September 21, 2025 • 11 mins
Last week, RBA Chief Economist Sarah Hunter said the central bank is getting closer to achieving its dual mandate of a strong jobs market and having inflation under control. Are we entering the goldilocks zone? And how hard is to stay there?
Also looking to the week ahead: monthly inflation figures, and RBA Governor Michele Bullock and team head to Canberra.
Michael Thompson is joined by economist Stephen Koukoulas.
Fear & Greed Q+A: Join Sean Aylmer & Michael Thompson and the team as they answer questions on business, investing, economics, politics and more. If you have your own question, get in touch via our website, LinkedIn, Instagram or Facebook!
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:05):
Welcome to Fear and Greed Q and A, where we
ask and answer questions about business, investing, economics, politics and more.
I'm Michael Thompson, and every Monday morning we're joined by
economist Stephen Cocolis to look at the weak 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 handles the cook Stephen, Good morning.
Speaker 2 (00:24):
Good morning, Michael. Little apologies in advance. I'm fighting a
bit of the man flu here, but I'll keep soldiering on.
As they say, oh good luck.
Speaker 1 (00:31):
We are heading into summer, cold and flu season should
be well behind us.
Speaker 2 (00:36):
But it is like, let's.
Speaker 1 (00:38):
Say, a lagging indicator. Perfect. Now, look, I do want
to look at the weak ahead because there are a
few things happening this week. But last week, if we
can just revisit some comments that were made by the
Reserve Banks Chief economist Sarah Hunter delivered. She made a
speech it was a really a fire sight chat, really
(01:00):
wasn't it, and was talking about the fact that the
RBA is pretty confident that they're close to getting inflation
back under control. Right, so not quite declaring victory, but
pretty close. Too, and essentially saying that they're getting close
to achieving that duel mandate, the dual target of a
(01:22):
strong jobs market and inflation under control. Are we there?
Are we close? How far off that? And how hard
is it to keep it there once we get there?
Speaker 2 (01:37):
Well, the momentum on all of the indicators to that
end point of well, yeah, the goldilocks, because we do
know this is the RBA's forecasts, and the forecast from
a lot of the market economists is that inflation will
be about two and a half percent over the next
couple of years, So we can tick that box. We
had the labor force numbers last week too, just by
(01:58):
the way, we can touch on them a bit later.
But the unemployment rate is still four point two percent,
four point two, four point three. It's been bouncing around
there for a few months, and on most measures, that
is fantastic. If we can get through this current economic
cycle with the unemployment rate peaking at a level below
four and a half percent, that is a really good outcome.
(02:19):
And then you throw in their economic growth and that
is sort of still the I don't know the problematic
issue out there. Because we had the reasonable GDP numbers
of what was that a few weeks ago, one point
eight percent annual GDP. Now the consensus in the RBA
are forecasting two percent, maybe a fraction more. So if
this comes to pass, then that will be great. It's
(02:41):
important to remember that that doesn't mean that interest rates
don't change and they'll ever move again because we've hit
this nirvana. But those forecasts are predicated on a couple
more rate cuts to lock in that stronger growth and
that job creation. And we are of course, I've been
around for a long time, Michael, I'm alert to shocks
that happen, and that could be in the form of
(03:03):
Trump tariffs, which is still lurking somewhere in the mix.
Could be US budget position, which is there. It could
be something domestically. It could be a house price bubble
sort of reflating, and of course the bank and others
would have to react to that. So look at the
moment work, we're sort of closed and of course you'll
never achieve it completely to every decimal point on the
(03:24):
economic indicators. But if we can get the economy growing
for a couple of years, we're unemployment, slow inflations on target,
that is pretty good.
Speaker 1 (03:33):
How big is the risk though, of perhaps over correcting
or over stimulating, because obviously we talk about interest rates
being a blunt instrument for this, there isn't a lot
of kind of room to move within that. Is there
a chance then they're just going just that little bit
too far and in doing so you just heat things
(03:54):
up a bit too much.
Speaker 2 (03:55):
Yeah, you're quite right there, blood on the downside and
the upside because you change interest rates. And this is
a debate that we sometimes have that you know, perhaps
with the West Australian economy, for example, really going booming,
house prices booming, and they like they don't need interestraight cuts,
but if you're in Victoria or Tazzy, you probably do
need the right cut more urgently. But of course we've
(04:15):
only got up one interestrate for the whole country. So
this is where the RBA is a lot more sober
than most of us. They tend to sit tight on
interest rates for a longer period in the market. The
market wants rate changes all the time. They love that volatility,
they love something to talk about. But the RBA are
quite happy to sit there and say, look, we're doing okay,
Yes we think we might have to cut eventually, but
(04:37):
we need to see the evidence come through to justify that.
