November 16, 2025 • 11 mins
This week: RBA minutes, wages data, and a look back at last week's strong labour force data - is an interest rate cut off the table?
Michael Thompson is joined by economist Stephen Koukoulas.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:06):
Welcome to Fear and Greed Q and A, where we
ask and answer questions about business, investing, economics, politics and more.
I'm Michael Thompson and every Monday morning we're joined by
economists Stephen Coo cool Is to look at the week ahead.
You'll find him at the kouk dot com. That's t
g ko uk dot com and on X using the
handle the kuk. Stephen, Good morning and welcome back choo.
Speaker 2 (00:28):
Great to be back. And holidays are wonderful, but back
to the harsh reality of the Australian economy and financial markets,
which of course are almost as exciting as having a
look at the UFIZI in Florence.
Speaker 1 (00:40):
Well, this is the thing. You've had six weeks, six
weeks a fantastic holiday throughout traveling Italy, and I was
looking at what's happened in the six weeks while while
you've been gone, We've had RBA meeting, We've had September
quarter inflation, the US government has been shut down for
(01:00):
the entire time you were gone. We had the Melbourne
Cup about all of these things. When you are an economist,
when you live and breathe this, do you pay attention
to it? While you are there sipping on your what
were you drinking?
Speaker 2 (01:16):
Mostly lovely kiante of course from the Tuscan region. And
then there's a little sort of a freshman at a
campari soda which is really lovely. But yes, I do
pay attention. It's one of those ones where look during
the course of the day and they're like, no, I
don't really look very closely. But there's always that sort
of time at the end of the day or quiet,
(01:37):
if it's raining or something. You check a few emails,
and of course the newsfeed. You get the newspapers on
your phone now and of course I listen to Fear
and Greed every morning and night just to get the
load down on what's happening in the economy, and so
I kept up to date with it all. And yes,
the world, the world and Australia has changed in that
(01:59):
six weeks.
Speaker 1 (02:00):
Yeah, yeah, it certainly has. And we've got a lot
that we want to talk about this coming up this week.
Before we get to that, I want to talk to
you about last week, because last week was a bump
a week. It felt like the headline was the labor
force data. We had Unemployment dropped from four and a
half percent in September to four point three percent in October.
The RBA had talked about the facts that the labor
(02:22):
market was indeed very strong. This was perhaps stronger than expected, though.
Speaker 2 (02:29):
Yeah, look probably broadly as expected. It's one of those
ones where the monthly numbers, as we know, are very
volatile and choppy, and if we sort of look at
the moving average or what was happening a few months before,
where we did have a couple of soft employment numbers,
there's no doubt about that, and that's why the RBA
in their November State My Montary Policy, had a smidge
upward revision to their unemployment forecast and this number, you know,
(02:50):
to two decimal places, looking at the last two months together,
is about where they were expecting. So in a sense,
it's a sign of resilience in the economy. Two thousand
jobs with more than all of them full time. There's
a bit of a dip in part time employment, so
when you're looking at these numbers, and again aside from
the monthly volatility, yes we're well aware of that, but
(03:11):
it's nice to see the economy remain resilient and resilient
enough to create employment to stop that unemployment rate from
moving high, which was something that I feared still due
to some extent, but really feared. With the economy just
looking to be growing at an okay pace but not
particularly strong.
Speaker 1 (03:29):
I want to look at what those labor force figures
mean from two perspectives. One is what it means then
for the RBA and the potential for interest rate cuts,
where that's entirely off the table. We'll get to that
one in a second. But first, small businesses or businesses,
anyone out there who might be looking for staff, what
(03:51):
does this actually mean? How does this then play out?
And are they going to find it harder? Is it
taking longer to get people into a job? Is there
more competition? What's it actually mean on the ground.
Speaker 2 (04:04):
Yeah, Look, that's a really important point. That's what one
reason why the unemployment rate matters to the business sector.
Obviously matters to the individual, but for the business sector,
we shouldn't ignore the fact that the unemployment rate has
crept up from where it was roughly eighteen months ago.
