Both business and consumer confidence shifted downwards over the month of August, with consumer confidence remaining deep in negative territory and business confidence falling back into negative territory. Of most concern is that both NAB’s Business Survey and Westpac’s Consumer Survey report deterioration in the outlook for the labour force.

On the consumer side, employed people, in particular, are more negative about the outlook for employment, while the business conditions index slid mostly due to a large fall in the employment sub index.

While the unemployment rate is rising at a gentle pace, we are now entering a period where almost all forward indicators of employment conditions are pointing in one direction – and that is to a sustained continued increase in the unemployment rate.

CreditorWatch’s main leading indicator of business stress, trade payment defaults, is now at record highs and has seen a 68 per cent increase for the 12 months to August. The RBA fully expects unemployment to rise and has indeed forecast the unemployment rate to reach 4.4 per cent by December 2024, and importantly, stay there until December 2026.

However, given we are already at a seasonally adjusted 4.3 per cent unemployment rate, these deteriorating leading indicators suggest we are now running a real risk of overshooting these unemployment forecasts. This measure will absolutely be one to watch over the next few months, as it will be in the USA and other major economies, and will be key to the timing of the first cash rate cut.