The Reserve Bank governor tells a gathering in Sydney she is not yet concerned about the level of unemployment in Australia.<\/p>\n
The headline rate encompasses the entire basket of goods and services the ABS measures, so it can go up and down a fair bit.<\/p>\n
To help smooth this out, the ABS reports what it calls the “trimmed mean” \u2014 this is a measure of core inflation<\/a>.<\/p>\n It is exactly what the name suggests: the top and bottom 15 per cent of the inflation basket \u2014 the ones that move around the most \u2014 are “trimmed” or taken out of the calculation.<\/p>\n The statisticians say this provides the ABS with a clearer picture of inflation in the economy.<\/p>\n It is this number the RBA focuses on, and indeed it wants inflation to hit its target \u2014 preferably, a bullseye on 2.5 per cent.<\/p>\n That would put inflation in the middle of its target range for price growth in the economy of between 2 and 3 per cent, on average, over time.<\/p>\n Ever so close<\/p>\n In the June quarter, core inflation came in at 2.7 per cent.<\/p>\n This was well down on the 2.9 per cent recorded in the March quarter.<\/p>\n It was, however, above what the Reserve Bank had been forecasting, at 2.6 per cent.<\/p>\n The Reserve Bank took the view in August to lower the cash rate by 0.25 of a percentage point because underlying inflation had continued “to decline back towards the midpoint of the 2-3 per cent range and labour market conditions [eased] slightly, as expected”.<\/p>\n It subsequently kept interest rates on hold in September, taking the view that “private demand [was] recovering, indications that inflation may be persistent in some areas and labour market conditions overall [remained] stable\u2026”.<\/p>\n The crucial point here is that the RBA wants to be “confident” that underlying inflation is likely to return to the midpoint of its target range.<\/p>\n Despite rising unemployment<\/a>, it appears the bank has lost a little confidence in that, as private sector demand has picked up.<\/p>\n Services the sticking point<\/p>\n This brings us to the so-called “sticky” \u2014 as RBA governor Michele Bullock calls it \u2014 services inflation.<\/p>\n This relates to out-of-pocket healthcare costs, insurance premiums, rents and the expenses of building a new home.<\/p>\n The increase in the prices of some of these items slowed in the June quarter.<\/p>\n For example, healthcare costs grew 2.9 per cent in the March quarter, but prices rose at a more modest 1.5 per cent in the June quarter.<\/p>\n But the insurance and financial services category, for example, remained at 0.5 per cent growth.<\/p>\n Crucially, the RBA continues to describe the jobs market as a “little bit tight”, which signals continued upward pressure on workers’ wages.<\/p>\n However, September’s official unemployment rate jumped to 4.5 per cent<\/a>, which was above the RBA’s forecasts of a 4.3 per cent jobless rate at the end of 2025<\/a>.<\/p>\n The next labour force report from the ABS is not until November 13.<\/p>\n The unemployment rate rose more than forecast in September. (AAP: Bianca De Marchi)<\/p>\n Wages growth supporting inflation<\/p>\n The National Australia Bank’s latest quarterly business report revealed wages continue to be a big expense for businesses.<\/p>\n<\/p>\n