RBA Governor Michele Bullock says ‘services’ inflation is the ‘sticky’ type. Picture: Martin Ollman
ANALYSIS
Shockwaves rumbled through the economic landscape last week, as Australia’s unemployment rate hit 4.5 per cent in September, according to the latest data released by the Australian Bureau of Statistics.
That’s a sizeable month-on-month leap up from the 4.3 per cent seasonally-adjusted number we got in August.
That now puts unemployment at its highest level since November in 2021, when we were still crawling our way out of the Covid lockdown situation.
But the September numbers shouldn’t come as too much of a surprise.
We already knew that banks and other big companies were cutting staff by the thousand in September, which was bound to put a dent in the numbers.
The ABS data showed there were 34,000 more unemployed Australians in September than in August.
Other data from ANZ revealed a 0.3 per cent decline in job ads month on month, which is the steepest fall since the beginning of 2024.
Job ads are down for the third straight month. Picture: David Mariuz
And job ads this September were 4.3 per cent down on the same month last year.
Job ads have now declined for three months in a row … I think we can call that a trend.
So, what will the RBA do? Surely they now must cut rates in November to give the economy a boost?
Not so fast, says Governor Michele Bullock. Why? Well, it seems inflation is a little … “sticky”.
Ugh, sticky, inflation is so gross.
So what can we do?
Apparently, it’s ‘services’ inflation that’s proving harder to get down than ‘goods’ inflation. ‘Services’ include things like education, health care and hairdressing.
So all we need for another rate cut would be to stop going to school, stop getting sick and going to hospital and also stop growing our hair so much. Some of us are already doing our bit for the economy on the last point.
We could also stop paying so much on rent, but, for a renter, the need to live somewhere will usually supersede any charitable feelings towards those paying off mortgages.
One expert thinks all this talk of inflation is so last week.
Stopping growing hair would reduce the spend on hairdressing. Picture: iStock
Dale Gilham, analyst and founder at Wealth within, described inflation as “yesterday’s battle”.
He said the real issue is that the economy is stalling and the RBA is watching as businesses put a freeze on hiring, consumer confidence plunges and the construction sector buckles.
For these reasons, he sees another rate cut this year as inevitable and believes that if the central bank holds next month, it will have no choice but to cut in December.
He has a point, but the RBA’s own language serves to reiterate over and over again that inflation is its number one responsibility.
That’s why it hiked so aggressively in 2022 and 2023. And that explains the reluctance to cut the cash rate and stimulate any level of spending that could de-rail its efforts so far.
There’s nothing the RBA likes more than to ‘wait and see’ what the next data set says. And the next big one will be the September quarter CPI data, which will be released on 26 October.
Strap yourself in for that one because it will be the set that decides the fate of the rate for the rest of the year.
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