The labor market was extremely tight. That you know, the
various surveys of the business sector, small, medium, and large
(04:26):
were sort of focused on how difficult is it for
you to find suitable labor for your business, and of
course that was off the charts. It was very, very difficult.
But the tick upwards in the unemployment rate over that
eighteen month period, plus the fact that we've got high immigration,
which is actually feeding into the supply of labor, there
are other issues associated with that, of course, means that
(04:48):
that timeness in the labor markets eased a bit or
in some instances quite a lot. There are still labor
and skill shortages, particularly in construction and these sorts of
things that we really desperately want to see recovery and
important for productivity and those sorts of things. But the
labor market, again is one of those ones where I'm
still loing for this adjective to describe something that's sort
(05:11):
of not burming, not busting, that's in the middle. And
so the labor market is in that groove. We're in
the gray area. You know, it's not as tight as
it was, but we certainly haven't got a whole lot
of slack in the labor market. It's just sort of
like that one where it's in a solid position, not
easy to find staff, but easier than it was a
(05:32):
year or two ago.
Speaker 1 (05:34):
Okay, all right, And from the other side, from the
Reserve Bank and their consideration about interest rates. Also last
week we had consumer confidence turning positive for the first
time what nearly four years, business conditions at their highest
level since early last year. You add in then this
unemployment number, economy traveling along fairly steadily, it seems. Does
(05:58):
this mean rate cuts are off the table?
Speaker 2 (06:01):
They're off the table for the next few months, at least.
Nothing's ever completely off the table. Look at this gray hair.
I've been around a long time and I've seen markets
and central banks change their view when things change. And
we still have in the RBA acknowledge this a global
uncertainty the US. You mentioned the lockdowns in the US recently,
(06:23):
the US economy or we don't know. They haven't had
much data printed sort of see what's happening there, and
so there's still some risks there. But for the here
and now and until we get well into twenty twenty six,
the RBA will be on hold. They'll be not quite
sitting back and thinking, gee, we've done a pretty good job. Unemployments,
relatively low inflation. Yeah, it might be just as midge uncomfortable,
(06:44):
but it's not bad. But so that basically means that
we are on hold. The RBA is on hold for
many months to come, and like all mere mortals, they'll
be watching the data flow.
Speaker 1 (06:55):
Okay, we'll get a bit of an insight into that
this week when the RBA minutes are a least. What
can we tell now from the minutes, because we've talked
in the past about the fact that we do learn
so much from the press conference after the RBA board meets.
What else can we glean then from the RBA minutes
and how much does it take on a different light
when all of a sudden you've in the time since
(07:18):
the RBA met, we've seen the labor force data and
maybe we will actually see that there's vindication here for
the results.
Speaker 2 (07:27):
Well, you're quite right that two hours after the interest
rate announcement back on the fourth of November, the governor
gave her talk and she was asked, quite appointedly, did
you consider a rate cup No? Did you consider a
rate hike? No. All we did was discuss the fact
that rates were on hold, and we analyzed the economy.
So it wasn't really a shall we change interestrates discussion?
(07:49):
It was more we're pretty content with rates of where
they are, and as we've just discussed on inflation, on unemployment,
on growth, on productivity, which of course is one of
the breaks on the economy right now, they were pretty content,
So the minutes will probably just reflect that. They'll talk
about some of the risks. They'll talk about uncertainty. I'm
(08:10):
not quite sure the word count for uncertainty in the minutes,
but in recent times it's been a lot, and fair
enough too, because we've got this sort of gray area
in the economy that's unfolding. So the ladder bit it'll
be a sort of a sanitized version of the RBA thinking,
but always worth a read, always worth just getting a
bit more information. Because of course these minutes WI also
(08:32):
incorporate the release of the updated forecasts and the statement
of monetary policy that occurred too, so they might just
sort of put a little bit more flesh on some
of those updated forecasts, particularly for inflation which was revised
up and unemployment, which as we said, was revised up
just to smite in those forecasts.
Speaker 1 (08:51):
The other big thing this week is wages. Now, I
want you to explain this to me why. I mean,
as employees, we all love to get a pay rise.
