There we go, the RBA has done it.

The rate has been cut for the first time since November 2020 – 25 points, making the official cash rate 4.1%.

On a $600,000 home loan that’s a saving of about $100 a month

The good news about today’s cut is it almost certainly means more are on the way – and likely at the next meeting, because then the RBA cuts rates it usually odes in pairs.

Over the past 25 years when the RBA has cut rates for the first time after a period of raising rates it has always cut twice in a row:

First we had in 2001 which came after 5 rate rises in 1999 and 2000:

February 2001 – 25 basis point cut

March 2001 – 25 bps

April 2001 – 25 bps

Then it paused for a few months and then did another 3 cuts in 4 months:

Sept 2001 – 25bps

Oct 2001 – 25 bps

Dec 2001 – 25 bps

Then in 2008 after 12 rates rises from May 2002 to March 2008 and as the GFC began to hit the RBA cut rates 5 meeting in a row (they don’t met in January) and 6 times in 7 meetings. This of course was rather panic stations so ww will not see them cut rates by such huge chunks this time:

Sep 2008 – 25bps

Oct 2008 – 100 bps

Nov 2008 – 75 bps

Dec 2008 – 100bps

Feb 2009 – 100 bps

April 2009 – 25bps

Then at the end of 2011, after raising rates 7 times from the then emergency levels of the GFC,  the RBA again cut twice in a row:

Now 2011 – 25bps

Dec 2011 – 25 bps

Then it waited 3 months and again did it 2 months in a row

May 2012 – 25bps

June 2012- 25bps

We then entered the period of the RBA not raising rates for over a decade. But even during this time it usually cut rates twice in either succession or close to it:

Oct 2012 – 25bps

Dec 2012 – 25bps

…

May 2013 – 25bps

Aug 2013 – 25bps

…

Feb 2015 – 25 bps

May 2015 – 25bps

…

May 2016 – 25bps

Aug 2016 – 25bps

…

June 2019 – 25bps

July 2019 – 25bps

Oct 2019 – 25bps

Then when the pandemic came, the RBA cut rates twice in the same month!

4 March 2020 – 25bps

20 March 2020 – 25bps

So when the RBA cuts rates it cuts them again, and we really should be expecting another on 1 April, unless the RBA for some reason decides to go against standard practice – which would be a rather political act.

ACTU Secretary Sally McManus has also thrown her weight behind a rate cut?

The Reserve Bank should cut rates to maintain low unemployment which is part of its mandate.
If it doesn’t, the slowdown in consumer spending coupled with the threat to jobs could tip the economy over.
That’s a risk working Australians should not have to confront after a long inflation fight.
Workers should not be asked to absorb high interest rates for any longer than is necessary, now that inflation is within the RBA’s target band.
Any stalling now poses a risk to economic growth and Peter Dutton should know that and stop putting his own political electioneering above the needs of workers with mortgages and bills to pay.
Dutton’s claim that working families are concerned the RBA could cut interest rates ‘too early’ is plain wrong. No working family has ever put that to me.
It is very concerning that he is happy to put his own interests before those of the rest of us, when that means less money in the bank accounts of working people.
Being too cautious now won’t help workers and it won’t help the economy. Inflation is coming down
faster than the Bank forecast and unless the strategy is to wait until the economy goes under, taking jobs down in the undertow, the Bank should announce the first rates cut today.
Similar economies started cutting rates six months ago. It’s long past time for the RBA to do the
same.”

While we are all waiting on the decision of our central bank, let’s check in on how things are going internationally:

The Trump administration is threatening Canada, slapping tariffs on Australia and telling European leaders that they’re the problem, all while forging ahead in negotiations with Vladimir Putin.

On today’s episode of After America, Senator David Shoebridge, the Australian Greens Spokesperson for Defence and Veterans Affairs, joins Dr Emma Shortis to discuss how Trump is treating America’s ‘friends’, the Australian Government’s response to tariffs and why the AUKUS submarine deal makes Australia less safe.

First things first – none of us know for sure when the election will be called. We are all running around like Chicken Littles screaming the election is coming with absolutely nothing but vibes and the guesses of those around us.

The big rumour that sent the press gallery scrambling and set in motion a bunch of emergency news bureau meetings is that Anthony Albanese will call the election either this Sunday or the one after (the Sunday just gone was also on the list) with the early election date set for April 5.

That’s because April 12 ( a favoured rumour until recently) is during Passover. So that pretty much rules it out.

The thinking is that the government wants to have the interest rate bump, avoid handing down a budget before an election (turns out baking in Aukus spending is bad for the budget numbers) and try and get ahead of any further voter disgruntleness.

