Today brings the latest unemployment number and those in the mortgage belt worried about news stories that say two or three rate rises could be on the cards, should be hoping that economists tipping a jobless rate of 4.5% are wrong. The simple story about the dismal science called economics is that a more worrying labour market is what the Reserve Bank board wants to see.
And as I ponder the possibility that the future unemployed Australians will come to the rescue of interest rate sufferers by being forced onto the dole queue, I’m trying to find a range of possible positive developments that might surprisingly come along before the now increasingly expected Cup Day rate rise on November 3.
For the record, only a jobless rate of 4.7% or higher will stop Tuesday’s ‘train’ carrying the RBA heavyweights, who are expected to be raising the cash rate from 4.35% to 4.6%.
What I’m speculating on are surprise happenings from left-field that could cancel the causes of many Australians’ hip-pocket pain every time the central bank goes for that cursed lever to raise the cash rate.
Here’s a nasty picture of what I’m saying from Judo Bank’s best rate caller at the moment, Warren Hogan, thanks to the AFR’s Michael Read.
While there are many causes of inflation now, here are a few but the first three are the ones that could help slow down and even stop rate rises. Here goes:
- A Trump-Iran deal to push oil prices down.
- This would reduce the expectations of rising and sticky inflation.
- Unemployment rises quicker than expected.
- Business and consumer confidence continues to slump.
- House price horror stories start to dissipate, and the housing sector starts to look less disastrous.
- The Albanese Government cuts spending in a mini budget, which is very unlikely.
- The Albanese Government cuts immigration numbers quicker than is currently promised.
Right now, there is some promising talk coming out of the Trump camp, but their messages haven’t proved reliable in the past.
Early yesterday, we learnt from CNBC that Trump said he has a “big decision” over whether to reach a deal with Tehran or “annihilate” the country! Despite the latter, oil prices eased slightly, with both Brent crude oil and West Texas Intermediate slipping roughly 1% each in the session.
More importantly, it has been reported that Iran has been in negotiations with the U.S. through a Qatari mediator in New York and has communicated its conditions for ending the seven-month war on all fronts.
There was also good news from Ukraine, with Volodymyr Zelensky of Ukraine saying he was ready for an ‘energy ceasefire’, and called for a trilateral meeting with Putin, Trump and himself.
Peace deals and falling oil prices would be a positive circuit-breaker that could make the RBA hold fire on more rate rises in either November or December, on top of the one I expect next week.
Throw in a bigger-than-expected unemployment number tomorrow, which I have no inside info on, and then there’d be a strong case for the RBA to hold fire on too many rate rises.
What I have liked is a recent trend that showed as oil prices eased, bond yields fell and that is a nice predictor of what could happen to interest rates, and that’s why Trump and Iran are very important players in the game called guessing what the RBA will do.
Pray for peace as it might put an end to the RBA’s rate rise reign of terror!
