November 30, 2025 • 13 mins
A massive week ahead for the economy, headlined by GDP data, following a shock jump in inflation and a sharp rise in business investment: all signs point to interest rate cuts being a thing of the past.
Michael Thompson is joined by economist Stephen Koukoulas.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:06):
Welcome to Fear and Greed Q and A where we
ask an answer questions about business, investing, economics, politics and more.
I'm Michael Thompson and every Monday morning we are joined
by economist Stephen Coucoulis to look at the week ahead.
You'll find him at the kook dot com. That's t
h e k O UK dot com and on X
using the handle of the kok Stephen, Good morning, Very
good morning, Michael. Oh. I don't know about you, but
(00:28):
I am excited. This is a bumper week. It's a
huge week, and it's all important because there are signs
that the economy is gathering a bit of momentum. First, though,
let's go back to last week because there are a
couple of key data releases weren't there that support this.
Perhaps monthly inflation is a good place to start. It's
the first time we've had the comprehensive monthly figure, and
(00:50):
we talked about that in some detail. Last week we
had a jump in headline inflation underlying rate now three
point three percent figures were above the RBA's target band.
What do you make of it?
Speaker 2 (01:03):
Yeah, they were both a genuine shock and it really
caused the market pricing for future interst rates, and a
lot of market economists to change their view on what
the Reserve Bank will do with interest rates over the
medium term. So what it was, we had that three
point eight percent increase in headline inflation in the year
to October. Now, our good friends and a good friend
(01:26):
of fear and greed, Diana Messina sort of put in
one of her notes at AMP that a lot of
the increase was in what we call administered prices, and
that market prices were still well contained. Now just give
me thirty seconds on administered prices.
Speaker 1 (01:42):
I'm glad you're going to do it, because I was
about to ask for an explanation.
Speaker 2 (01:46):
Administered prices are the prices that are determined largely, if
not completely, by government policy changes. So the unwinding of
the electricity subsidy was one that caused the electricity to
price rise by thirty seven percent. Now it didn't really
rise by thirty to seven percent, but from the consumer
price level, it did because those subsidies that were there
(02:08):
a year ago are now being phased out. Similarly with
excise on tobacco, Similarly with urban transport fares that have
been unwound given some of those very cheap fares that
were in place in a couple of states previously. So,
in a funny way, does monetary policy and is the
rate of inflation that monetary policy controls going to be
(02:31):
any different with a rate hike or a rate cut
for the price of transport fares, alcohol and tobacco, with
the excise petrol, with the excise increase, and of course
the electricity subsidies. So yes, it's a worry. Yes, it
kills Stone dead the discussion of any interest rate cuts
(02:51):
for the time being at least. And it is a warrior.
So it's one of those ones that's moved. We've got
to look at this very close to see where there's
actually something else going on. But the hear and now
I think the market reaction is probably a little bit
over the top.
Speaker 1 (03:03):
A little bit extreme, just on that in terms of
electricity prices, tobacco, excis, et cetera. We know all of those,
We knew they were coming. So why then would we
be surprised by this reading.
Speaker 2 (03:18):
Really good question because those things, yeah, that they were
evident to all of us. Now, this is where the
slight concern comes through in the rest of the inflation
numbers that a number of other items which are more
supply and demand linked, did have an increase in price momentum.
Look still but in the target band. But that lovely
(03:38):
deceleration in inflation that we'd had for the last couple
of years has not only bottomed out, but there is
a little hook high. You know, we're economists. We love
turning points in economic data. And while the turning point
in market determined inflation isn't a worry yet, it'll only
take another two or three months of further upside momentum
(04:00):
and then I think we start hitting the panic button.
Speaker 1 (04:02):
Okay, you mentioned though that really interest rate cuts off
the table. A number of economists are now predicting that
the next move will be up. What do you think
is that the case?
Speaker 2 (04:15):
Look, I still think there's enough lack of momentum in
the labor market. Remember that the RBA has got the
dual mandate inflation and the unemployment rates. So the bottom
line is that rates are on hold for a long time.
