Q+A: The Week Ahead

Sean Aylmer is joined by EY Chief Economist for Oceania Cherelle Murphy for a look at the week ahead in the economy, with a focus on the labour force data out on Thursday.

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Episode Transcript

Speaker 1 (00:05):
Welcome to Fear and Greek Q and A, where we
ask and to answer questions about business, investing, economics, politics
and more. I'm Sean Almer, and today it's all about
the economy in the state of the labor market in
Australia this Monday morning. We're joined by Cherrell Murphy, Chief
Economist Oceania at Ey Sharrell.

Speaker 2 (00:22):
Good morning, Good wedding John.

Speaker 1 (00:25):
Before we jump into the labor market, which is that
we've got labor force figures out this week. Pretty interesting
consumers sentiment reading last.

Speaker 2 (00:33):
Week, yeah, it was. There was quite a big fall
in that measure from the Westpac Melbourne Institute Combined Consumer
Sentiment Index. It fell three point one percent, which doesn't
sound like a lot, but that's actually quite a big
move in a month for that indicator. It does suggest,
I think that consumers have become a little bit less

(00:56):
confident about further interest rate cuts from the IBA, though
there was you know, there was maybe some interesting information
also tremrentous that was a bit negative as well, so
it's not all about interest rates. And there was also
an indication in there that house press expectations had hit
a fifteen year high, so maybe that's also contributing to

(01:17):
that weak consumer sentiment, with some obviously feeling pretty locked
out of the housing market. So you know, certainly something
to keep an eye on. It can be a bit boundcy,
but you know, certainly not the kind of indicator that
we'd want to be seeing after three interest rate cuts
from the IRBA.

Speaker 1 (01:34):
Imagined housing then sherelle, how important is housing not just
to the economy, but to the psyche of the economy,
be that business or consumers. It kind of to me
it's always been important, but it just seems to be
kind of as significant as ever.

Speaker 2 (01:52):
Absolutely, It's just the stakes are so high, aren't they.
When you think about how much housing takes out of
the average holds budget, It's just so much. And mortgage
repayments can obviously make a big difference, even with the
twenty five basis point change in the variable interest rate
on your mortgage. But I do wonder because in the

(02:13):
past it's tended to show if you've got higher host
press you tend to get higher consumption. You know, that's
been fairly robust as a relationship. But I do wonder
know whether or not higher host prices are starting to
maybe be quite negative for some consumers, given they are
just feeling completely locked out of the market, and even

(02:34):
those with the host don't necessarily see it as one
hundred percent good thing when especially when they think about
their own kids, if they have them, and the fact
that they are really struggling with that. So yeah, I
think this relationship could definitely be changing.

Speaker 1 (02:50):
Okay, let's move on to the week ahead. The big
ABS data out this week is labor force. What is
going on in the labor market now? We have a
four point two percent unemployment rate. I suppose I'm interested
in what you think will happen this week, but generally
how it's softening. I think everyone agrees that it's not

(03:10):
at a peak, it's coming off a bit. But how
concerned should we be about that?

Speaker 2 (03:15):
Yeah? I don't think we should be too concerned at
the moment, because it has been so strong for such
a long period of time, and so any sort of
deterioration from here to some extent had to be expected
because you couldn't kind of maintain that level of job's
growth and such a low unemployment rate forever. Of course,
you know, it's hard to talk about this in the
macro because to one person Obviously, a loss of a

(03:38):
job is a big deal, so I don't kind of
want to take away from that, but I think, look,
we should see continued job's growth in September. And this
is a point actually that Michelle Bullock, the Governor of
Reserve Bank, made last week at the Senate Estenance Community
heing we're not actually seeing a lot of job losses.
What we're seeing is jobs growth not being as fast.

(04:01):
So for the most part, people are still finding work.
From here on in, it does seem like the labor
market will start to show the effects I guess of
you know, some of the previous leader, because the labor
market takes a long time to adjust, and as I say,
it's been so strong, so it probably will slow, but yeah,

(04:22):
not substantially. This week we might see the unemployment rate
jump from four point two to four point three percent.
Again not ideal, but not certainly not something I think
we have to worry too much about it.

Speaker 1 (04:35):
I mean ten years ago, if you said we're worried
about unemployment rate going to four point three percent, people
would have thought you were mad, because for generations correct,
unemployment was five percent plus. So the actual market is
pretty strong. What else is coming up this week.

Speaker 2 (04:52):
So we've also got the NAB Business Confidence and Business
Conditions with which is contained within the NAB Business Survey,
which is a really useful Indian care of what's happening
in the corporate sector. This look. This has been kind
of interesting because it's it's certainly not bad, but neither
is it good. Confidence and conditions both picked up a
tiny bit in the last couple of months, which, you know,

(05:14):
that's good news and probably to some extent reflective of
the slightly strong consumer and the slightly lower interest rates.
I think that's helping, But you know, neither are we
looking at a future where businesses are going, yes, let's go.
You know, let's get into it. Animal spirits are certainly
not firing. And I think a lot of that actually
comes down to some of the more structural issues in

(05:36):
the economy. That's sort of feeling that the sort of
productivity number is low, and the tax is too high,
and there's a lot of concern, I guess about what's
happening with the global economy. All of these seem to
be weighing a bit on business, and there's just a
bit of a feeling of you know, not not great,
you know, looking forward on that front, and.

Speaker 1 (05:56):
Of course we're going to hear a lot from the
Reserve Bank this week, but it minutes from the most
recent board meeting as well as a few speakers.

Speaker 2 (06:02):
Yeah, that's right. So this week we've got the RBN
minutes from the September Monetary Policy Board meeting. They'll come
out on Tuesday. Always worth a look. You get a
bit more detail about what exactly went on at that
board meeting. Of course there wasn't any change, but there's
always some I guess look forward doing that which is
worth getting a handle on. And yeah, thre speakeruse this week,

(06:24):
so quite a few. The Governor of Michelle Bullock, is
actually in Washington, so we get a very early conversation
at the Number of Research Forum actually from her on
Thursday morning, and then a little bit later in the
morning Chris Kent, who's the Assistant Governor of Financial Markets,
will talk to the CFA Society, and on early in

(06:45):
the week on Thursday, Sarah Hunter, who's the chief Economist,
she's speaking in Sydney, so there's gonna be quite a
lot to absorb there. Of course, it's now quite a
little while until we get to the next board meeting,
and so this is often when the Reserve Bank senior
leaders come out and start talking about some of the
issues they're thinking about. They want to leave a little

(07:06):
bit space between their public speeches and the board meeting,
so that's why it's pretty dense at the moment.

Speaker 1 (07:11):
Enjoy the week, Charrelle.

Speaker 2 (07:12):
Thanks Sean, you too.

Speaker 1 (07:13):
It's Eryl Murphy, Chief Economist Oceania asked ey, I'm Suan
Alma and this is fear and greed Q and a