The RBA’s interest rate decision on 6 June 2023 will again be a line ball decision as to whether they raise or not. 

I think the RBA will keep interest rates on hold this month giving them more time to assess the incoming data especially the GDP national accounts.

“Members reaffirmed the Board’s determination to do what is required to bring inflation back to target, while emphasising that it is still seeking to traverse the narrow path. Members also agreed that further increases in interest rates may still be required, but that this would depend on how the economy and inflation evolve.”

Last months out of the blue decision to raise by 0.25% to 3.85% was like a warning shot across the bows of the economy. People to an extent had started to relax thinking that interest rates had topped out and inflation was beaten. The last thing the RBA want’s us to think is that the inflation fight is over. 

The RBA is likely to keep an interest rate tightening bias for quite a while to keep us on our toes. 

Unemployment is the key

Unemployment is the key. Unemployment is still close to record lows. Demand of all sorts which is driving inflation will not slow until people start to fear losing there jobs or jobs become harder to find. It’s a bit sad and perverse to think that we need unemployment to go up to confirm inflation is coming down.

We’ll likely know that inflation is on the way to being beaten once unemployment in Australia breaks back through 4%. Interestingly I have just returned from a holiday in the USA where in the small sample size of places I visited every second shop was looking for staff. 

Let’s see.