The case for RBA patience is getting stronger

Markets may be leaning dovish, but the data no longer is. Labour supply is slowing, inflation is synchronising upward, and supply-side optimism looks premature.

November Jobs: Market Caution May Be Misplaced

Markets moved quickly to reprice RBA rate expectations after today's November labour force release. But in their rush to declare the economy sicker than we thought, they may be overlooking the bigger picture.

The labour market is cooling, but not enough to ease inflation pressure. In fact, once you adjust for participation and NAIRU dynamics, the labour market remains tighter than it appears - and inflation is re-broadening. Markets may be reacting to the wrong signal.

The Neutral Rate Debate: What Comes After 15 Years of Emergency?

Introduction

Before 2008, nobody argued about the neutral interest rate. It was textbook macroeconomics: the neutral real rate (r) roughly equals trend real economic growth (g). For Australia, that meant r around 3-4%. Add the inflation target of 2.5%, and you get a nominal neutral rate of 5.5-6.5%.

The RBA cash rate averaged about 5.5% from 1993 to 2007, bouncing around neutral as the economy cycled through expansions and contractions. Rates went up when inflation threatened, down when growth weakened, but always gravitating back to that 5-6% centre of gravity.

This wasn't controversial. It was Econ 101.

Then Lehman Brothers collapsed, and everything we thought we knew about interest rates went out the window.

Building a Toy Macro Model for Australia

Bayesian approach to estimating NAIRU, potential output, and the output gap

Electoral calculus: The Coalition's Net-Zero Framing

Let's assume that the Coalition's abandonment of the net zero target is rational positioning for electoral success. But note, while this strategy may have short-term electoral benefits, it carries medium-term risks to Coalition unity (as it exposes unresolved regional vs urban tensions), and long-term risks for grid stability.

Labor's announcables vs architecture

Australia's energy transition has been hobbled by three distinct failures: the Liberals' policy whiplash that achieves little, the Nationals' agrarian caution that pines for Eden lost, and Labor's substitution of announceables for architecture - a glossy, frenetic politics that talks to consumers while industry and the underlying system barely features.

Liberal backflip on energy policy

Less consequential than it sounds: Yesterday's Liberal Party announcement is unlikely to deliver a substantially different outcome from the pathway the energy system is already on. Even if the Coalition abandons net-zero entirely and reorients policy to the single objective of cheap, reliable electricity, the physics and economics of the grid do not change. The policy shift slows the transition, but it does not fundamentally redirect it.