So this announcement won’t make things clearer. But it will (if the cut goes through) mean Jim Chalmers breathes a tiny bit easier.

One of the biggest zombie ideas that requires multiple stakes through the heart because it has been behind a lot of the rate rises is the NAIRU.

This is the non-accelerating inflation rate of unemployment. A relic of free market loving economists of the 1970s that bizarrely has become seen as a universal truth.

Essentially it is the view that there is a minimum rate at which unemployment can fall to without causing inflation to rise (or accelerate). This is because as we mentioned earlier they think that if too many people are employed then there is too much money being spent and huzzah up goes inflation.

The problem is no one really knows what the NAIRU is. IN the 1980s it was around 6%, then it fell to 5%. For a while economists and the RBA have thought it is 4.5%.

Problem is we have had unemployment around 4% for well over a year, and in that time inflation has fallen – ie Decelerated.

This would just be a boring academic debate, except the RBA believes it is true and has for the past 2 years been trying to get unemployment to rise to 4.5% by raising rates. Both major political parties also essentially agree with it as well. That means both the ALP and Liberal Party believe we should have at least 600,000 – 700,000 people unemployed all the time for “the good of the economy”, and yet both parties also believe those people should be on a JobSeeker rate that has them living in poverty.

Gotta love neoliberal economics, eh?

Ok, final thing – wages!

If wages are rising fast, then the worry is that inflation will also rise because once again we will fell so flush that we will shop madly and thus retailers will think, wow, all my shelves are emptying, I can raise my prices because people will pay more!!!

This as you can see above, is not happening.

Wage growth did pick up in 2022 and 2023, because, bloody hell, when prices are going up 7% you deserve a pay rise that tries to keep up sort of close to that.

But wage growth has peaked.

In the 12 months to March last year private sector wages rose 4.2% – that is pretty high, and is at the level the RBA gets a bit antsy. But then in the 12 months to June last year wage rose just 4.1%, so slower. And then in the 12 months to September last year they rose just 3.5%. That is at a level consistent with inflation being around 2.5%.

So again. If the RBA is looking for a reason not to cut, it can’t find them in wages.

Rather oddly, the December quarter wage figures come out tomorrow.

Let us hope the RBA does not hold of on rates because it wanted more data.

We have some more recent figures on how were are spending – retail trade figures only count the things we buy in shops and restaurants etc. This is about a third of everything we spend our money on, so it is a pretty important measure.

And because shops employ a lot of workers it is also is a good indicator of whether shops are busy and likely to start employing more people, which hopefully means higher wages and thus might have the RBA worried that inflation will start going up.

Well, they can stop worrying.

In 2024 the growth of retail trade in real terms was lower in every singly category than the long-term average.

We are not buying much stuff (this will not be news to any of you)

What other things make the case for cutting rates pretty clear?

Well lets looks at household spending.

The most recent GDP figures showed that in the 12 months to September last year household consumption (which is everything we spend money on, from shopping to buying cars to paying bills) rose just 0.4% in real terms (ie taking out inflation).

Usually growth of 3.0% is considered a nice average increase.

So we are not buying a lot of stuff. And if you include population growth then the amount each household spent in the year to Sept 2023 actually fell 2%.

That ain’t good. And the amount we are buying “per person” is much lower than is was when the RBA began cutting rates, and roughly back where it was in 2019.

That is not the sign of a booming economy.

Some breaking news now and the nation’s corruption watchdog will investigate six individuals referred to it, following a review of the Robodebt Royal Commission.

In October, the National Anti-Corruption Commission revealed it would reconsider its decision not to launch a corruption probe, finding commissioner Paul Brereton should have “removed himself from related decision-making processes” due to an “apprehended bias”.

That review was conducted by Geoffrey Nettle AC KC.

Minutes ago, the NACC released this statement:

“As a result of the decision made by its independent reconsideration delegate, Mr Geoffrey Nettle AC KC, on 10 February 2025, the Commission will investigate the 6 referrals it received from the Royal Commission into the Robodebt Scheme.”

“The purpose of the investigation is to determine whether or not any of the 6 referred persons engaged in corrupt conduct.”

“Consistent with its usual practice, the Commission does not publish reasons for commencing an investigation, as doing so may prejudice the investigations, disclose information which the Commission is required by law to keep confidential, compromise investigative pathways and/or unfairly impact reputations and rights of individuals to impartial adjudication. “

“The Commission is nowmaking arrangements to ensure the impartial and fair investigation of the referrals, as it did with the appointment of Mr Nettle as independent reconsideration delegate. “

“The Commissioner and those Deputy Commissioners who were involved in the original decision not to investigate the referrals, will not participate in the investigation.”