The Tightrope Walk: Will Employment Data Trigger One Last RBA Rate Cut?
Seventy-four percent of homeowners in Toowoomba are now struggling to meet mortgage repayments. This stark figure underscores the delicate balancing act facing the Reserve Bank of Australia (RBA) as it weighs its next interest rate decision on September 30th. While the RBA has already delivered three rate cuts this year, bringing the cash rate to 3.6% – a level not seen since April 2023 – the question of whether another reduction is on the cards hinges on a single data point: tomorrow’s national employment figures.
The Employment Rate: The Deciding Factor
Experts, including EQ Economics managing director Warren Hogan, are unequivocal: the unemployment rate is the key. “I think the unemployment rate is the key this week for the RBA,” Hogan told Sky News Australia. The global trend amongst central banks is towards the end of easing cycles, meaning the RBA’s decision will be heavily influenced by domestic conditions. A rising unemployment rate could provide the justification for further easing, while continued strength in the labour market would likely solidify the current rate.
Currently, Australia’s unemployment rate sits at 4.2%, a slight improvement from 4.3% in June. The RBA forecasts it to remain around 4.3% by the end of 2025. However, even small fluctuations will be scrutinized. The recent shift towards more part-time employment, coupled with the highest unemployment levels since the peak of the COVID-19 pandemic earlier this year, adds to the complexity.
The Property Market Paradox: Cuts Help Borrowers, Hurt Aspirants
The impact of any rate decision is far-reaching. While lower rates provide relief to existing mortgage holders, they simultaneously fuel demand – and prices – in an already overheated property market. This creates a challenging situation for those trying to enter the market, pushing the dream of homeownership further out of reach. Further cuts risk exacerbating this affordability crisis, potentially creating a two-tiered system where existing homeowners benefit at the expense of prospective buyers.
The Tech Disruption & Future of Work
Looking beyond the immediate rate decision, a more fundamental shift is underway in the Australian labour market. As Hogan points out, companies like ANZ are announcing job losses, signaling a broader reorganization driven by technological advancements. This isn’t simply a case of job displacement; it’s a structural change requiring workers to adapt to new roles and industries. The question isn’t just whether we’ll see periods of labour market weakness, but whether the RBA will respond with rate cuts in the face of these evolving dynamics.
This technological disruption will likely lead to increased volatility in employment figures over the next decade. The challenge will be transitioning workers from declining industries to emerging ones, a process that won’t be seamless. The RBA will need to consider these long-term trends when formulating its monetary policy.
Inflation Cooling, But Not Conquered
The RBA’s chief economist, Sarah Hunter, offers a more optimistic outlook, suggesting the central bank is nearing its inflation target. “We had inflation almost at 8 per cent at the end of 2022, and we’ve been really trying to bring inflation back down,” Hunter stated to the AFR. However, achieving this target requires continued vigilance and a careful assessment of economic data. Strong employment figures and stable wages are crucial components of this equation.
The RBA’s success in curbing inflation will ultimately determine its future course of action. While the possibility of another rate cut before Christmas remains on the table, the likelihood depends heavily on the interplay between employment data, inflation trends, and the broader economic landscape.
For a deeper dive into the factors influencing Australian property prices, explore the latest research from the Domain Research House.
What are your predictions for the RBA’s September decision? Share your thoughts in the comments below!