But the moment, they're sitting tight. So the RBA meet
well next on the thirtieth of September, So next week,
no one's thinking they're going to move. I don't think
they're going to move. And they've got this opportunity to
sort of spell out the Sarah Hunter thesis a little
bit more, and I hope they do that. Look, we
(04:59):
can't declar their victory on the economy because we never
had a clear victory on the economy. It's like you
never finished painting the Sydney Harbor Bridge. You finished and
you've got to start again. You kind of keep adjusting,
and their cracks emerge or something happens that you've got
to you've got to react to. But if we can
get through this period and the RBA is cautious and
they tweak rates down a bit, they don't overdo it,
they don't underdo it, that we could be in for
(05:20):
a you know, a decent twenty twenty six in terms
of the economy.
Speaker 1 (05:24):
All right, So in the end, it's essentially trying to
get those fundamentals in place, and those two basic kind
of the twin planks in line, so that then they
are in a good position to deal with any shocks
and other things that do come up.
Speaker 2 (05:38):
Yes, and that they can react quickly. And again we
saw that during the global financial crisis. What was that
fifteen sixteen years ago? Now, goodness me and the pandemic. Yeah,
they were cutting greats, they're printing money. They did a
whole lot of things which helped support the economy. Ten
out of ten, well done, RBA and that. But they
were sort of extreme shocks. What's a bit more subtle
is when you get a you get a small but
(06:00):
then significant impact on the economy from something. You know,
an oil shock used to be the one that caused
people some concern where the oil price sort of went
up or down. That created a lot of tension. The
one that is still lurking, as I mentioned before, and
Trump tariffs. They haven't gone away. Your markets have been
remarkably resilient to the threat of tariffs. But there's something
still brewing there that I fear it might blow up
(06:22):
at some stage.
Speaker 1 (06:24):
Okay, last week you mentioned that we did have the
labor force data come out unemployment steady at four point
two percent, but there was a loss of jobs within
that is the market is weakening a little bit.
Speaker 2 (06:35):
Yeah, and a lot of that was full time employment
was down, so the hours worked in the economy was down,
and that's usually a sign that activity in the economy
is not quite as strong as you would like it
to be. You know, bosses don't say to their stuff, look,
I don't need you this week, or I only need
you to do ten hours, not twenty hours, and I'm
not going to hire anybody because I don't have that
business case to do so. So it's consistent with the economy. Again,
(06:57):
they're not catastrophic un employment numbers by any You have
four point two percent undployed rapecers. We mentioned. It's good.
We did lose some jobs though, and that I think
is why we are still thinking the markets, thinking that
there's still a couple of rate cuts to come. And
as you mentioned, sort of Sarah Hunter, fine tuning the
economy a little bit if inflation's on track. But then
you just start to get a few of these indicators
(07:19):
on the labor market, job vacancies, the employment, number hours
worked just fading, not crashing, just fading. Right, we must
give a twenty five point cut just to keep a
bit of a boost under the economy.
Speaker 1 (07:33):
Yeah, just to keep them the momentum going. Momentum is
a very hard word to say.
Speaker 2 (07:38):
It is at this time of the morning.
Speaker 1 (07:39):
I found my kryptonite here to keep the momentum going.
There we go so smooth through that one. Okay, we
are now somewhat relatedly looking now to the weak ahead.
It's where I meant to start seven and a half
minutes ago, and now we're finally getting there. Monthly inflation
figures this week, what are you expecting to see a
bit of a pullback?
Speaker 2 (07:58):
You might recall that the job Lie monthly numbers, which
came out a month ago surprised on the upside. Both
the headline figure at two point eight percent and the
trimmed me at two point seven were higher than I
think everybody was forecasting. Some of that was due to
the timing of electricity rebates, and given that they were
July numbers, there's a bit of a seasonal increase in
(08:19):
some prices on the first of July. August is expected
to be a bit weaker, So we've got the annual
headline figure probably dipping back to about two point six
two point seven trimmed me at two and a half.
