
it dropped its dividend purely on the back of lower
iron oil prices. And this is exactly what you're talking about.
This is how it feeds through.
Speaker 2 (07:03):
Correct and so you're seeing that come through not not
only the corporate world, but in the national income sense,
because that's export dollars at the Australian economy is not
only So all.
Speaker 1 (07:11):
Of a sudden, we're going to have to look at
the ABS's international trade data.
Speaker 2 (07:15):
I'm going to be looking at it a bit more
than I used to because I still glances and think, oh,
there's a surplace of five billion dollars a good exports imports.
We're doing okay on the international trade front. But just again,
anybody have a look at the chart, go to the
RBA chart pack. There's a child on exports and you're
sort of looking think, see that's actually pretty weak, and
remembering that exports are about one fifth bottom line GDP.
(07:35):
So if that's weak, you've got to get the other
parts really kicking high to get a decent level of
economic growth.
Speaker 1 (07:40):
Kirk, enjoy your week.
Speaker 2 (07:41):
Thank you.
Speaker 1 (07:42):
That was kind of a Stephen coculis better known as
the Kookie. You can find him at the cook dot
com and follow him on next using to handle the Kirk,
I'm sure all and this is hearing greed, Q and D.
Welcome to Fearing Greed QNA, where we ask and answer
questions about business, investing, economics, politics and more. I'm Sean
Alma and every Monday morning we asked the question what's
happening in the week ahead when it comes to the economy.
I'm joined by economist Stephen Coaculis. You'll find him at
the cook dot com and on X using the handle
the Cook that's t h E K O U K Stephen.
Speaker 2 (00:26):
Good morning, top of the morning to you, Sean.
Speaker 1 (00:29):
Hell of a week last week, Steven. Let's be honest.
We had we had speeches, we had inflation data, we
had retail building, all sorts of things.
Speaker 2 (00:37):
Where to start. I think the obvious ones, that is
the inflation numbers, and I think everybody let out a
big sigh of relief because they confirmed headline inflation at
two point one percent. And yes, they are being distorted
by a whole lot of government policies. But if we
look at the trimmed mean, which is what the RBA
love to look at, it decelerated further to two point
(00:59):
six seven percent, so in the target band, and it
was in the range that the Reserve Bank have indicated
that their shock non cut decision last month was needed
to sort of put them across the line. So the
market as we sit here now is pricing in well baseball,
it's actually more than one hundred percent chance for rate
cut on the twelfth of aug. So inflation is decelerating.
(01:23):
And I guess when you stop and think about it,
when the economy has been pretty sluggish, which it has
been for the best part of eight eight months or so,
that consumers have been relatively weak, and exports have been
pretty weak, that sort of stuff, it's not surprising, and
inflations falling, it has filter in rate cut fantastic.
Speaker 1 (01:42):
Having said all that, because you dismal scientists, you economists,
there's always the other side of the coin. And there's
actually some data out last week on retail and building.
Neither of those sectors have been doing particularly well except
the data from last week.
Speaker 2 (01:56):
Except that, well, the journ retail sales numbers, and this
is the last retail released ever from the Bureau of Statistics.
They've moved household survey which is actually coming out this week,
so a more comprehensive survey of consumer spending. But that said,
the retail sales plus one point two percent month on
month in June. Now that follows, admittedly a couple of
(02:16):
sluggish months, but there was a bit of a spike
in how much we consumers were actually spending in the
retail sector in June. However, again gosh, on the one hand,
On the other hand, here I am again the June
numbers incorporated the June quarter, so the April, May and
June data in real volume terms, and they were actually
(02:38):
a little bit weak the eros byero point three percent
in the quarter. And in per capita terms, which sort
of matters for standards of living and all that stuff.
I'd a lot about per capita recessions and per capita
GDP they're like, but per capita real retail sales minus
point one percent in the court, So on average we
are all spending a smidge less, and it's really population
(02:58):
growth that spark the increase in retail spinning. Building approvals hooray.
I actually danced when I saw a plus twelve percent.
Speaker 1 (03:06):
I would I would love to see the dancing.
Speaker 2 (03:10):
Oh mate, you get it onst that goes with my
karaoke singing. It doesn't get a lot of public display.
But building approvals rose twelve percent, highest level in almost
four years, moving to an annualized rate above two hundred
thousand dwellings for the first time in almost four years.
