August 10, 2025 • 7 mins
Will the Reserve Bank cut interest rates tomorrow?
Today Sean is joined by economist Stephen Koukoulas for a look at what the Reserve Bank board will do tomorrow, as well as the upcoming wages and labour force data (which - unfortunately for the RBA - straight after the decision on rates).
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:05):
Welcome to Fear and Greed QNA, where we ask and
answer questions about business, investing, economics, politics and more. I'm
Sean Ailma and today's question fairly and squarely in the
economics category, will the Reserve Bank finally cut interest rates
the third time when it meets this week? Of course
every Monday, we're joined by economist Stephen Coucoulis. You'll find
(00:28):
him at the cook dot com and on next using
the handle that Kirk Stephen. The question is will the
Reserve Bank cut interest rates when they meet this week?
Speaker 2 (00:38):
I'm going to answer this way, Sean. They should, oh,
and they probably, They very probably will after last month
when the vast majority of us got it wrong. The
market pricing was wrong, and they surprised by that on
whole decision. If we think back to the thing, it
was the eighth of July this week, so tomorrow at
two thirty Sydney time when they make their announcement, Yes,
(00:59):
they cut rates, and the reasons are relatively straightforward. It's
one of these ones where it's not rocket science, or
it shouldn't be rocket science, because since that meeting when
the Governor Michelle Buller quite explicitly said, the decision to
hold back then was not a question of direction. There
was a question of timing. And in the intervening five
(01:22):
weeks or so that we've experienced data, we had confirmation
from the June quarter CPI that inflation trendmin headline, whichever
way you want to slice and dice, it is still decelerating.
It's still within the RBA target pan tick for right cut.
And from the labor market, which is part of its
dual mandate, we had a well, frankly, a disappointing labor
(01:45):
market release. We chatted about a couple of weeks ago
where the unemployment rate kicked from four point one percent
to four point three percent, the highest level in about
three and a half years. So on those two indicators,
inflation and unemployment, and the market, as I glanced at
my screen's basically got a one hundred percent priced in
They have to deliver.
Speaker 1 (02:05):
Okay, you use the word decelerating, Can I just dive
into that a little bit more? Because the trimmed mean
measure of inflation over the last twelve months is actually
above the halfway point of the two to three percent band.
The headline inflation is at the bottom part of it.
They like the trim mean the Reserve Bank the fact
that it's decelerating. So we're talking about the trend as
(02:29):
opposed to a point in time. Is that right?
Speaker 2 (02:31):
Yes, And if we look back, I won't take the
absolute high point in inflation. I think with the end
of twenty twenty two, in the trim demean we've got
to about seven percent. That was that cost of living crisis. Yeah,
and it was a genuine massive problem for the Reserve Bank,
end for its consumers are for business away. Through the
course of last year, the inflation rate was hovering that
I'll use the trim de meaning again because of electricity subsidies,
(02:52):
petrol prices, they're all volatile, tobacco taxes, all this sort
of stuff is distorting the headline figure. So the RBA
prefer the trim to mean, which takes out those volatile items.
And through last year it was hovering in the low
threes three point four, three point two, three point three,
and it wasn't coming back to target as quickly as
the RBA wished. It would then lo and behold in
(03:15):
the December quarter last year, the March quarter this year,
and again the June quarter numbers which just came out
ten or twelve days ago. We've had that inflation rate
go from to two point nine to two point seven.
And if you look at the run rate, this is
the other thing that the Reserve Bank do because remember
that an annual figure in the year to the June quarter.
The latest numbers that we've got include what inflation was
(03:38):
in the September quarter, and so it's a little bit
like when you move a quarter, you drop the last
one out and you move forward. You drop one out,
move forward, and next time we're getting a one dropping
out of the year on year run rate. And my
friends at Westpact, justin Smirk, who's sort of one of
the inflation gurus if you like, on analyzing inflation, he
put out a very preliminary forecast for the September quarter
(04:00):
on the trims mean he's got a point point six,
I think, he said, and that drives the annual thinking
to two point four. So if the RBA has got
a similar run rate coming through, you headed off at
the pass. It's one of these ones where you preemptively
move and it's look a certain as night for those days.
Inflation rate's still coming down. Yes, as we sit here,
(04:20):
now it's not at the midpoint of the target. But
even if you sit here and just twiddle your thumbs,
it will be when the ABS released the September quarter
data in three months time.
Speaker 1 (04:29):
Okay, so the answer is probably they will cut rates
when they meet tomorrow, right, probably hardly probably, of course,
the Reserve Bank's got two goals, keeping it on prices
full employment. Now, in a case of bad timing, shall
we say they make this announcement tomorrow, then on Wednesday
we have wages figures. On Thursday we have labor force figures.
(04:52):
Will the Reserve Bank know those figures before they deliberate?
Speaker 2 (04:55):
This is one thing that a few people have picked
up on is the timing of this board meeting because
the announcements made on Tuesday afternoon, and then on Wednesday
we get the all important wage price in next numbers,
and then on Thursday we get the next labor force
the next unemployment number, and it's you know, they, as
(05:16):
far as I understand that they do not have access
to those numbers. They're highly confidential from the Independent Bureau Statistics.
