Q+A: The Week Ahead with NAB

Welcome to Fear and Greed Q&A, where we ask and answer questions about business, investing, economics, politics, and more. I'm Sean Aylmer, and every Monday morning, we're joined by the economics team at NAB to look at the week ahead. Gareth Spence is head of Australian economics at NAB. Gareth, good morning.

Morning, Sean. How are you?

Well, we can't really look at the week ahead without at least mentioning last week, which was a bit of a bonanza. We had a rate hike. We had CPI figures for August, which were probably, if anything, a touch on the soft side. We also had house prices for the month of September, and they've come off even more. How do you wrap all that up?

Yeah, look, it's quite a bit of a challenge at the moment. We've certainly got that flood of data. We got the messaging from the RBA. I think some slightly, I guess, conflicting signals as well. And that's just the challenge we're in at the moment as economists trying to weigh up what the underlying trends are in things. The CPI, as you said, certainly maybe the margin is slightly softer than expected, but it's the usual story that it's a new monthly CPI measure and it is a bit volatile. We're all a little bit used to that that volatility but i think you know as you say i think the key takeaway there is um maybe july looked quite strong uh the august data looked a little bit softer um but the overall story i guess is still very much consistent with that rba rate decision last week in terms of inflation is too high so i think the question here is inflation isn't running away from us um but it's it's a question of how quickly is it moderating or is it sort of stuck at these 0.9 or one percent in that quarterly sense

Do you think, and we'll get to the week ahead in a moment because that is the name of the podcast, I suppose, but in terms of further rate hikes, what is NAB's position on that?

Look, we have them on hold for now. I think we've pretty openly acknowledged that we think there is a risk there is a little bit more. I think markets certainly had expectations firming a little bit stronger for November and even possibly again in Feb. That has pushed back or pushed out a little bit over the week based on that RBA messaging. And so I think The pressure is there. That inflation data still does show the breadth of inflation. So about 60% of that basket is still rising by more than 3.5% in annualized terms. That's a percentage point above the midpoint of the RBA's target. So they'll be pretty cautious. We know the risks of the Middle East are still there in the background. They are possibly going to flow through a bit more. Our business survey certainly says that. And so I think the RBA is still treading a fairly cautious path. They know that inflation is the focus, but also still very much looking at what's happening in the labour market and activity as well.

Okay. So this week, we don't have a huge amount of data around the building approvals. Data is the main piece from the ABS. Maybe that's an opportunity to think about housing and construction and where that sector is up to. Just firstly, for listeners, why do we care so much about housing and construction and that type of thing?

I