You know, it's hard to sort of even speculate whether
it's going to be May or July or whatever next year. Yeah,
a long way away before we see a change in
rates in which direction it is. But I think the
(04:37):
safer discussion is more that rates are on hold, and
like the mere mortals that we are, the RBA is
just made up of humans who as the data the
same way, and they are shocked by data periodically, and
I'm sure they were last week as well.
Speaker 1 (04:53):
Something I was actually going to ask you about last week,
and this is a good time to do it. Does
the RBA have a tender to just leave rates on
hold rather than risk going early, too fast, too hard,
whether it's increasing rates or decreasing rates. They'd rather be
late to the party than to act too quickly and
potentially do damage.
Speaker 2 (05:14):
Look, I think it's safe to say yes, that that's right,
that the RBA has a predisposition to do nothing with
interest rates, and it's only when they are seeing a
range of economic indicators up or down to hike or cut,
and they're open to this criticism partly valid. I think
that they're sort of waiting too long before moving. They're
(05:35):
not preemptive, even though, and again you alluded to, we
knew these excise changes were ending and the subsidies were ending,
so we knew that headline inflation was picking up. And
the RBA did forecast that, but the magnitude was higher
than expected. But the RBA really need to sort of
see numbers, and if you do that, you can still
of wait a little bit too long. So the hiking
(05:56):
cycle in twenty twenty two, twenty three was probably a
little to slow. The cutting cycle probably started a little
too late, and they could have cut earlier and now
we would be genuinely talking about rate hikes if rates
were lower. Hour. So look, without sort of wanting to
throw a brick through the RBA's window, that maybe, just
maybe they could be a little bit more preemptive in
(06:18):
what they're doing with rates.
Speaker 1 (06:20):
The other thing last week was business investment. It was
the biggest jump in four years. Capital expenditure was six
point four percent higher, way above expectations. In simple terms,
Why does this matter so much?
Speaker 2 (06:34):
Oh, Michael, I did a little jig when I saw
that number. I was absolutely thrilled and excited because one
of the issues for basically a decade now is the
problem of productivity. We've spoken about productivity in the past,
and the Treasure had his round table back in August
to work out how to fix productivity. One of the
issues why productivity has been so rotten in Australia is
(06:58):
a lack of business investment. You think about the business
investment cycle that you get more productive when machinery and
equipment and technology and good infrastructure is allowing you as
a business person to function more efficiently productivity, And we'd
had a decade of rotten CAPEX numbers. So when I
saw the six point four percent increase in real quarterly
(07:22):
private sector investment, it's laying the foundation for an improvement
in productivity. Now, it won't happen in one quarter. We
need years of this to happen. But when you're getting
data centers being built, airlines coming in, so those planes
that were imported by the airlines, that are their cap X.
So if you're an airline and you buy a plane,
that's investment. But over the course of the next I
(07:43):
don't know. You know more than me. You're a plane fan,
how long a commercial jet lasts for. It's going to
be flying around and around and around for a decade
or two making money, faring business people and tourists and
freight all around the world. So that's why productivity is
important because without planes, you know, we can't rely on
a horse and cart to do those things.
Speaker 1 (08:03):
It was the jump though in capex spending broad enough
to make a meaningful difference, or is it just in
a couple of specific sectors like data centers and technology.
Speaker 2 (08:15):
Yeah, look, it was genuinely concentrated in those two areas,
but there were hints that things like warehouses. You know,
the way that we are shopping nowadays, the less sort
of walking into the shopping malls and we just click click, click,
and you need that warehouse for the distribution. That's part
of the productivity too. So rather than the warehouse delivering
to a shop, we walk into the shop and put
(08:36):
in the boot of our car and drive home. We
go click, clicklick. It just goes from the warehouse to
our front door. That's actually more efficient way of distributing
retail purchases. So warehouses were very strong too, and I
think that's linked to that change in societal spending pattern. So, yes,
one quarter, we don't get too excited, although I confess
I did if we see another couple of quarters. And
(08:58):
the thing Michael that was partly overlook is that the
survey also had expected capex over the next financial year,
and it was up seven percent which is not a
bad outcome. So if we get that locked in, then
it's not just this one quarter wonder. We will actually
get a trend improvement. And again, like I was saying before,
(09:18):
turning points on graphs are the thing that excite me,
We're going to see capex moving higher over the course
of the next year.