They don't leak them or preb them to anybody, including
the Reserve Bank. So the Board meeting today Monday, when
they sort of mull over the sort of intricacies of
the modeling and the forecasts and the outlook and all
these other things, will not include those two critical indicators
(05:39):
of the labor markets. So if only they had the
board meeting next week, they could have incorporated the next
wage number, the next unemployment number, and.
Speaker 1 (05:47):
JOm Michelle Bullet could ring I'm not sure Dave Grewin
is the head of ABS and say, Dave, come on,
we're the Reserve Bank years ago. Come on, can't we
get together.
Speaker 2 (06:00):
Yeah, I don't know how those things work. And a
last I'm not privy to it. She should, they'd be,
in fact, nothing wrong. Quite frankly, there'd be nothing wrong.
Obviously they wouldn't have to disclose it. It's a bit
like why, yeah, the Federal Treasury Secretary is on the
RBA board. Some people sort of say, oh, it's a
bit politicization of the board and all those other things.
I differ a little bit because again, even though the
(06:22):
Secretary of the Treasury, whoever that is at the moment,
so it's Jenny Wilkinson at the minute, is the representative
on the board. She can sort of say to the
board without disclosing what's in the budget. For example, so
when the budget is a hot topic and you know
they're looking at tax changes or electricity subsidies or something
like that, she can sort of say, nudge, nug twink, week,
you know, we shouldn't worry about a stimulatory budget or
(06:46):
we've got because it will be so having that what
do we call it, I call it inside doledgeuse that
sounds a bit sort of dodgy, but having like an
insight into what's happening is really important for the RBA
deliberations because it would be funny. And this is one
scenario which I'm reading later this week. They cut twenty
five and Michelle Bullock says, look, that's it. We're going
to take a pause for a while. Then the next
day we get a really low wages number. In the
(07:08):
day for that, we not only get a four point three,
you get a four point four, and then the market well,
well you should have gone again, so you've got another
Then seven weeks of well they cut again, will they again?
And all this silly deliberation and speculation that goes on.
Speaker 1 (07:22):
Well, I'm sure all these people know each other. In fact,
I know they do because David grew in ahead of Abs,
Jenny Wilkinson, Head of Treasury, Michelle Bullock Reserve Bank. They're
all at the Reserve Bank together in the nineties. I
know that for a fact because I was there there you, Stephen,
enjoy your week.
Speaker 2 (07:38):
It'll be an absolute blockbuster. Thank you, Sean.
Speaker 1 (07:40):
That was economist Stephen cookulis better known as the Cookie.
You can find him at the cook dot com and
follow him on x using to handle the Cook. I'm
Chanelma and this is Fearing, dury Q and Da
Welcome to Fear and Greed QNA, where we ask and
answer questions about business, investing, economics, politics and more. I'm
Sean Ailma and today's question fairly and squarely in the
economics category, will the Reserve Bank finally cut interest rates
the third time when it meets this week? Of course
every Monday, we're joined by economist Stephen Coucoulis. You'll find
(00:28):
him at the cook dot com and on next using
the handle that Kirk Stephen. The question is will the
Reserve Bank cut interest rates when they meet this week?
Speaker 2 (00:38):
I'm going to answer this way, Sean. They should, oh,
and they probably, They very probably will after last month
when the vast majority of us got it wrong. The
market pricing was wrong, and they surprised by that on
whole decision. If we think back to the thing, it
was the eighth of July this week, so tomorrow at
two thirty Sydney time when they make their announcement, Yes,
(00:59):
they cut rates, and the reasons are relatively straightforward. It's
one of these ones where it's not rocket science, or
it shouldn't be rocket science, because since that meeting when
the Governor Michelle Buller quite explicitly said, the decision to
hold back then was not a question of direction. There
was a question of timing. And in the intervening five
(01:22):
weeks or so that we've experienced data, we had confirmation
from the June quarter CPI that inflation trendmin headline, whichever
way you want to slice and dice, it is still decelerating.
It's still within the RBA target pan tick for right cut.
And from the labor market, which is part of its
dual mandate, we had a well, frankly, a disappointing labor
(01:45):
market release. We chatted about a couple of weeks ago
where the unemployment rate kicked from four point one percent
to four point three percent, the highest level in about
three and a half years. So on those two indicators,
inflation and unemployment, and the market, as I glanced at
my screen's basically got a one hundred percent priced in
They have to deliver.
Speaker 1 (02:05):
Okay, you use the word decelerating, Can I just dive
into that a little bit more? Because the trimmed mean
measure of inflation over the last twelve months is actually
above the halfway point of the two to three percent band.
The headline inflation is at the bottom part of it.
They like the trim mean the Reserve Bank the fact
that it's decelerating. So we're talking about the trend as
(02:29):
opposed to a point in time. Is that right?
