The jobs market appears to be weakening, and the latest data has given the Reserve Bank only a little of what it needs as it tries to bring inflation under control. Whether that is enough to stop at least one more interest rate hike remains unclear.
That matters today because the central bank’s inflation fight is still in its early stages, even as the unemployment debate intensifies and the pressure around household spending stays high. The latest jobs data showed the labour market is no longer providing the same support it had in recent months, which is one reason economists are watching the next move so closely.
Over the past few months, this column has argued that the Reserve Bank’s task would be made harder by two forces running in opposite directions. One is the roughly $3 trillion added to household wealth over the past two years. The other is spending tied to structural changes in the economy that is likely to continue almost regardless of where interest rates go.
Those structural changes are not a short-lived burst of demand. They include investment in data centres, the energy transition and the critical minerals sector, all of which can keep activity moving even as borrowing costs rise. That leaves the Reserve Bank trying to slow inflation in an economy that is not responding in a straight line.
The tension is clear in the latest jobs numbers. A weakening labour market can help cool inflation, but it can also point to a softer economy at exactly the moment the Reserve Bank still needs evidence that price pressures are easing. The data delivered some of that signal, but not enough to settle the question.
So the answer for now is simple: the latest jobs data helps the Reserve Bank, but not decisively. It weakens the case for stronger demand, yet it does not rule out at least one more interest rate hike if the inflation fight stalls.
