RBNZ cuts rates
If there's one thing that will get central banks motivated towards cutting interest rates, it's rising unemployment, and the Reserve Bank of New Zealand cut interest rates today as the rising rate of unemployment has begun to become a concern.
A dovish statement points to more rate cuts ahead for NZ, while for now the official ABS unemployment rate in Australia is only 4.1 per cent.
In the UK, both core and services inflation fell sharply and more than expected in today's release, meaning that interest rate cuts will also be following from the Old Lady of Threadneedle Street.
In the US, the Bureau of Labor Statistics reported that headline inflation fell to a slightly lower than expected 2.9 per cent, after rising 0.2 per cent in the month of July.
The core inflation figure for the month was 0.17 per cent, while the 3-month and 6-month annualised core figures were each the lowest since the first quarter of 2021 respectively.
Source: Bureau of Labor Statistics
With the US Federal Reserve and other central banks due to cut interest rates in September and further over the remainder of the year, will Australia be able to hold out, or will we soon be following suit by the end of 2024 (in line with market pricing)?
Later to the party
Inflation in locked down Australia peaked some six months later than in the US, Canada, and New Zealand, and two months later than in the UK and the Eurozone.
So in that context it's maybe not too surprising that we're the last of this select group to get back down to around ∼3 per cent inflation.
Monetary policy in Australia is obviously somewhat influenced by what happens elsewhere, and it also appears that inflation rates around the developed world are fairly well correlated these days.
There will be some helpful base effects for Australia over the coming few months which will help to push the monthly inflation gauge down to around 3 per cent in due course (in fact, government subsidies will do the same for the quarterly headline inflation figures as well).
Down Under news
Today's figures from Jobs & Skills Australia showed job advertisements dropping another -3.7 per cent in July 2024, to be -23.1 per cent lower than a year ago and at the lowest level in 3 years.
CommSec chimed in with the relevant chart:
Source: CommSec
While there we still 217,000 vacancies on this government index - which for now remains higher than in 2019 - and one doesn't want to be alarmist, is that trend is starting to look just a little bit '2009-ish'?
In Victoria, job vacancies fell by a concerning -7 per cent over the month to be -32 per cent lower over the year, for example.
Business insolvencies also running at elevated levels in Australia, especially across the construction sector.
In other news, the iron ore price has plunged from $140/tonne earlier in the year and looks pretty much set to break below $100/tonne, which will make a significant difference to revenues hitting the coffers.
These and other softening trends suggest that Australia's November interest rate meeting could yet prove to be a 'live' one for a first interest rate cut - and markets have fully priced in a cut by December - but tomorrow's labour force figures will shed more light on things.
Roy Morgan's shadow unemployment rate survey rose to above 10 per cent this month, for the highest since reading August 2023.
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