July 13, 2025 • 5 mins
Sean Aylmer and Stephen Koukoulas dissect the RBA's surprise decision to keep rates on hold last week. They also discuss the major events, reports and releases that provide insight into the economy this week.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:05):
Welcome to Fear and Greed the week Ahead. I'm Sean Aylmer,
and as always I'm joined by economist Stephen Kokula. Still
find herem at the Cook dot com, t h e
k O uk dot com and on X using the
handle the Kirk Stephen. Have you gotten over last week's
non decision by the Reserve Bank?
Speaker 2 (00:21):
No, I don't think I Bill, and I don't think
I'm the lone ranger on this one too. But look,
we've had now what five or six days to digest
what the RBA did, and we've had a chance to
analyze what the RBA governor said, both in her press
release and in the press conference, and look, a lot
of us are still scratching our heads a little bit
(00:42):
about why they waited this extra five weeks until the
August meeting. We know there's the June quarter inflation data,
which is more comprehensive than the monthly numbers. That said,
the monthly numbers still contain an awful lot of information
on price that will be actually incorporating to the quarterly figure,
and when it was basically ninety five odd percent priced
(01:04):
into the markets, it did cause a lot of us
to be a little shocked or a lot shocked. And
our mistake, I guess, was looking at the data and
not looking at the nuances of.
Speaker 1 (01:17):
You know what was interesting. We had Lucy Ellis on
the show last week. I saw the unscary of course,
used to be chief economist, and she exactly same what
you've said. She said, I just don't understand. It's not
like they're getting a lot more information over the next
five weeks. It's going to make much of a difference.
And I said, do you think it's the board, the
board being much more independent? She said, well, you know,
(01:37):
the board weren't patsies previously. All that's okay, so that's fine,
but it does really for the first time show the
world is different and the Reserve Bank Management can't get
its way necessarily.
Speaker 2 (01:52):
That's true. And the fact that they did release the
aggregate voting because there are nine members of the RBA
Monetary Policy Board and they vote should we put them
up down or leave them steady and all these other things,
and it was six to three, so six said on
hold three set of cuts. So there was obviously some
pretty fullsome discussion, let's say, And had Lucy and I
(02:14):
have been on the board Heaven forbid me. You know
we would have cut rates because again, and just to
take a step back, you're getting back to the initial
point of your first question. We do know that on
the monthly basis trimmed mean inflations I put a lot
side headline for a moment is two point four percent
below the midpoint of the target range. We do know
that the GDP growth rates under one and a half percent.
(02:37):
We do know that things like consumers spending building approvals
are pretty subdued. And we also know that the current
three point eight five percent cash right is restrictive, and
that means, in simple terms, it's putting more negative influence
on the economy than positive. And we needed to get
neutral at the very least, and that's still fifty basis
(02:59):
points low than we currently are. So moving to neutral
is sort of the the fault position that I've still
got for the RBA policy over the next couple of months.
Speaker 1 (03:07):
Yeah, so when the upshot of that, though, the upshot
of last week is that Michelle Bullock, the governor, did
say rates are still going to come down. It's a
timing issue, not a directional issue.
Speaker 2 (03:16):
Yes, she was at pains to say that, So I
think she was sort of probably just really wanting to
reinforce at the RBA board and particularly with global issues.
By the way, again, over the weekend we've seen more
Trump tariffs being announced and there's sort of a bit of
a scattergun approach, and you know, the RBA is of
the assessment and quite rightly that these tariffs, even though
they don't directly impact Australia by huge amount, the effect
(03:40):
on international trade will be significant. And again Australia, with
roughly a quarter of our economy being export focused, if
the world economy China in particular, but Asia more generally,
is then we'll get a bit of a negative backwash
on that. So that's what the RBA is thinking too.
So again, yeah, there's rake cuts are still coming, there's
still pr us into them. I was just looking at
(04:01):
my future's curve this morning. We've still got about seventy
five ish maybe one hundred points priced in by this
time next year. That of course can change, but the
market's still looking for eight cuts even though we had
the shock decision last week.
Speaker 1 (04:16):
Okay, the next few days, labor force figures is probably
the big one.
Speaker 2 (04:20):
They're BIGGI yeah, always and again bigger because it's important
in a social sense, but important because it's part of
the RBA dual mandate. They have an eye on full
employment and to the credits. The labor market's been very
resilient in the last couple of years. We've had employment
growth well monthly. It's incredibly volatile. Putting a trend line
(04:40):
through that, we've got decent employment growth. We're expecting another
twenty odd thousand jobs on Thursday when the numbers are released,
and the unemployment rate's been sort of really fly paper
to four point one percent. Can't move from that level.
It will one day, but I think at six months
in four point one the market's expecting that to be repeated.
But again I think they're sort of if they were
(05:00):
to say, where are the risks, it's probably that we
get a four point two or four point three unemployment rate,
which will just reinforce the expectation that in early August
our friends at the RBA will trim rates again.
Speaker 1 (05:12):
And what do you expect from the National Australian Bank
Business Survey this week?
Speaker 2 (05:15):
Yeah, more information there. It's sort of a little few
grounds for sort of mixed views. Again, the rate cuts
that we've seen in the past have been helpful, but again,
global conditions. It's all about global conditions. I think for
the business sector they're not quite as interstraight sensitive as
US household, as US consumers. They're more looking at big
picture policy issues, global issues. So yeah, we'll see.
Speaker 1 (05:39):
Stephen and Joy the week.
Speaker 2 (05:40):
Thanks Sean.