So aside from the monthly volatility of let us prices,
petrol prices and these sort of things, inflations at two
and a half give will take a few tenths. So
(08:40):
that'll give everybody, including our friends at the RBA, a
lot of comfort that that inflation issue is well in check.
Speaker 1 (08:48):
Speaking of our friends at the RBA, we will be
hearing quite a bit from them this week because we've
got Reserve Bank Governor Michelle Bullock likely also Deputy Governor
Andrew Houser, Sarah Hunter, who we've talked about all jumping
into the car together. In my mind, they're all traveling
together to Canberra to appear before the Standing Committee on Economics.
(09:09):
It happens twice a year, doesn't it, And so this
is a It delivers an insight. What what are we
going to learn there that we don't already know, Particularly
with so much transparency now with press conferences every RBA meeting.
Speaker 2 (09:25):
It's a chance for a different line of question. You know,
the press conferences after every meeting are good. They're better
than they were when they started. I think the journals
have learned not for a gotcha question, but for one
that really digs into some of the insights, some of
the research, some of the thinking that the RBA is
going on with because that's what it's that's what it's
meant to be. These ones, Oh look, if I'm a
(09:47):
bit cynical, they tend to have a political edge to it.
So the Labor Party will ask, all, what do you
think the economy is doing? Brilliantly? And the Liberal Party
is say, oh, what about something else? So that there's
a bit of a political tone to it, which is
a bit pointing. But at the end of the day,
Michelle Bullock and her team will be able to sort
of articulate or more than what we've spoken about, they'll
(10:08):
be able to release a bit more modeling, I'm assured.
I'm assuming there'll be more questions about how worried are
you about the Trump tariffs? Have you modeled what the
macro effects might be of the climate change policies that
we're hearing so much about too. Now there might be
another discussion. All house prices seem to be lifting rapidly,
is that a concern to you? And if so, what
you do about it? Given that you don't target house prices,
(10:29):
So it's really a chance to dig in and delve
into some of these really key issues, and I hope
the panel or the committee do dig into those and
put some of the politics to the side.
Speaker 1 (10:40):
Yeah, that would be nice to see. All Right, I
think you've stretched that voice as far as you possibly
can go. And have a button menthol and an e
lemon tea and some Manuka honey. Yeah, and prepare for
a big week ahead. Thanks very much, Steven, Thank you.
Speaker 2 (10:54):
Michael.
Speaker 1 (10:54):
That was economist Stephen coucoulis, better known as the Kook.
You can find him at the kook dot com and
fillow him on X using the handle of the Cook
are Michael Thompson And this is Fear and Greed Q
and a
Welcome to Fear and Greed Q and A, where we
ask and answer questions about business, investing, economics, politics and more.
I'm Michael Thompson, and every Monday morning we're joined by
economist Stephen Cocolis to look at the weak 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 handles the cook Stephen, Good morning.
Speaker 2 (00:24):
Good morning, Michael. Little apologies in advance. I'm fighting a
bit of the man flu here, but I'll keep soldiering on.
As they say, oh good luck.
Speaker 1 (00:31):
We are heading into summer, cold and flu season should
be well behind us.
Speaker 2 (00:36):
But it is like, let's.
Speaker 1 (00:38):
Say, a lagging indicator. Perfect. Now, look, I do want
to look at the weak ahead because there are a
few things happening this week. But last week, if we
can just revisit some comments that were made by the
Reserve Banks Chief economist Sarah Hunter delivered. She made a
speech it was a really a fire sight chat, really
(01:00):
wasn't it, and was talking about the fact that the
RBA is pretty confident that they're close to getting inflation
back under control. Right, so not quite declaring victory, but
pretty close. Too, and essentially saying that they're getting close
to achieving that duel mandate, the dual target of a
(01:22):
strong jobs market and inflation under control. Are we there?
Are we close? How far off that? And how hard
is it to keep it there once we get there?
Speaker 2 (01:37):
Well, the momentum on all of the indicators to that
end point of well, yeah, the goldilocks, because we do
know this is the RBA's forecasts, and the forecast from
a lot of the market economists is that inflation will
be about two and a half percent over the next
couple of years, So we can tick that box. We
had the labor force numbers last week too, just by
(01:58):
the way, we can touch on them a bit later.
But the unemployment rate is still four point two percent,
four point two, four point three. It's been bouncing around
there for a few months, and on most measures, that
is fantastic. If we can get through this current economic
cycle with the unemployment rate peaking at a level below
four and a half percent, that is a really good outcome.