(03:32):
And while we're still short of the run rate, we
need to get to that one point two million new
dwellings over five years to meet the supply constraints that
are front confront of the housing market. Right now, we
actually are getting some sort of recovery, so property developers,
builders are sort of getting out there and you know
that trend improvement in the supply of response to housing
(03:54):
just might be coming through. And that's that's what makes
me happy, because we need to build more dwellings if
we're to fix this housing affordability issue.
Speaker 1 (04:00):
Why do we get so hung up on building approvals
and building Why is construction so important to the Australian economy.
Speaker 2 (04:08):
Well, it's actually first, it's also an important part of GDP.
So when you think about the digging foundations, pouring cement
and hammering up the jip brock and the frames and
all this other stuff. It employs a lot of people
construction sectors about five directly five percent of employment. When
you think about the secondary effects, because each dwelling has
to be fitted with a washing machine and heaters and
(04:31):
air conditions and all those sorts of things. The effect
on retail spending is actually positive, so there's a compounding
effect through that. So that's what matters. And again, given
that our Australian obsession with housing and legitimately this question
of housing affordability that it's been around for a long
time being at renting or prices, and we've had a
very high level of immigration post COVID, that we do
(04:53):
need to focus on building more houses to supply those
dwellings and Sean economics one on one. I know you
know this really really well, and I know every one
listening knows as well. Supply and demand do work. If
you've got an extra supply relative to demand, the price falls,
and that's what we need in housing. You need to
build more dwellings.
Speaker 1 (05:12):
Okay, what about this week? You mentioned the household spending survey.
Excited about that one.
Speaker 2 (05:17):
I'm very excited because it's been coming up for a
few months now, so there's been sort of this overlap
of retail sales and household spending. The household spending survey
incorporates a lot of spending on services that were not
in the retail sales and so it's about double the size.
So it's a really good indicator of how we consumers
are responding. And given what we saw last week on
the retail sales which feed into it, of course we're
(05:39):
probably going to get another decent result on household spending.
So that's something that again RBA Deputy Governor Andrew Houserd
was talking about last week. The consumer side of the
economy is something that they've got in their forecasting outlook
as something that is behind an economic recovery. We want
to see a pretty solid number coming through on household
spending because that is still half of the GDP. So
(06:01):
looking for another decent sort of increase to sort of
put a bit more optimism into the economy. Anything else
this week, International trade, I'll just spend thirty seconds on that.
Cause's quite interesting, did you know. And I was looking
at this to think, well, why is this d economy
still not getting that traction that we wanted to the
value of exports has fallen fifteen percent in the last
(06:23):
two years, and I was sort of looking at the
volumes are actually holding up. Okay, so the tonnages of
stuff that the big exporters are selling to China and
resources and these sorts of things are okay, but the
price has fallen. So instead of getting over fifty billion
per month in export receipts for cash, it's now to
about forty two to forty three billions so per month.
(06:45):
And that's what hol on bottom line national income. And
that's sort of why perhaps the economy is a little
bit weaker than we thought. So I'm going to look
at these trade numbers to see where there's any rebound
in exports.
Speaker 1 (06:54):
So real last week, I think for its half year,
it dropped its dividend purely on the back of lower
iron oil prices. And this is exactly what you're talking about.
This is how it feeds through.
Speaker 2 (07:03):
Correct and so you're seeing that come through not not
only the corporate world, but in the national income sense,
because that's export dollars at the Australian economy is not
only So all.
Speaker 1 (07:11):
Of a sudden, we're going to have to look at
the ABS's international trade data.
Speaker 2 (07:15):
I'm going to be looking at it a bit more
than I used to because I still glances and think, oh,
there's a surplace of five billion dollars a good exports imports.
We're doing okay on the international trade front. But just again,
anybody have a look at the chart, go to the
RBA chart pack. There's a child on exports and you're
sort of looking think, see that's actually pretty weak, and
remembering that exports are about one fifth bottom line GDP.
(07:35):
So if that's weak, you've got to get the other
parts really kicking high to get a decent level of
economic growth.
Speaker 1 (07:40):
Kirk, enjoy your week.
Speaker 2 (07:41):
Thank you.
Speaker 1 (07:42):
That was kind of a Stephen coculis better known as
the Kookie. You can find him at the cook dot
com and follow him on next using to handle the Kirk,
I'm sure all and this is hearing greed, Q and D.
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