We all want to wage increase, But why from an
economic perspective are we so scared about booming wages?
Speaker 2 (09:07):
Really good question, and yes, these wage numbers that come
out in the middle of the week are really important.
And we were just discussing the availability of labor, you know,
labor shortages for the business sector. One benchmark on in fact,
arguably the most important benchmark on whether the labor market
is tight or slack or somewhere in between, is what's
(09:30):
happened to wages. Because if you're having trouble finding suitable
labor and you desperately need that labor, that skill, that
talent to expand your business, you'll pay up, yes, and
by that I mean you'll pay a higher wage, you'll
head hunt someone from a competitor, or you'll you'll pay
up for someone who's entering the labor market. And that
of course is higher wages growth than for the individual terrific.
(09:51):
But as the business person, how do you recoup that
extra cost? You put up your prices? What's that? That's inflation.
So that's the sort of thing where the NAHRU or
the full employment rate of unemployment is such an important concept,
and so that's why the wages numbers are very important.
And for the last couple of quarters that the wages
growth has moderated a bit, we're looking for a pretty
(10:16):
steady annual increase about three point four to three point
five percent, which is again in the groove, another one
of those in the groove numbers. Any surprise to the
high side will well and truly kill talk of rate cuts,
And then dare I say, it might even feel some
speculation about rate hikes next year. But if we get
a three point four or three point five or three
point three, then it says that the labor market tightness
(10:39):
is probably not as extreme as the RBA was fearing recently,
and it'll be one of those numbers that everyone will
be happy because wages are still increasing in a rate
faster than the inflation rate. So we get only by
a little bit, but we're getting real wage increases coming
through the economy.
Speaker 1 (10:56):
All right, big week ahead, It was a big week
last week, and it's great to have you back, Stephen.
Thank you for talking to fear and greed.
Speaker 2 (11:02):
Thank you, Michael. Great to be back.
Speaker 1 (11:04):
That was economists Stephen Coo Coolers, better known as the Kook.
You can find him at the kook dot com and
follow him on X using the handle of the Kook.
I'm Michael Thompson and his Fear and Greed Q and a.
Welcome to Fear and Greed Q and A, where we
ask and answer questions about business, investing, economics, politics and more.
I'm Michael Thompson and every Monday morning we're joined by
economists Stephen Coo cool Is to look at the week ahead.
You'll find him at the kouk dot com. That's t
g ko uk dot com and on X using the
handle the kuk. Stephen, Good morning and welcome back choo.
Speaker 2 (00:28):
Great to be back. And holidays are wonderful, but back
to the harsh reality of the Australian economy and financial markets,
which of course are almost as exciting as having a
look at the UFIZI in Florence.
Speaker 1 (00:40):
Well, this is the thing. You've had six weeks, six
weeks a fantastic holiday throughout traveling Italy, and I was
looking at what's happened in the six weeks while while
you've been gone, We've had RBA meeting, We've had September
quarter inflation, the US government has been shut down for
(01:00):
the entire time you were gone. We had the Melbourne
Cup about all of these things. When you are an economist,
when you live and breathe this, do you pay attention
to it? While you are there sipping on your what
were you drinking?
Speaker 2 (01:16):
Mostly lovely kiante of course from the Tuscan region. And
then there's a little sort of a freshman at a
campari soda which is really lovely. But yes, I do
pay attention. It's one of those ones where look during
the course of the day and they're like, no, I
don't really look very closely. But there's always that sort
of time at the end of the day or quiet,
(01:37):
if it's raining or something. You check a few emails,
and of course the newsfeed. You get the newspapers on
your phone now and of course I listen to Fear
and Greed every morning and night just to get the
load down on what's happening in the economy, and so
I kept up to date with it all. And yes,
the world, the world and Australia has changed in that
(01:59):
six weeks.
Speaker 1 (02:00):
Yeah, yeah, it certainly has. And we've got a lot
that we want to talk about this coming up this week.
Before we get to that, I want to talk to
you about last week, because last week was a bump
a week. It felt like the headline was the labor
force data. We had Unemployment dropped from four and a
half percent in September to four point three percent in October.