(02:19):
And then you throw in their economic growth and that
is sort of still the I don't know the problematic
issue out there. Because we had the reasonable GDP numbers
of what was that a few weeks ago, one point
eight percent annual GDP. Now the consensus in the RBA
are forecasting two percent, maybe a fraction more. So if
this comes to pass, then that will be great. It's
(02:41):
important to remember that that doesn't mean that interest rates
don't change and they'll ever move again because we've hit
this nirvana. But those forecasts are predicated on a couple
more rate cuts to lock in that stronger growth and
that job creation. And we are of course, I've been
around for a long time, Michael, I'm alert to shocks
that happen, and that could be in the form of
(03:03):
Trump tariffs, which is still lurking somewhere in the mix.
Could be US budget position, which is there. It could
be something domestically. It could be a house price bubble
sort of reflating, and of course the bank and others
would have to react to that. So look at the
moment work, we're sort of closed and of course you'll
never achieve it completely to every decimal point on the
(03:24):
economic indicators. But if we can get the economy growing
for a couple of years, we're unemployment, slow inflations on target,
that is pretty good.
Speaker 1 (03:33):
How big is the risk though, of perhaps over correcting
or over stimulating, because obviously we talk about interest rates
being a blunt instrument for this, there isn't a lot
of kind of room to move within that. Is there
a chance then they're just going just that little bit
too far and in doing so you just heat things
(03:54):
up a bit too much.
Speaker 2 (03:55):
Yeah, you're quite right there, blood on the downside and
the upside because you change interest rates. And this is
a debate that we sometimes have that you know, perhaps
with the West Australian economy, for example, really going booming,
house prices booming, and they like they don't need interestraight cuts,
but if you're in Victoria or Tazzy, you probably do
need the right cut more urgently. But of course we've
(04:15):
only got up one interestrate for the whole country. So
this is where the RBA is a lot more sober
than most of us. They tend to sit tight on
interest rates for a longer period in the market. The
market wants rate changes all the time. They love that volatility,
they love something to talk about. But the RBA are
quite happy to sit there and say, look, we're doing okay,
Yes we think we might have to cut eventually, but
(04:37):
we need to see the evidence come through to justify that.
But the moment, they're sitting tight. So the RBA meet
well next on the thirtieth of September, So next week,
no one's thinking they're going to move. I don't think
they're going to move. And they've got this opportunity to
sort of spell out the Sarah Hunter thesis a little
bit more, and I hope they do that. Look, we
(04:59):
can't declar their victory on the economy because we never
had a clear victory on the economy. It's like you
never finished painting the Sydney Harbor Bridge. You finished and
you've got to start again. You kind of keep adjusting,
and their cracks emerge or something happens that you've got
to you've got to react to. But if we can
get through this period and the RBA is cautious and
they tweak rates down a bit, they don't overdo it,
they don't underdo it, that we could be in for
(05:20):
a you know, a decent twenty twenty six in terms
of the economy.
Speaker 1 (05:24):
All right, So in the end, it's essentially trying to
get those fundamentals in place, and those two basic kind
of the twin planks in line, so that then they
are in a good position to deal with any shocks
and other things that do come up.
Speaker 2 (05:38):
Yes, and that they can react quickly. And again we
saw that during the global financial crisis. What was that
fifteen sixteen years ago? Now, goodness me and the pandemic. Yeah,
they were cutting greats, they're printing money. They did a
whole lot of things which helped support the economy. Ten
out of ten, well done, RBA and that. But they
were sort of extreme shocks. What's a bit more subtle
is when you get a you get a small but
(06:00):
then significant impact on the economy from something. You know,
an oil shock used to be the one that caused
people some concern where the oil price sort of went
up or down. That created a lot of tension. The
one that is still lurking, as I mentioned before, and
Trump tariffs. They haven't gone away. Your markets have been
remarkably resilient to the threat of tariffs. But there's something
still brewing there that I fear it might blow up
(06:22):
at some stage.
Speaker 1 (06:24):
Okay, last week you mentioned that we did have the
labor force data come out unemployment steady at four point
two percent, but there was a loss of jobs within
that is the market is weakening a little bit.