Speaker 1 (09:24):
All right, how does that then feed into the big
number this week GDP? We get that this week, which
I know you are very excited about. Are we going
to see you do another jig Steven?
Speaker 2 (09:35):
I hope. So we're looking for a quarterly increase of
point seven for GDP growth, which would bring the annual
increase to a round about two point two to two
point three percent. And in a way that doesn't sound great,
but that would be the fastest rate of economic growth
in about three years. Again, so we've got through that
down to and I remember this is important to remember
(09:57):
where were we Where the hell have we come from?
In twenty twenty four, GDP growth was sub one percent.
That's why we were all feeling miserable. The economy was weak,
we weren't spending interest rates, with too high cost of
living pressures. Many of those things have either receded or
completely ended, and so the economy is growing again, and
that's a beautiful thing.
Speaker 1 (10:17):
What's the biggest contributor, what is the main driver? And
I suppose where's the big risk if we've been kind
of surprised, for instance, and we've seen the capacity for surprises,
what is the thing that could derail these expectations.
Speaker 2 (10:32):
Yeah, the one thing that could derail them is our
the net export contribution. Because one of the things about
aircraft and adding to capex and business investment, which feeds
directly to GDP, is a lot of that's imported. So
when we import something, that's a negative for GDP growth
because we don't make planes, for example. So that could
be where there's a bit of a downside risk to
(10:53):
the GDP numbers. But we do know that household spending
growth has been moderately positive. We know that there's been
a turning point in dwelling investment. We know capex, as
we're just discussing, has been a little bit stronger. The
other one, which is one that we have no partial
indicators on, is government demand. And we know over the
last two years that we've had a boom in government
(11:14):
spending and across state and commonwealth and local government areas
that appears to be slowing down. And certainly what we're
hearing from the government lead up to the next budget
next year is that they're looking for savings. So have
we already seen some of that public sector, which is
an important part of GDP starting to just moderate. So
that's some downside risk too, But for the here and now,
(11:37):
from what we know, we're going to see a nice
two percent plus GDP growth rate and that's something that
I'm going to be celebrating with a nice strong cup
of coffee.
Speaker 1 (11:47):
Now very quickly, because we are pretty much out of time.
Monthly household spending, this is something else that we find
out this week, and he did just mention that it
has been growing, but it's been.
Speaker 2 (11:59):
A little bit.
Speaker 1 (12:00):
We've just talked a lot about these signs that the
economy is kind of is growing. Is there a mismatch
between kind of what households are doing and what households
are seeing and the cost of living pressures that everyone
is still under and these signs of economic growth.
Speaker 2 (12:15):
Look, the household spinning numbers should be a little bit
better because there are a few things that are still positive.
And while you know, we do like to sort of
moan and grain man electricity bill comes in, and the
insurance bill comes in and all these other things. But
we have had three rate cuts. They're impacting on us.
Now we have had wages growth at a moderate but
positive pace. That's helping the wealth effect from house prices
(12:36):
booming is generating some sort of confidence in the economy.
Believe it. I'm not okay to the issues of the
intergenerational inequality of house price booms, but it actually does
add to the rate of economic growth. So they're the
positives that are being offsetting some of this. You know,
still pretty tepid consumer sentiment that's out there.
Speaker 1 (12:56):
There are so much more that we could have talked
about house prices and building a pre It is hopefully
up a jumbo jumbo week for the economy. Steven enjoy it.
Speaker 2 (13:05):
Thank you, Michael.
Speaker 1 (13:06):
That was Economy of Stephen COO. Coolis better known as
the Kook. You can find him at the kook dot
com and follow him on X using the handle of
the Kook. A Michael Thompson And this is fear and
Greek Q and a
Welcome to Fear and Greed Q and A where we
ask an answer questions about business, investing, economics, politics and more.
I'm Michael Thompson and every Monday morning we are joined
by economist Stephen Coucoulis to look at the week ahead.