The RBA had talked about the facts that the labor
(02:22):
market was indeed very strong. This was perhaps stronger than expected, though.
Speaker 2 (02:29):
Yeah, look probably broadly as expected. It's one of those
ones where the monthly numbers, as we know, are very
volatile and choppy, and if we sort of look at
the moving average or what was happening a few months before,
where we did have a couple of soft employment numbers,
there's no doubt about that, and that's why the RBA
in their November State My Montary Policy, had a smidge
upward revision to their unemployment forecast and this number, you know,
(02:50):
to two decimal places, looking at the last two months together,
is about where they were expecting. So in a sense,
it's a sign of resilience in the economy. Two thousand
jobs with more than all of them full time. There's
a bit of a dip in part time employment, so
when you're looking at these numbers, and again aside from
the monthly volatility, yes we're well aware of that, but
(03:11):
it's nice to see the economy remain resilient and resilient
enough to create employment to stop that unemployment rate from
moving high, which was something that I feared still due
to some extent, but really feared. With the economy just
looking to be growing at an okay pace but not
particularly strong.
Speaker 1 (03:29):
I want to look at what those labor force figures
mean from two perspectives. One is what it means then
for the RBA and the potential for interest rate cuts,
where that's entirely off the table. We'll get to that
one in a second. But first, small businesses or businesses,
anyone out there who might be looking for staff, what
(03:51):
does this actually mean? How does this then play out?
And are they going to find it harder? Is it
taking longer to get people into a job? Is there
more competition? What's it actually mean on the ground.
Speaker 2 (04:04):
Yeah, Look, that's a really important point. That's what one
reason why the unemployment rate matters to the business sector.
Obviously matters to the individual, but for the business sector,
we shouldn't ignore the fact that the unemployment rate has
crept up from where it was roughly eighteen months ago.
The labor market was extremely tight. That you know, the
various surveys of the business sector, small, medium, and large
(04:26):
were sort of focused on how difficult is it for
you to find suitable labor for your business, and of
course that was off the charts. It was very, very difficult.
But the tick upwards in the unemployment rate over that
eighteen month period, plus the fact that we've got high immigration,
which is actually feeding into the supply of labor, there
are other issues associated with that, of course, means that
(04:48):
that timeness in the labor markets eased a bit or
in some instances quite a lot. There are still labor
and skill shortages, particularly in construction and these sorts of
things that we really desperately want to see recovery and
important for productivity and those sorts of things. But the
labor market, again is one of those ones where I'm
still loing for this adjective to describe something that's sort
(05:11):
of not burming, not busting, that's in the middle. And
so the labor market is in that groove. We're in
the gray area. You know, it's not as tight as
it was, but we certainly haven't got a whole lot
of slack in the labor market. It's just sort of
like that one where it's in a solid position, not
easy to find staff, but easier than it was a
(05:32):
year or two ago.
Speaker 1 (05:34):
Okay, all right, And from the other side, from the
Reserve Bank and their consideration about interest rates. Also last
week we had consumer confidence turning positive for the first
time what nearly four years, business conditions at their highest
level since early last year. You add in then this
unemployment number, economy traveling along fairly steadily, it seems. Does
(05:58):
this mean rate cuts are off the table?
Speaker 2 (06:01):
They're off the table for the next few months, at least.
Nothing's ever completely off the table. Look at this gray hair.
I've been around a long time and I've seen markets
and central banks change their view when things change. And
we still have in the RBA acknowledge this a global
uncertainty the US. You mentioned the lockdowns in the US recently,
(06:23):
the US economy or we don't know. They haven't had
much data printed sort of see what's happening there, and
so there's still some risks there. But for the here
and now and until we get well into twenty twenty six,
the RBA will be on hold. They'll be not quite
sitting back and thinking, gee, we've done a pretty good job. Unemployments,
relatively low inflation. Yeah, it might be just as midge uncomfortable,
(06:44):
but it's not bad. But so that basically means that
we are on hold. The RBA is on hold for
many months to come, and like all mere mortals, they'll
be watching the data flow.
