While the RBA looks a certainty to stay ‘on hold’, the next decision on Cup Day in November looks like a good each way bet for a 0.25% cut. And here’s why.

With 32 out of 32 economists and commentators telling a Finder.com.au survey that there’d be no change to the cash rate of interest from the RBA today, the words of J.K. Galbraith, one of my favourite economists, came back to me.

These words are: “In economics, the majority is always wrong.”

While the word “always” makes Galbraith’s astute observations debateable, it has always been something I’ve never forgotten when it comes to trying to make sense out of economies, government policies and stock, as well as bond markets.

While his statement wouldn’t be so impactful, I’m more comfortable with substituting “always” for “often”. This is really good advice for anyone who aspires to make money out of financial markets.

That said, the majority of economists should be proved right today. While the RBA looks a certainty to stay ‘on hold’, the next decision on Cup Day in November looks like a good each way bet for a 0.25% cut.

However, it will depend on the data drops between now and November 4, when ‘the race that stops the nation’, competes with the RBA for front page headlines.

Given that Mark Twain, the great US social commentator and historically great bagger, was credited as coining the description “the race that stops a nation” in 1895, even Twain would have a wager on the winner of the Cup beating a rate cut for top headline in our bet-crazy country! (By the way, ChatGPT, disputes that Twain penned this observation of the Cup, but it does say he loved the occasion.)

But I digress. Back to the reason for no cut today. So let me list my reasoning that the cash rate will be held at 3.6% today. Here goes:
1. We’ve had three cuts totalling 0.75% already this year.
2. Monthly inflation went back to a too high 3% in August.
3. Unemployment is only 4.2% and didn’t rise in August.
4. Economic growth was 0.6% in the June quarter and annual growth was 1.6%, which was better than the March figures of 0.2% for the quarter and 1.2% for the year.
5. Electricity prices soared 24.6% in the 12 months to August, with the large increase primarily due to state and federal governments energy rebates being phased out, and now the state rebates have lapsed.
The maker or breaker of a Cup Day rate cut will be the quarterly Consumer Price Index number delivered on October 29. This report needs to show both headline and underlying inflation is firmly in the 2-3% band.

Before that, on October 24, we see the National Accounts that will tell us how the economy was growing at the end of September. If it’s less than 1.6% that will help those praying for a rate cut. If it’s higher, then the RBA board would think a rate cut isn’t necessary. That’s why the inflation reading five days later will be the big determinant on whether a cut happens on Cup Day.

While I’d like to say you can bet on a November rate cut, as Twain once said: “Truth is stranger than fiction and