Q+A: The Week Ahead | 3 August 2026
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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. Stephen, I don't know about you, but it does feel like this week is kicking off in a pretty different place to where we kind of started last week. Because last Monday morning, there was the very real chance of a brutal June quarter inflation number on Wednesday and then an interest rate hike to follow. And we didn't get it.
Instead, we saw inflation easing more than expected. So let's start there. It's a perfect place to start. I know this is just going to open up a whole can of worms, but are we out of the woods yet, Stephen?
We're not quite out of the woods, but we can see an exit out of the woods if that doesn't talk to the cliché too much. But again, inflation came in a tenth or two lower than the market was expecting, and indeed, more importantly, than the Reserve Bank were expecting. So even though that only sounds like a relatively small difference, like 3.6% for the annual trim mean as opposed to 3.8%, First of all, the error was in the right direction, nearer the target, and that's good. The momentum that we saw from the monthly numbers, and I think as we discussed last week, the monthly numbers contain a within-quarter trend. You get the April, May, and June numbers rather than the average of the June quarter.
They're both important, but... looking at the intra-quarter movements, it does look as if that momentum on inflation is decelerating into the September quarter. Now, I don't want to sort of over-egg this, but it does look as if the price momentum, the inflation momentum is decelerating at a pace that would be a little bit more sharper than the RBA was thinking. And that's good news. The inflation, still a problem, still too high. We're not out of the woods, as you're saying, but you can see a path that over the next 12, maybe 18 months, we'll get inflation back on track.
Okay, so 12 to 18 months is kind of perhaps when we're looking at it getting back comfortably within the target band there. So what does that mean then in terms of interest rates? Next move in rates, what is it and when is it?
How did last week's inflation figures change the outlook for monetary policy?
The next move is sideways. That's my cop-out. Look, the board meet next week, Monday and Tuesday. I think the market pricing is a very, very low probability of a rate hike. I'm more likely to open the batting for Australia this summer than the rate hike to be delivered, and that ain't going to happen. So I think the bank, and Michelle Bullock gave a speech last week at the Anika Foundation. This was before the inflation numbers came out. And again, she was all hawkish, anti-inflation, we've got to fight inflation, and absolutely spot on, as she should have been. But I think even she would have been pleasantly surprised that that fight is being won, and that when we look at things like the labour market, the unemployment rate, which is sort of creeping up a little bit,
House prices, and again, Ms. Bullock made the point that they don't target house prices. However, they do look at the effect of changes in house prices on we consumers, the bank balance sheets, because we don't want house prices to be sort of undermining the financial health of our banks. Yep. And all of this sort of says, look, just be on hold for this particular meeting. They meet again at the end of September. There'll be another round of numbers coming through the economy that they can then contemplate. And it says we've got a hawkish bias. If there is a move, it'll be up, not down. But we don't need to move them at this meeting.
Okay. Just one last one on inflation because I don't want to spend too much time on something that really – Those results last week are behind us. What could derail it over the next, if we're talking about next 12 to 18 months, inflation gets back into that comfortable range for the RBA, what would be the biggest risk?
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