You'll find him at the kook dot com. That's t
h e k O UK dot com and on X
using the handle of the kok Stephen, Good morning, Very
good morning, Michael. Oh. I don't know about you, but
(00:28):
I am excited. This is a bumper week. It's a
huge week, and it's all important because there are signs
that the economy is gathering a bit of momentum. First, though,
let's go back to last week because there are a
couple of key data releases weren't there that support this.
Perhaps monthly inflation is a good place to start. It's
the first time we've had the comprehensive monthly figure, and
(00:50):
we talked about that in some detail. Last week we
had a jump in headline inflation underlying rate now three
point three percent figures were above the RBA's target band.
What do you make of it?
Speaker 2 (01:03):
Yeah, they were both a genuine shock and it really
caused the market pricing for future interst rates, and a
lot of market economists to change their view on what
the Reserve Bank will do with interest rates over the
medium term. So what it was, we had that three
point eight percent increase in headline inflation in the year
to October. Now, our good friends and a good friend
(01:26):
of fear and greed, Diana Messina sort of put in
one of her notes at AMP that a lot of
the increase was in what we call administered prices, and
that market prices were still well contained. Now just give
me thirty seconds on administered prices.
Speaker 1 (01:42):
I'm glad you're going to do it, because I was
about to ask for an explanation.
Speaker 2 (01:46):
Administered prices are the prices that are determined largely, if
not completely, by government policy changes. So the unwinding of
the electricity subsidy was one that caused the electricity to
price rise by thirty seven percent. Now it didn't really
rise by thirty to seven percent, but from the consumer
price level, it did because those subsidies that were there
(02:08):
a year ago are now being phased out. Similarly with
excise on tobacco, Similarly with urban transport fares that have
been unwound given some of those very cheap fares that
were in place in a couple of states previously. So,
in a funny way, does monetary policy and is the
rate of inflation that monetary policy controls going to be
(02:31):
any different with a rate hike or a rate cut
for the price of transport fares, alcohol and tobacco, with
the excise petrol, with the excise increase, and of course
the electricity subsidies. So yes, it's a worry. Yes, it
kills Stone dead the discussion of any interest rate cuts
(02:51):
for the time being at least. And it is a warrior.
So it's one of those ones that's moved. We've got
to look at this very close to see where there's
actually something else going on. But the hear and now
I think the market reaction is probably a little bit
over the top.
Speaker 1 (03:03):
A little bit extreme, just on that in terms of
electricity prices, tobacco, excis, et cetera. We know all of those,
We knew they were coming. So why then would we
be surprised by this reading.
Speaker 2 (03:18):
Really good question because those things, yeah, that they were
evident to all of us. Now, this is where the
slight concern comes through in the rest of the inflation
numbers that a number of other items which are more
supply and demand linked, did have an increase in price momentum.
Look still but in the target band. But that lovely
(03:38):
deceleration in inflation that we'd had for the last couple
of years has not only bottomed out, but there is
a little hook high. You know, we're economists. We love
turning points in economic data. And while the turning point
in market determined inflation isn't a worry yet, it'll only
take another two or three months of further upside momentum
(04:00):
and then I think we start hitting the panic button.
Speaker 1 (04:02):
Okay, you mentioned though that really interest rate cuts off
the table. A number of economists are now predicting that
the next move will be up. What do you think
is that the case?
Speaker 2 (04:15):
Look, I still think there's enough lack of momentum in
the labor market. Remember that the RBA has got the
dual mandate inflation and the unemployment rates. So the bottom
line is that rates are on hold for a long time.
You know, it's hard to sort of even speculate whether
it's going to be May or July or whatever next year. Yeah,
a long way away before we see a change in
rates in which direction it is. But I think the
(04:37):
safer discussion is more that rates are on hold, and
like the mere mortals that we are, the RBA is
just made up of humans who as the data the
same way, and they are shocked by data periodically, and
I'm sure they were last week as well.
Speaker 1 (04:53):
Something I was actually going to ask you about last week,
and this is a good time to do it. Does
the RBA have a tender to just leave rates on
hold rather than risk going early, too fast, too hard,
whether it's increasing rates or decreasing rates. They'd rather be
late to the party than to act too quickly and
potentially do damage.
