The headlines say there has been a “surprising number of Australians out of work in December” and now the four major banks say the RBA is done and dusted with interest rate rises. I think they’re right, unless the Reserve Bank board is populated by a bunch of dunces!
Sure, the January 31 Consumer Price Index reading for the December quarter has to show inflation continues to slide but this loss of 65,100 jobs in the month of December and unemployment at 3.9% (and going higher) SCREAMS that 13 interest rate rises since May 2022 were definitely enough.

For months I’ve been arguing that the last two rises were probably excessive because rate rises (or monetary policy) works with a longish lag. Throw in the fact that 40% of borrowers were on fixed rate home loans (due to Covid-created historically low rates) when usually it’s only15% of borrowers, two things were likely to happen.
First, the lag between rate rises and people stopping their spending to help reduce inflation would mean the lag would be longer than usual. This means monetary policy would work slower than usual.
Second, lots of people were on low fixed rate home loans, which didn’t convert to high variable home loan rates as quickly as was expected, this also added to the lag.
However, given economists expected 15,000 jobs to be created last month, but we actually lost 65,100, their calculations were way out. If you lose 65,100 jobs when you expect 15,000 jobs to be created, that equals an 80,100 mistake!
Now, these December job numbers are telling us that interest rates are really starting to bite. And even though the jobless rate didn’t change at 3.9%, that’s still an 18-month high.

HSBC chief economist Paul Bloxham told the Daily Telegraph that there has “…been a continued gradual loosening of jobs market conditions for the past 15 months.”

This sentiment was supported by IG market analyst Tony Sycamore. “Make no mistake, the labour market is cooling, and following a recent run of softer inflation data, RBA rate cuts are coming.”

He told Sky News that the “December quarter inflation data, scheduled for release on January 31, will determine whether expectations of two 25 basis point RBA rate cuts become three in 2024.”

Seriously, barring a surprise spike in inflation in December, if the RBA raises interest rates again, we’ll have to get out the dunce hats! By the way, the next big drama/question for the central bank will be when do they start the cuts? Until yesterday’s job figures, the economists who got these numbers wrong thought September would bring the first cut, but they now could come sooner to avoid us falling into a recession.