Speaker 1 (05:41):
That's economist Stephen cookulis better known as the Kok. You
can find him at the cook dot com and follow
him on X using the handle the Kirk. I'm Sean
fearing Greed The week ahead.
Welcome to Fear and Greed the week Ahead. I'm Sean Aylmer,
and as always I'm joined by economist Stephen Kokula. Still
find herem at the Cook dot com, t h e
k O uk dot com and on X using the
handle the Kirk Stephen. Have you gotten over last week's
non decision by the Reserve Bank?
Speaker 2 (00:21):
No, I don't think I Bill, and I don't think
I'm the lone ranger on this one too. But look,
we've had now what five or six days to digest
what the RBA did, and we've had a chance to
analyze what the RBA governor said, both in her press
release and in the press conference, and look, a lot
of us are still scratching our heads a little bit
(00:42):
about why they waited this extra five weeks until the
August meeting. We know there's the June quarter inflation data,
which is more comprehensive than the monthly numbers. That said,
the monthly numbers still contain an awful lot of information
on price that will be actually incorporating to the quarterly figure,
and when it was basically ninety five odd percent priced
(01:04):
into the markets, it did cause a lot of us
to be a little shocked or a lot shocked. And
our mistake, I guess, was looking at the data and
not looking at the nuances of.
Speaker 1 (01:17):
You know what was interesting. We had Lucy Ellis on
the show last week. I saw the unscary of course,
used to be chief economist, and she exactly same what
you've said. She said, I just don't understand. It's not
like they're getting a lot more information over the next
five weeks. It's going to make much of a difference.
And I said, do you think it's the board, the
board being much more independent? She said, well, you know,
(01:37):
the board weren't patsies previously. All that's okay, so that's fine,
but it does really for the first time show the
world is different and the Reserve Bank Management can't get
its way necessarily.
Speaker 2 (01:52):
That's true. And the fact that they did release the
aggregate voting because there are nine members of the RBA
Monetary Policy Board and they vote should we put them
up down or leave them steady and all these other things,
and it was six to three, so six said on
hold three set of cuts. So there was obviously some
pretty fullsome discussion, let's say, And had Lucy and I
(02:14):
have been on the board Heaven forbid me. You know
we would have cut rates because again, and just to
take a step back, you're getting back to the initial
point of your first question. We do know that on
the monthly basis trimmed mean inflations I put a lot
side headline for a moment is two point four percent
below the midpoint of the target range. We do know
that the GDP growth rates under one and a half percent.
(02:37):
We do know that things like consumers spending building approvals
are pretty subdued. And we also know that the current
three point eight five percent cash right is restrictive, and
that means, in simple terms, it's putting more negative influence
on the economy than positive. And we needed to get
neutral at the very least, and that's still fifty basis
(02:59):
points low than we currently are. So moving to neutral
is sort of the the fault position that I've still
got for the RBA policy over the next couple of months.
Speaker 1 (03:07):
Yeah, so when the upshot of that, though, the upshot
of last week is that Michelle Bullock, the governor, did
say rates are still going to come down. It's a
timing issue, not a directional issue.
Speaker 2 (03:16):
Yes, she was at pains to say that, So I
think she was sort of probably just really wanting to
reinforce at the RBA board and particularly with global issues.
By the way, again, over the weekend we've seen more
Trump tariffs being announced and there's sort of a bit of
a scattergun approach, and you know, the RBA is of
the assessment and quite rightly that these tariffs, even though
they don't directly impact Australia by huge amount, the effect
(03:40):
on international trade will be significant. And again Australia, with
roughly a quarter of our economy being export focused, if
the world economy China in particular, but Asia more generally,
is then we'll get a bit of a negative backwash
on that. So that's what the RBA is thinking too.
So again, yeah, there's rake cuts are still coming, there's
still pr us into them. I was just looking at
(04:01):
my future's curve this morning. We've still got about seventy
five ish maybe one hundred points priced in by this
time next year. That of course can change, but the
market's still looking for eight cuts even though we had
the shock decision last week.
Speaker 1 (04:16):
Okay, the next few days, labor force figures is probably
the big one.
Speaker 2 (04:20):
They're BIGGI yeah, always and again bigger because it's important
in a social sense, but important because it's part of
the RBA dual mandate. They have an eye on full
employment and to the credits. The labor market's been very
resilient in the last couple of years. We've had employment
growth well monthly. It's incredibly volatile. Putting a trend line
(04:40):
through that, we've got decent employment growth. We're expecting another
twenty odd thousand jobs on Thursday when the numbers are released,
and the unemployment rate's been sort of really fly paper
to four point one percent. Can't move from that level.
It will one day, but I think at six months
in four point one the market's expecting that to be repeated.
But again I think they're sort of if they were
(05:00):
to say, where are the risks, it's probably that we
get a four point two or four point three unemployment rate,
which will just reinforce the expectation that in early August
our friends at the RBA will trim rates again.
Speaker 1 (05:12):
And what do you expect from the National Australian Bank
Business Survey this week?
Speaker 2 (05:15):
Yeah, more information there. It's sort of a little few
grounds for sort of mixed views. Again, the rate cuts
that we've seen in the past have been helpful, but again,
global conditions. It's all about global conditions. I think for
the business sector they're not quite as interstraight sensitive as
US household, as US consumers. They're more looking at big
picture policy issues, global issues. So yeah, we'll see.
Speaker 1 (05:39):
Stephen and Joy the week.
Speaker 2 (05:40):
Thanks Sean.
Speaker 1 (05:41):
That's economist Stephen cookulis better known as the Kok. You
can find him at the cook dot com and follow
him on X using the handle the Kirk. I'm Sean
fearing Greed The week ahead.
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