Speaker 1 (06:55):
Okay, we'll get a bit of an insight into that
this week when the RBA minutes are a least. What
can we tell now from the minutes, because we've talked
in the past about the fact that we do learn
so much from the press conference after the RBA board meets.
What else can we glean then from the RBA minutes
and how much does it take on a different light
when all of a sudden you've in the time since
(07:18):
the RBA met, we've seen the labor force data and
maybe we will actually see that there's vindication here for
the results.
Speaker 2 (07:27):
Well, you're quite right that two hours after the interest
rate announcement back on the fourth of November, the governor
gave her talk and she was asked, quite appointedly, did
you consider a rate cup No? Did you consider a
rate hike? No. All we did was discuss the fact
that rates were on hold, and we analyzed the economy.
So it wasn't really a shall we change interestrates discussion?
(07:49):
It was more we're pretty content with rates of where
they are, and as we've just discussed on inflation, on unemployment,
on growth, on productivity, which of course is one of
the breaks on the economy right now, they were pretty content,
So the minutes will probably just reflect that. They'll talk
about some of the risks. They'll talk about uncertainty. I'm
(08:10):
not quite sure the word count for uncertainty in the minutes,
but in recent times it's been a lot, and fair
enough too, because we've got this sort of gray area
in the economy that's unfolding. So the ladder bit it'll
be a sort of a sanitized version of the RBA thinking,
but always worth a read, always worth just getting a
bit more information. Because of course these minutes WI also
(08:32):
incorporate the release of the updated forecasts and the statement
of monetary policy that occurred too, so they might just
sort of put a little bit more flesh on some
of those updated forecasts, particularly for inflation which was revised
up and unemployment, which as we said, was revised up
just to smite in those forecasts.
Speaker 1 (08:51):
The other big thing this week is wages. Now, I
want you to explain this to me why. I mean,
as employees, we all love to get a pay rise.
We all want to wage increase, But why from an
economic perspective are we so scared about booming wages?
Speaker 2 (09:07):
Really good question, and yes, these wage numbers that come
out in the middle of the week are really important.
And we were just discussing the availability of labor, you know,
labor shortages for the business sector. One benchmark on in fact,
arguably the most important benchmark on whether the labor market
is tight or slack or somewhere in between, is what's
(09:30):
happened to wages. Because if you're having trouble finding suitable
labor and you desperately need that labor, that skill, that
talent to expand your business, you'll pay up, yes, and
by that I mean you'll pay a higher wage, you'll
head hunt someone from a competitor, or you'll you'll pay
up for someone who's entering the labor market. And that
of course is higher wages growth than for the individual terrific.
(09:51):
But as the business person, how do you recoup that
extra cost? You put up your prices? What's that? That's inflation.
So that's the sort of thing where the NAHRU or
the full employment rate of unemployment is such an important concept,
and so that's why the wages numbers are very important.
And for the last couple of quarters that the wages
growth has moderated a bit, we're looking for a pretty
(10:16):
steady annual increase about three point four to three point
five percent, which is again in the groove, another one
of those in the groove numbers. Any surprise to the
high side will well and truly kill talk of rate cuts,
And then dare I say, it might even feel some
speculation about rate hikes next year. But if we get
a three point four or three point five or three
point three, then it says that the labor market tightness
(10:39):
is probably not as extreme as the RBA was fearing recently,
and it'll be one of those numbers that everyone will
be happy because wages are still increasing in a rate
faster than the inflation rate. So we get only by
a little bit, but we're getting real wage increases coming
through the economy.
Speaker 1 (10:56):
All right, big week ahead, It was a big week
last week, and it's great to have you back, Stephen.
Thank you for talking to fear and greed.
Speaker 2 (11:02):
Thank you, Michael. Great to be back.
Speaker 1 (11:04):
That was economists Stephen Coo Coolers, better known as the Kook.
You can find him at the kook dot com and
follow him on X using the handle of the Kook.
I'm Michael Thompson and his Fear and Greed Q and a.
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