Respected economist Chris Richardson, a former Treasury number cruncher and founder of Access Economics, is warning us that economically the worst is yet to come. And why wouldn’t it when a country has just copped 12 interest rate rises in around a year?

These warnings come in an important week for the economy and stocks. In recent times, the impact of the excessive rate rises is starting to show and it’s why most economists expected the RBA to pause on rate rises in recent months (three pauses in fact). Quite a number are now tipping that we’ve seen the last rise from the Reserve Bank. The cash rate is now 4.1% and in April last year it was 0.1%!

However, that will depend on the run of economic data. This week delivers some important data that should tell us about the likely course of inflation in both here and in the US, where Wall Street is the big influencer on what will happen to our stock prices.

If you want interest rates to fall ASAP, we need bad news to get worse, so for you, bad news is good news. This puts pressure on the new RBA Governor to get the rate rises or cuts right, so we still beat inflation down to 2-3%, while avoiding a deep recession.

This is why the new RBA boss, Michele Bullock, is on a million dollars plus a year!

Here are the big watches for this week for rate worriers, homebuyers, stock players and business growers. It’s also important for savers because term deposit rates are starting to fall a little, which is a sign that banks are expecting inflation to keep falling and the cash rate possibly has hit the top here.

Back to the upcoming data drops. Here they are:

Locally, consumer and business confidence will tell the RBA about the ongoing hit from their rate rises, while the CBA’s Household Spending Indicator will be another gauge of how the local consumer is reacting to rates. The biggie is the labour force reading on Thursday. If unemployment keeps rising, the RBA will stick with pausing, but if jobs created rise bigger than expected, then more potential rate rises will grab the headlines.

Here are the main points from Chris Richardson’s economic crystal ball that he shared with Rachel Clun in the SMH:

1. The “overall pain gets worse from here” he predicts.
2. Unemployment at 3.7% is heading to 4.4%.
3. The mortgage cliff keeps kicking in for those who were on low fixed rate mortgages and go to high variable rate loans.
4. Low- and middle-income taxpayers lose their pandemic-related tax cut from the 2021-22 Budget.

(The LMITO was a temporary tax cut for anyone earning up to $126,000 and put about $11 billion into consumers’ hands.)

5. He doesn’t expect rate cuts until the end of next year!

So, Chris is at odds with the CBA and AMP whose economists have rates falling in the March quarter of next year.

In contrast, Rachel Clun tells us that “Westpac, NAB and ANZ all expect the first rate cut to come in the latter half of 2024. Westpac and NAB expect the first cut in August, while ANZ is forecasting the first cut in November.”

What’s interesting about Richardson’s negative calls about unemployment at 4.4% and rate cuts not coming until late in 2024, is that this is bad news that would be good for some.

You see, if the CBA and AMP are right and rates fall in the March quarter, then all Richo’s bad economic developments will actually be worse than what he’s expecting. This will force the RBA to cut sooner rather than later.

If his bad news isn’t as bad as the CBA and AMP are expecting, then rate cuts will come later because the threat of inflation staying high will keep Michele Bullock holding back on cuts.

Really bad economic news between now and Christmas will bring rate cuts forward, but OK bad news will delay rate cuts. Of course, if the news is worse than expected, then rates will fall quicker, but you could lose your job beforehand!