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Chapter 1: What economic indicators are being discussed this week?
Welcome to Fear and Greed Q&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 Koukoulis to look at the week ahead. You'll find him at thekouk.com, that's T-H-E-K-O-U-K.com, and sharing his views on LinkedIn as well. Stephen, good morning. Very good morning, Michael.
Now, we've got a fair bit coming up this week, including the GDP figures, which we'll talk about in a moment. But I wanted to just touch on last week's inflation numbers. These were the April inflation figures. Came in a little softer than expected and couple that with the household spending that we saw last week as well, showing some signs of softening.
Can we now say that a June rate hike is completely off the table?
Absolutely.
Look, I think the short answer is yes. It's not just the inflation numbers. And as you said, the household spending numbers were very weak, but it's in concert with what's happening on the labour market. We saw the figures a couple of weeks ago showing a rise in the unemployment rate. But from last week, the inflation numbers came in a little bit better than expected.
The headline inflation was still 4.2%. So that's still very, very high. There's Part of the unwind of the electricity subsidies impacting the annual figures and the like, but the trimmed mean 3.4%, so still about a percentage point above where the RBA would like it. But there appears to be a consolidation around that 3.25% to 3.5% for inflation.
And of course, the impact of the rate hikes hasn't really kicked in yet. So when the economy is starting to slow down, when you've got the inflation numbers topping out, I think we can squarely say the RBA may want to just sit tight, see the impact of the three rate hikes so far in 2026, see their impact on the economy.
And June looks to be on hold and we'll wait for the next round of labour market and inflation numbers again in the months ahead.
You mentioned that headline figure of 4.2%. Jim Chalmers, the Treasurer, was speaking last week and said that if it wasn't for the fuel excise cut that the government had introduced, that the headline rate would have been closer to 4.7%. What happens when that temporary cut to the petrol excise comes off and the price goes back up?
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Chapter 2: How did last week's inflation numbers affect the June rate hike?
Yeah, we're expecting actually a reasonable result. I think a figure around about 0.6% quarter on quarter. which is not bad. The annual figure will be just a little bit below 3%. So the first quarter of 2026 was actually okay in terms of economic growth. We saw last week too some CapEx capital expenditure numbers being very strong.
Data centres again driving that, but hey, that's real economic activity.
so the bottom line gdp numbers are probably being okay but a little bit like the petrol price effect in the month of march so for one third of the quarter the quarter's january february march there was this big boost in spending as people topped up their petrol tanks and filled up jerry cans and the like so that will probably just add about 0.1 to bottom line gdp that will not be there
In the June quarter data, sorry to be a little bit all over the place on these numbers, but it's a really important thing to think about that these numbers are going to be, again, a little artificially strong. The RBA will be pleased to see the economy growing, but it'll be very well aware that there's going to be a bit of an unwind when we get the June quarter numbers.
You mentioned 0.6% quarter on quarter. Can you put that into some historical context in terms of how does that compare to how Australia's economy has grown in the past? I know that you said this is actually, that's not a bad result for us now, but how does it compare with where we've been previously?
What you've ripped open there is the can of worms of productivity back in the olden days. And the olden days is only 10 years ago. We used to get quarterly GDP growth of around about 0.8%, so three and a quarter annualized, which was not bad. what we're seeing now is that figures now around about 2%, 2% to 2.5%, according whether it's the RBA or Treasury that you listen to.
So 0.6 is sort of the new trend, if you like. And if we grow much faster than that, we get demand pressures, we get inflation pressures and the like.
Okay. It'll be interesting this week. I think we've got Reserve Bank Governor Michelle Bullock is speaking at, she's appearing at the Senate Economics Legislation Committee. Importantly, she'll be appearing after the GDP figures have come out. So we might get a little bit of an insight into her read on that.
Really important. And again, it's very hard to judge what questions shall be asked by the Senate. My hunch is it'll be all focused on the implications of these tax policy, the capital gains tax, negative gearing and trust tax changes, their impact on the economy and inflation. So there'll be a Obviously, a heavy political element to that. So I think she'll bat them away to the sideline.
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