RBA<\/a>, September 2025<\/p>\nMousina comments that the environment for households is going to be better, though it may feel slow for cost-of-living pressures to turn around while we await wages catching up.<\/p>\n
We\u2019re not completely safe yet though when it comes to inflation.<\/p>\n
\u201cThere are still upside risks to inflation. For example, dwelling construction costs, goods prices and the impact of tariffs on those,\u201d Mousina notes, but highlights the RBA is more likely to be monitoring the labour market now.<\/p>\n
\u201cThere are concerns that interest rate rises could weaken the labour market. The good news is that unemployment hasn\u2019t increased too much, it bottomed at 3.5% and is currently 4.2%,\u201d she says.<\/p>\n
Interestingly, the labour market is also something Mousina is monitoring in the US market, alongside the positive earnings season. On the whole, she feels the US market has held up nicely, with an easing cycle supporting the consumer and other drivers.<\/p>\n
What you need to know about productivity<\/p>\n
Productivity has been a concern of late and not just in Australia. US has been one of the few countries to buck the trend of weaker productivity growth. There hasn\u2019t been significant growth in productivity in Australia since 2016. In the last measure (2023-2024), the 20-year average annual growth rate in productivity was 0.8%.<\/p>\n
\u201cWe care about productivity growth because it is the long-term driver of wages growth and living standards. Household disposable income rises with productivity growth,\u201d Mousina explains.<\/p>\n
It is measured using a number of indicators, with the broadest one being GDP per hour worked and it can be broken down into sectors.<\/p>\n
\u201cThe non-market sector has had weak productivity growth in recent years, but always will compared to the private sector because you don\u2019t target productivity and improvements in productivity in the care economy. Agriculture has been an outperformer with really strong growth, while mining has had weaker growth,\u201d Mousina highlights.<\/p>\n
The recent productivity summit came out with a number of recommendations to support better productivity \u2013 but Mousina cautions not to expect a quick change-around.<\/p>\n
\u201cSome are easier, quick wins like activity in the construction sector that can offer an improvement in productivity in the next 12-18 months. Other things, like education standards, take years to move through the system,\u201d she says.<\/p>\n
The timing of the next rate rise<\/p>\n
Mousina expects a pause in the meeting on 30 September 2025, as the central bank continues to monitor the results of the last cut. She anticipates a cut in the November meeting, as the current level is restrictive for the economy.<\/p>\n
\u201cWe think there will be one more rate cut in November and then one more in the first half of next year, taking the cash rate to 3.1%,\u201d Mousina says.<\/p>\n
She notes that the RBA\u2019s own estimates average close to 2.9% – the current rate is 3.6%, leaving room to move.<\/p>\n
Investing in the current environment<\/p>\n
On the whole, Mousina is positive about the outlook and the potential for further cuts to offer support to the economy.<\/p>\n
\u201cIt doesn\u2019t look like we\u2019re going to have a major decline in share market performance. Earnings growth is still holding up and there\u2019s still opportunities from exposure to growth assets, like US equities, even if you think there might be a bubble in the tech sector,\u201d she says.<\/p>\n
She reminds investors that either way, \u201cmost years in share markets tend to be positive. There will still be negative years, but being invested over time is going to help balance out those years.\u201d<\/p>\n
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