Uh, what will the Reserve Bank be considering when it meets next month?

The Reserve Bank's going to be looking very closely at the inflation data that we saw yesterday because it is the f- I guess, the most important indicator for them, and in that they're going to be particularly interested in the fact that the headline inflation, um, rate fell a little bit, and a little bit unexpectedly too, which is very welcome of course.

But I think beyond that, of course, they're gonna be digging through the, the detail and starting with the, the core inflation number or the trimmed mean.

They're gonna see that inflation certainly did cool, but it's, the fire's not out, and I think they'll be looking for evidence that there's inflation risks on the horizon, and I think there's plenty of those, unfortunately, from both domestic sources and international sources.

And that means that they'll be looking, of course, very closely at the, the domestic data, but also, of course, the, the international issues within the Middle East, um, the, the, the Trump tariffs, which in themselves may not be inflationary, but certainly add to that feeling that there is a lot of tension out there.

What impact will that have on inflation?

inflation?Yeah, that's right, and that will mean that the July number will, um, look a little higher, all else equal, because we have seen fuel prices move up again for consumers in that month.

So it means that the headline number gets a little bit of upward pressure.

Sherelle Murphy is an economist at the accounting and consulting firm EY Oceania.

I think that the, the bank is gonna have to weigh up a, a bit of conflicting data here.

On the one hand, the headline number for inflation doesn't look quite as bad as it thought it would, and it's sitting a little bit below the RBA's own forecast.

But the sort of core inflation, which is I think better representative of what's going on in the economy, still remains pretty high.

So like all up, I think just at the margin it adds up to another rate hike in August, although I do completely admit that this is gonna be a difficult call for the Reserve Bank to make.

Where do you think we're headed for the rest of the year when it comes to interest rate rises? More on the cards?

Unfortunately, I think so because we know that on the basis of the Reserve Bank's own forecast, which of course will really matter for what it will do, you can see the underlying inflation rate sitting up above 3% really right through 2020. to the middle of next year.

So that's core inflation sitting above 3% for more than another year.

And that is with the assumption in the forecast because it uses market forecasts to give a rate assumption.

There's one more rate hike already in there.

So even with that situation, you still have inflation too high, which means there's no other read of this other than the fact that inflation will remain high and therefore interest rates need to go higher.

What did you make of Michelle Bullock's comments about government spending yesterday? She was saying that

the increase in demand that comes from government spending, which is kind of no different from increase in demand that may come from a private sector spending or a tight labour market, that's all contributing here.

The Reserve Bank's been worried about strength.

I mean, yes, it's, it's definitely a risk, and I was actually a little surprised at how that was underplayed in the, both the post-meeting statement and also the post-meeting press conference by the governor.

Not to say that I think that there's a, a, an imminent risk of recession, I definitely don't.

However, um, it was kind of, you know, it's kind of a, very much a s- very much a second-order issue.

I will say, though, that that's also the beauty of monetary policy, it can respond to what's going on in the economy at this point in time, including of course the Reserve Bank's own forecasts.

If those forecasts change, then the Reserve Bank can change course, and they've got an opportunity to do that every four to six weeks in this meeting, and they could do it in between meetings as well.

Um, and, you know, in certain emergencies they have and they would.

Does the Reserve Bank, do you think, need a bit of help from the government to wind back spending? And then I suppose given what we were talking about earlier, is there a problem that if it does that too much, we might be, because of the oil crisis, heading into recessionary territory anyway and it might need to reverse it?

Yep, wages, which had remained broadly steady over the first half of 2025, after accounting for one-off administered increases, declined to 0.7%, its slowest rate to 2021." So show me the private sector that's being crowded out when they're managing not to pa- you know, to pay the lowest wage increases, uh, in four years.

This is an in- interesting point.

I agree with you that those aggregate numbers on wages are not particularly strong.

Um, but I think there's, there's other elements here.

So, for example, I was actually talking to a contractor on the weekend, and he made the point that it's hard to get labor to work for him when they are often, um, uh, various tradies are offered longer-term, better conditions in government, for example.

You know, so they, they, they can be offered maybe a five-year role, um, you know, building, say, the Western Sydney Airport.

Uh, he can only offer them six months' work at a time.

It's one of her targets.

But how concerned should we be about that?

Yeah, I don't think we should be too concerned at the moment because it has been so strong for such a long period of time.

And so any sort of deterioration from here to some extent had to be expected because you couldn't kind of maintain that level of jobs growth and such a low unemployment rate forever.

Of course, you know, it's hard to talk about this in the macro because to one person, obviously a loss of a job is a big deal.

So I don't kind of want to take away from that.

But I think, look, we should see continued jobs growth in September.

And this is a point, actually, that Michelle Bullock, the governor of the Reserve Bank, made last week at the Senate Estimates Committee hearing.

And, of course, we're going to hear a lot from the Reserve Bank this week, be it minutes from the most recent board meeting as well as a few speakers.

I mean, if you could pick where you wanted your economy to be, inflation in that 2% to 3% target, 4.2% unemployment, growth is a bit slow, definitely, but it's not a disaster by any stretch.

No, that's right.

We're sort of in this kind of Meek Mill in some ways.

We are getting, I think the economy is genuinely getting a little stronger.

You know, we've got the consumer picking up.

That's really important.

As you know, like half of GDP is the consumer.

How do we fix it?