Speaker 2 (02:31):
Yes, And if we look back, I won't take the
absolute high point in inflation. I think with the end
of twenty twenty two, in the trim demean we've got
to about seven percent. That was that cost of living crisis. Yeah,
and it was a genuine massive problem for the Reserve Bank,
end for its consumers are for business away. Through the
course of last year, the inflation rate was hovering that
I'll use the trim de meaning again because of electricity subsidies,
(02:52):
petrol prices, they're all volatile, tobacco taxes, all this sort
of stuff is distorting the headline figure. So the RBA
prefer the trim to mean, which takes out those volatile items.
And through last year it was hovering in the low
threes three point four, three point two, three point three,
and it wasn't coming back to target as quickly as
the RBA wished. It would then lo and behold in
(03:15):
the December quarter last year, the March quarter this year,
and again the June quarter numbers which just came out
ten or twelve days ago. We've had that inflation rate
go from to two point nine to two point seven.
And if you look at the run rate, this is
the other thing that the Reserve Bank do because remember
that an annual figure in the year to the June quarter.
The latest numbers that we've got include what inflation was
(03:38):
in the September quarter, and so it's a little bit
like when you move a quarter, you drop the last
one out and you move forward. You drop one out,
move forward, and next time we're getting a one dropping
out of the year on year run rate. And my
friends at Westpact, justin Smirk, who's sort of one of
the inflation gurus if you like, on analyzing inflation, he
put out a very preliminary forecast for the September quarter
(04:00):
on the trims mean he's got a point point six,
I think, he said, and that drives the annual thinking
to two point four. So if the RBA has got
a similar run rate coming through, you headed off at
the pass. It's one of these ones where you preemptively
move and it's look a certain as night for those days.
Inflation rate's still coming down. Yes, as we sit here,
(04:20):
now it's not at the midpoint of the target. But
even if you sit here and just twiddle your thumbs,
it will be when the ABS released the September quarter
data in three months time.
Speaker 1 (04:29):
Okay, so the answer is probably they will cut rates
when they meet tomorrow, right, probably hardly probably, of course,
the Reserve Bank's got two goals, keeping it on prices
full employment. Now, in a case of bad timing, shall
we say they make this announcement tomorrow, then on Wednesday
we have wages figures. On Thursday we have labor force figures.
(04:52):
Will the Reserve Bank know those figures before they deliberate?
Speaker 2 (04:55):
This is one thing that a few people have picked
up on is the timing of this board meeting because
the announcements made on Tuesday afternoon, and then on Wednesday
we get the all important wage price in next numbers,
and then on Thursday we get the next labor force
the next unemployment number, and it's you know, they, as
(05:16):
far as I understand that they do not have access
to those numbers. They're highly confidential from the Independent Bureau Statistics.
They don't leak them or preb them to anybody, including
the Reserve Bank. So the Board meeting today Monday, when
they sort of mull over the sort of intricacies of
the modeling and the forecasts and the outlook and all
these other things, will not include those two critical indicators
(05:39):
of the labor markets. So if only they had the
board meeting next week, they could have incorporated the next
wage number, the next unemployment number, and.
Speaker 1 (05:47):
JOm Michelle Bullet could ring I'm not sure Dave Grewin
is the head of ABS and say, Dave, come on,
we're the Reserve Bank years ago. Come on, can't we
get together.
Speaker 2 (06:00):
Yeah, I don't know how those things work. And a
last I'm not privy to it. She should, they'd be,
in fact, nothing wrong. Quite frankly, there'd be nothing wrong.
Obviously they wouldn't have to disclose it. It's a bit
like why, yeah, the Federal Treasury Secretary is on the
RBA board. Some people sort of say, oh, it's a
bit politicization of the board and all those other things.
I differ a little bit because again, even though the
(06:22):
Secretary of the Treasury, whoever that is at the moment,
so it's Jenny Wilkinson at the minute, is the representative
on the board. She can sort of say to the
board without disclosing what's in the budget. For example, so
when the budget is a hot topic and you know
they're looking at tax changes or electricity subsidies or something
like that, she can sort of say, nudge, nug twink, week,
you know, we shouldn't worry about a stimulatory budget or
(06:46):
we've got because it will be so having that what
do we call it, I call it inside doledgeuse that
sounds a bit sort of dodgy, but having like an
insight into what's happening is really important for the RBA
deliberations because it would be funny. And this is one
scenario which I'm reading later this week. They cut twenty
five and Michelle Bullock says, look, that's it. We're going
to take a pause for a while. Then the next
day we get a really low wages number. In the
(07:08):
day for that, we not only get a four point three,
you get a four point four, and then the market well,
well you should have gone again, so you've got another
Then seven weeks of well they cut again, will they again?
And all this silly deliberation and speculation that goes on.
Speaker 1 (07:22):
Well, I'm sure all these people know each other. In fact,
I know they do because David grew in ahead of Abs,
Jenny Wilkinson, Head of Treasury, Michelle Bullock Reserve Bank. They're
all at the Reserve Bank together in the nineties. I
know that for a fact because I was there there you, Stephen,
enjoy your week.
Speaker 2 (07:38):
It'll be an absolute blockbuster. Thank you, Sean.
Speaker 1 (07:40):
That was economist Stephen cookulis better known as the Cookie.
You can find him at the cook dot com and
follow him on x using to handle the Cook. I'm
Chanelma and this is Fearing, dury Q and Da
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