Speaker 2 (05:14):
Look, I think it's safe to say yes, that that's right,
that the RBA has a predisposition to do nothing with
interest rates, and it's only when they are seeing a
range of economic indicators up or down to hike or cut,
and they're open to this criticism partly valid. I think
that they're sort of waiting too long before moving. They're
(05:35):
not preemptive, even though, and again you alluded to, we
knew these excise changes were ending and the subsidies were ending,
so we knew that headline inflation was picking up. And
the RBA did forecast that, but the magnitude was higher
than expected. But the RBA really need to sort of
see numbers, and if you do that, you can still
of wait a little bit too long. So the hiking
(05:56):
cycle in twenty twenty two, twenty three was probably a
little to slow. The cutting cycle probably started a little
too late, and they could have cut earlier and now
we would be genuinely talking about rate hikes if rates
were lower. Hour. So look, without sort of wanting to
throw a brick through the RBA's window, that maybe, just
maybe they could be a little bit more preemptive in
(06:18):
what they're doing with rates.
Speaker 1 (06:20):
The other thing last week was business investment. It was
the biggest jump in four years. Capital expenditure was six
point four percent higher, way above expectations. In simple terms,
Why does this matter so much?
Speaker 2 (06:34):
Oh, Michael, I did a little jig when I saw
that number. I was absolutely thrilled and excited because one
of the issues for basically a decade now is the
problem of productivity. We've spoken about productivity in the past,
and the Treasure had his round table back in August
to work out how to fix productivity. One of the
issues why productivity has been so rotten in Australia is
(06:58):
a lack of business investment. You think about the business
investment cycle that you get more productive when machinery and
equipment and technology and good infrastructure is allowing you as
a business person to function more efficiently productivity, And we'd
had a decade of rotten CAPEX numbers. So when I
saw the six point four percent increase in real quarterly
(07:22):
private sector investment, it's laying the foundation for an improvement
in productivity. Now, it won't happen in one quarter. We
need years of this to happen. But when you're getting
data centers being built, airlines coming in, so those planes
that were imported by the airlines, that are their cap X.
So if you're an airline and you buy a plane,
that's investment. But over the course of the next I
(07:43):
don't know. You know more than me. You're a plane fan,
how long a commercial jet lasts for. It's going to
be flying around and around and around for a decade
or two making money, faring business people and tourists and
freight all around the world. So that's why productivity is
important because without planes, you know, we can't rely on
a horse and cart to do those things.
Speaker 1 (08:03):
It was the jump though in capex spending broad enough
to make a meaningful difference, or is it just in
a couple of specific sectors like data centers and technology.
Speaker 2 (08:15):
Yeah, look, it was genuinely concentrated in those two areas,
but there were hints that things like warehouses. You know,
the way that we are shopping nowadays, the less sort
of walking into the shopping malls and we just click click, click,
and you need that warehouse for the distribution. That's part
of the productivity too. So rather than the warehouse delivering
to a shop, we walk into the shop and put
(08:36):
in the boot of our car and drive home. We
go click, clicklick. It just goes from the warehouse to
our front door. That's actually more efficient way of distributing
retail purchases. So warehouses were very strong too, and I
think that's linked to that change in societal spending pattern. So, yes,
one quarter, we don't get too excited, although I confess
I did if we see another couple of quarters. And
(08:58):
the thing Michael that was partly overlook is that the
survey also had expected capex over the next financial year,
and it was up seven percent which is not a
bad outcome. So if we get that locked in, then
it's not just this one quarter wonder. We will actually
get a trend improvement. And again, like I was saying before,
(09:18):
turning points on graphs are the thing that excite me,
We're going to see capex moving higher over the course
of the next year.
Speaker 1 (09:24):
All right, how does that then feed into the big
number this week GDP? We get that this week, which
I know you are very excited about. Are we going
to see you do another jig Steven?