Speaker 2 (06:35):
Yeah, and a lot of that was full time employment
was down, so the hours worked in the economy was down,
and that's usually a sign that activity in the economy
is not quite as strong as you would like it
to be. You know, bosses don't say to their stuff, look,
I don't need you this week, or I only need
you to do ten hours, not twenty hours, and I'm
not going to hire anybody because I don't have that
business case to do so. So it's consistent with the economy. Again,
(06:57):
they're not catastrophic un employment numbers by any You have
four point two percent undployed rapecers. We mentioned. It's good.
We did lose some jobs though, and that I think
is why we are still thinking the markets, thinking that
there's still a couple of rate cuts to come. And
as you mentioned, sort of Sarah Hunter, fine tuning the
economy a little bit if inflation's on track. But then
you just start to get a few of these indicators
(07:19):
on the labor market, job vacancies, the employment, number hours
worked just fading, not crashing, just fading. Right, we must
give a twenty five point cut just to keep a
bit of a boost under the economy.
Speaker 1 (07:33):
Yeah, just to keep them the momentum going. Momentum is
a very hard word to say.
Speaker 2 (07:38):
It is at this time of the morning.
Speaker 1 (07:39):
I found my kryptonite here to keep the momentum going.
There we go so smooth through that one. Okay, we
are now somewhat relatedly looking now to the weak ahead.
It's where I meant to start seven and a half
minutes ago, and now we're finally getting there. Monthly inflation
figures this week, what are you expecting to see a
bit of a pullback?
Speaker 2 (07:58):
You might recall that the job Lie monthly numbers, which
came out a month ago surprised on the upside. Both
the headline figure at two point eight percent and the
trimmed me at two point seven were higher than I
think everybody was forecasting. Some of that was due to
the timing of electricity rebates, and given that they were
July numbers, there's a bit of a seasonal increase in
(08:19):
some prices on the first of July. August is expected
to be a bit weaker, So we've got the annual
headline figure probably dipping back to about two point six
two point seven trimmed me at two and a half.
So aside from the monthly volatility of let us prices,
petrol prices and these sort of things, inflations at two
and a half give will take a few tenths. So
(08:40):
that'll give everybody, including our friends at the RBA, a
lot of comfort that that inflation issue is well in check.
Speaker 1 (08:48):
Speaking of our friends at the RBA, we will be
hearing quite a bit from them this week because we've
got Reserve Bank Governor Michelle Bullock likely also Deputy Governor
Andrew Houser, Sarah Hunter, who we've talked about all jumping
into the car together. In my mind, they're all traveling
together to Canberra to appear before the Standing Committee on Economics.
(09:09):
It happens twice a year, doesn't it, And so this
is a It delivers an insight. What what are we
going to learn there that we don't already know, Particularly
with so much transparency now with press conferences every RBA meeting.
Speaker 2 (09:25):
It's a chance for a different line of question. You know,
the press conferences after every meeting are good. They're better
than they were when they started. I think the journals
have learned not for a gotcha question, but for one
that really digs into some of the insights, some of
the research, some of the thinking that the RBA is
going on with because that's what it's that's what it's
meant to be. These ones, Oh look, if I'm a
(09:47):
bit cynical, they tend to have a political edge to it.
So the Labor Party will ask, all, what do you
think the economy is doing? Brilliantly? And the Liberal Party
is say, oh, what about something else? So that there's
a bit of a political tone to it, which is
a bit pointing. But at the end of the day,
Michelle Bullock and her team will be able to sort
of articulate or more than what we've spoken about, they'll
(10:08):
be able to release a bit more modeling, I'm assured.
I'm assuming there'll be more questions about how worried are
you about the Trump tariffs? Have you modeled what the
macro effects might be of the climate change policies that
we're hearing so much about too. Now there might be
another discussion. All house prices seem to be lifting rapidly,
is that a concern to you? And if so, what
you do about it? Given that you don't target house prices,
(10:29):
So it's really a chance to dig in and delve
into some of these really key issues, and I hope
the panel or the committee do dig into those and
put some of the politics to the side.
Speaker 1 (10:40):
Yeah, that would be nice to see. All Right, I
think you've stretched that voice as far as you possibly
can go. And have a button menthol and an e
lemon tea and some Manuka honey. Yeah, and prepare for
a big week ahead. Thanks very much, Steven, Thank you.
Speaker 2 (10:54):
Michael.
Speaker 1 (10:54):
That was economist Stephen coucoulis, better known as the Kook.
You can find him at the kook dot com and
fillow him on X using the handle of the Cook
are Michael Thompson And this is Fear and Greed Q
and a
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