The Reserve Bank has left interest rates on hold, as predicted, and said that while inflation has picked up more than expected, many of the factors were temporary. The central bank upped its forecasts and expects inflation to be above three per cent for much of next year, before heading to around 2.7 per cent at the end of 2026. The RBA forecast the unemployment rate will stabilise around its current level. Financial markets' immediate response to the rate decision was muted – the Aussie dollar didn’t move much from US65.25c and bond yields, which reflect expectations of future rates, were largely unchanged. The consensus view among market economists remains no rate cut this year, and one next year.

Listen to today's episode 🎧 

News in brief

The corporate regulator, ASIC, has released a benchmark report into private and public markets, including private credit and equities, and the bottom line is that both are good, if done well. According to ASIC, in the case of private credit, there is a fair bit of work to do to get to that point.

The federal government will force electricity suppliers to offer three hours of free power in the middle of the day, when demand is low and solar generation is at its peak.

Barnaby Joyce, the former Nationals leader and current party member, just, yesterday voiced what many conservatives think – coal fired power is the cheapest available option and is the solution to high energy bills.

Microsoft has signed a $14.8 billion deal to purchase AI cloud capacity from IREN, becoming the Australian company’s largest customer. IREN is building a data centre in Tasmania and is listed on Nasdaq. Its share price shot up 25 per cent on the news.

The Maldives has banned anyone born on or after 1 January 2007 from smoking tobacco, becoming the only country in the world to enforce a nationwide generational tobacco prohibition.

Fear-o-meter

Reserve Bank Governor Michele Bullock yesterday talked about whether monetary policy was restrictive. Are interest rates holding the economy back? The general perception had been that they are. Even the central bank had suggested that.

Now Bullock isn’t so sure. Maybe changes to the economy mean interest rates are already at neutral.

What people pay for a mortgage or business loan today, or consider when investing, might be the long-run sweet spot. If so, it is very possible the next move in interest rates will be up, not down.

It isn’t the central case scenario for most market economists, but it is a strong possibility if inflation doesn’t fall back towards 2.5 per cent.

If unemployment stays around 4.5 per cent and the economy keeps growing at a two per cent plus rate, which is about the best we can hope for, and there is no drop in inflation, then rates are likely to go up, not down.

Fear & Greed Q+A today

On yesterday's interest rate decision, and the major shifts in the Australian economy that mean the next move in interest rates could be up:

 

"This stronger than expected inflation number points to a risk that we could see a rate hike in May. I'm not ready to push that yet. I want to see a bit more data, but look, that's unfortunately, we have a lot of uncertainties, both geopolitical, structural, but the reality is we have an economy that's in a cyclical recovery. We now have evidence that inflation has turned the corner and that means one thing and one thing only, and that rates are not going down and are probably going to have to go up a bit."

Greed-o-meter

Yes, we talked about this earlier in the week, but the stats are too interesting to leave to just one day. Nine newspapers have taken a deep dive into the ABS data to find Australia's hardest workers. Assistant drillers on mine sites came in at #1, working 70.3 hours per week, but here are some other common jobs:

Source: ABS, reported in Nine newspapers

Forwarded from a friend? Sign up to our daily newsletter