Speaker 2 (09:35):
I hope. So we're looking for a quarterly increase of
point seven for GDP growth, which would bring the annual
increase to a round about two point two to two
point three percent. And in a way that doesn't sound great,
but that would be the fastest rate of economic growth
in about three years. Again, so we've got through that
down to and I remember this is important to remember
(09:57):
where were we Where the hell have we come from?
In twenty twenty four, GDP growth was sub one percent.
That's why we were all feeling miserable. The economy was weak,
we weren't spending interest rates, with too high cost of
living pressures. Many of those things have either receded or
completely ended, and so the economy is growing again, and
that's a beautiful thing.
Speaker 1 (10:17):
What's the biggest contributor, what is the main driver? And
I suppose where's the big risk if we've been kind
of surprised, for instance, and we've seen the capacity for surprises,
what is the thing that could derail these expectations.
Speaker 2 (10:32):
Yeah, the one thing that could derail them is our
the net export contribution. Because one of the things about
aircraft and adding to capex and business investment, which feeds
directly to GDP, is a lot of that's imported. So
when we import something, that's a negative for GDP growth
because we don't make planes, for example. So that could
be where there's a bit of a downside risk to
(10:53):
the GDP numbers. But we do know that household spending
growth has been moderately positive. We know that there's been
a turning point in dwelling investment. We know capex, as
we're just discussing, has been a little bit stronger. The
other one, which is one that we have no partial
indicators on, is government demand. And we know over the
last two years that we've had a boom in government
(11:14):
spending and across state and commonwealth and local government areas
that appears to be slowing down. And certainly what we're
hearing from the government lead up to the next budget
next year is that they're looking for savings. So have
we already seen some of that public sector, which is
an important part of GDP starting to just moderate. So
that's some downside risk too, But for the here and now,
(11:37):
from what we know, we're going to see a nice
two percent plus GDP growth rate and that's something that
I'm going to be celebrating with a nice strong cup
of coffee.
Speaker 1 (11:47):
Now very quickly, because we are pretty much out of time.
Monthly household spending, this is something else that we find
out this week, and he did just mention that it
has been growing, but it's been.
Speaker 2 (11:59):
A little bit.
Speaker 1 (12:00):
We've just talked a lot about these signs that the
economy is kind of is growing. Is there a mismatch
between kind of what households are doing and what households
are seeing and the cost of living pressures that everyone
is still under and these signs of economic growth.
Speaker 2 (12:15):
Look, the household spinning numbers should be a little bit
better because there are a few things that are still positive.
And while you know, we do like to sort of
moan and grain man electricity bill comes in, and the
insurance bill comes in and all these other things. But
we have had three rate cuts. They're impacting on us.
Now we have had wages growth at a moderate but
positive pace. That's helping the wealth effect from house prices
(12:36):
booming is generating some sort of confidence in the economy.
Believe it. I'm not okay to the issues of the
intergenerational inequality of house price booms, but it actually does
add to the rate of economic growth. So they're the
positives that are being offsetting some of this. You know,
still pretty tepid consumer sentiment that's out there.
Speaker 1 (12:56):
There are so much more that we could have talked
about house prices and building a pre It is hopefully
up a jumbo jumbo week for the economy. Steven enjoy it.
Speaker 2 (13:05):
Thank you, Michael.
Speaker 1 (13:06):
That was Economy of Stephen COO. Coolis better known as
the Kook. You can find him at the kook dot
com and follow him on X using the handle of
the Kook. A Michael Thompson And this is fear and
Greek Q and a
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Are You A Charlotte?
In 1997, actress Kristin Davis’ life was forever changed when she took on the role of Charlotte York in Sex and the City. As we watched Carrie, Samantha, Miranda and Charlotte navigate relationships in NYC, the show helped push once unacceptable conversation topics out of the shadows and altered the narrative around women and sex. We all saw ourselves in them as they searched for fulfillment in life, sex and friendships. Now, Kristin Davis wants to connect with you, the fans, and share untold stories and all the behind the scenes. Together, with Kristin and special guests, what will begin with Sex and the City will evolve into talks about themes that are still so relevant today. "Are you a Charlotte?" is much more than just rewatching this beloved show, it brings the past and the present together as we talk with heart, humor and of course some optimism.
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.