We Have a Problem!

[jaceew79]

Some of you think the RBA are terrible forecasters.

A few of you, with friends working inside the RBA, have pointed out that there is significant disagreement between the economics team and the monetary policy team/decision-makers.

Honestly, who tf knows.

That said, what I can see is this:

https://preview.redd.it/3zrpift4ixx...bp&s=aa008ad4f3ffdd3a82c79eda8917b308da45fdfd

• Inflation is not forecasted to be in the range of 2% to 3%. This is after factoring the RBA's explicit communication - even in writing - that further increases are on the horizon.
• The unemployment rate is currently at 3.5% and is forecasted to climb to only 4.5%. This is not a doomsday scenario. Yes, it hurts some. But it does not smash the Australian economy.
  • If you look around, there are very few signs the unemployment rate is on course to reach 4% by Xmas. By Xmas! I mean...show me where 80,000 people are about to get sacked by 25 December. This gives the RBA room to increase rates higher if 80,000 do not get the chop.
• Soon, it will be mandated that the RBA adopt a dual mandate of achieving inflation in the range of 2-3% and 'maximum' employment.
  • There are responsibilities, accountability, and obligations that come with this.
  • In other words, one way or another, inflation is going to f...g come down to 2-3%. That is the mandate. Change the mandate, and then we can debate.

None of these points are opinions. I am merely pointing out the discrepancies, which suggests that the RBA may raise rates to a level that is a lot closer to USA. 3.85% vs 5.125% (midpoint) is 5 rate rises. Again, not an opinion, just pointing out that it's mathematically 5x 25bps rate rises. Whether they do so or not is for you to punt, based on:

a) what the RBA has explicitly said, and

b) what the in-house economics team are projecting after factoring rate rises.

Edit: And the value of New Home Loans just surged 5.5% month-on-month. Surprise, surprise - the AUD now reversing course and surging.

https://preview.redd.it/bnktyvbhkxx...bp&s=68a7688b57a73a75d0a46ead56300e47d831cbab

 

[cassandralee]

@jaceew79 Separate, more important question that OP would probably be well placed to answer...

Is 1pm on a Friday too early to start on nose beers?

 

[raul_1977]

@cassandralee Anyone who posts analysis on Ausfinance must be high

 

[abugah]

@cassandralee Not early enough

 

[jaceew79]

@cassandralee I didn't even know what NB meant. You obviously do.

 

[jikim329]

@jaceew79 Only a professional uses the NB acronym.

 

[anneka]

@jikim329 What type of professional do you need to be? Asking for a friend.

 

[jikim329]

@anneka Scarface, face buried into a huge big pile.. kinda level

 

[anneka]

@jikim329 oh so I can't get away with wearing 60k tailored suits with imported shirts from England? Plus I have botox so nothing moves....plus i have 400-count cotton hankies with embossed intials logos for any nose actiion.

 

[truthvsmedia]

@anneka One that earns money for the job they chose to do as their profession.

 

[pandalarry]

@jaceew79 One thing you're missing is that the RBA has consistently been overly optimistic in forecats for the past 10+ years when looking at wage growth and a handful of other things.

There's a decent chance that it will take much longer to get back to normal than this prediction.

 

[beatye]

@jaceew79 Bullish for housing?

 

[exinanition]

@beatye Prime Bull.

 

[chemea70]

@jaceew79 My inlawys confidently said their would be only 2 more rate rises before the last one. I had a great chuckle at that. They are letting anecdotal experience get in the way of the obvious. Spending isn't going down.

 

[dmit5487ivan]

@jaceew79

A few of you, with friends working inside the RBA, have pointed out that there is significant disagreement between the economics team and the monetary policy team/decision-makers.

Why even post this? This is the very definition of rumours.

Inflation is not forecasted to be in the range of 2% to 3%. This is after factoring the RBA's explicit communication - even in writing - that further increases are on the horizon.

Eh, no, that's based on a rate of 3.75% - a mix of market implied and economist forecasts. RBA's communications don't come into it - they base forecasts on that mix so as not to be seen as "promising" a certain path themselves.

https://imgur.com/0qh7bcB

https://www.rba.gov.au/publications/smp/2023/may/forecasts.html

If you look around, there are very few signs the unemployment rate is on course to reach 4% by Xmas. By Xmas! I mean...show me where 80,000 people are about to get sacked by 25 December. This gives the RBA room to increase rates higher if 80,000 do not get the chop.

Not sure about your workings for 80k. That pegs the labour force at 16M, if my maths is right, which is a bit high? Anyway, that's by the by. No one needs to get the chop for unemployment to go up. We need, I want to say, about 30k additional net jobs every month to keep the unemployment rate where it is. So, just for the remainder of the year us falling a bit short of that - while more people are still being hired - would leave us with a higher unemployment rate. It might be 20k, I've seen those numbers. I think that's a bit wrong, but anyway - somewhere in that range. But, anyway, lower increases in numbers of jobs every month get us to that range.

Since we're talking about it, job ads are showing slowing hiring in lots of indusries. We had a massive run up in job ads through the pandemic and after, but that's starting to get reversed. It's off a high level, it's not the end of the world yet, but, again, you said

show me where 80,000 people are about to get sacked by 25 December

Don't need to get sacked. Job ads falling. It might take four weeks to find a job instead of two after leaving - that jacks up unemployment rate.

I know people think of unemployment as a thing that happens to someone else, but it actually affects everyone, since any hope of better wage growth evaporates if we start getting monthly "unemployment rate is up" articles plastered everywhere. Not cool, we were hoping for more. That's kind of the aim of the whole exercise, by the way. "Labour market tightness" is code for "more wage rises". When RBA wants a looser labour market, it's slower wage growth.

Anyway, I'll leave it there.

 

[jjddww]

@dmit5487ivan Kinda bloke that goes on to AusFinance to say "my mate works at the RBA and told me what's going on" is the kinda bloke to run around the school yard in primary telling people how his uncle works at Nintendo and knows when some new game is coming out.

This is what they grew up into.

 

[royalrangerwv]

@jaceew79 And yet, all it takes is one crisis and all everything you articulated is null and void.

A crisis like a war, a stock market collapse (1987, Dotcom), a pandemic (Covid), bank collapse (Lehman Brothers), a collapse of the construction industry, recession, etc

The question is what is the next crisis, and when will it be?

 

[lina0531]

@jaceew79 After the senate committees and the RBA review, the RBA has a clear path to do what they need to do and is to get inflation back to the 2-3 range, absolutely nothing to do with mortgages, zero

 

[jaceew79]

@lina0531 interest rates affect money and credit, especially its supply and demand. ‘Mortgages’ is credit.

 

[lina0531]

@jaceew79 Inflation affects everything