Global factors have played a key role in today’s decision by the Reserve Bank of Australia (RBA), as inflation continues to remain sticky in the US, and currency movements make inflation harder to tame in Australia. The US Federal Reserve hiked their interest rates another 75 basis points in September, and indicated they won’t stop until inflation is well under control there. This has raised the prospect of recession in the US considerably, and resulted in a downbeat mood amongst equity investors.

Key indicators in Australia remained fairly stable, although there are very early signs of labour force pressures easing. The unemployment rate rose by 0.1% to 3.5%, although the overall number of employed people also increased. Job Vacancies, however, declined on a seasonally adjusted basis for the first time since the onset of the pandemic. There are now 10,000 fewer jobs available in Australia in 3 months ago. This is a forward indicator for unemployment, and coupled with increasing labour supply through migration, we may have already witnessed our trough in the unemployment rate. Given strong employment has been such a key driver of consumers’ willingness to spend, the RBA will be watching this data closely. If the unemployment rate does continue to ease, the RBA may choose to make more ‘wait and see’ decisions as we move through the remainder of 2022 and in to 2023.