No wonder Michele Bullock’s dramatic departure from the interest rate script left markets swinging wildly | Greg Jericho
The statements on Tuesday by the governor of the Reserve Bank, Michele Bullock, sent markets into a tizz, but even while she suggested rate cuts are now off the table, there’s no reason to think Australia’s economy needs to cool.Usually when the Reserve Bank leaves rates on hold, little happens.But on Tuesday when the RBA monetary policy board announced the cash rates staying at 3.6%, the markets all got a bit spooked.First off, the statement released was a rather big change from the usual.
Normally investors, speculators and lowly economists pick through each sentence looking for subtle word changes and trying to work out what the RBA means.For example, last year the December changed the wording of one subheading from “The outlook remains highly uncertain” to “The outlook remains uncertain”.Sign up: AU Breaking News emailThis time round, however, there were wholesale changes to the statement.Gone were the subheadings in the November statement and the December statement was around a third shorter.There were still some of the old tea leaves readings though.
In November that RBA noted “The Board’s judgment is that some of the increase in underlying inflation in the September quarter was due to temporary factors”.This month’s statement had the same sentence but followed up with a new one stating: “Nevertheless, the data do suggest some signs of a more broadly based pickup in inflation, part of which may be persistent and will bear close monitoring.”That seemed like the RBA was a bit more worried about inflation and “hawkish” to use the economic jargon.But the real impact on markets came when Bullock gave her press conference later in the day and told the reporters: “It does look like additional cuts are not needed.”She followed up even more stridently saying, “I don’t think there are interest rate cuts on the horizon for the foreseeable future.
The question is, is it just an extended hold from here or is it the possibility of a rate rise? I couldn’t put a probability on those, but I think they’re the two things that the board will be looking closely at coming into the new year.”Boom.And with that the market started pricing in a rate hike by May.To let you know how madly sentiment has swung, less than two months ago the market was not only predicting that the cash rate would already be at 3.35% but that by May next year a further cut to 3.
1% was almost certain,Now the market is betting that by May there will be a rate rise to 3,85% and by the end of next year we’ll be looking at 4,1%:If the graph does not display click hereThis, of course, does not mean the market is more right now than it was in October – just that those whose job it is to make money speculating on what the RBA might do have decided that, when the governor of the RBA tells you there won’t be any more rate cuts, to believe her,It is worth remembering that this time last year the market predicted pretty well all the rate cuts that came in 2025, but it also thought the cuts would continue:If the graph does not display click hereFor the moment I am less ready to follow the market up the interest rate mountain climb.
Importantly there’s no sense of wage growth taking off.In fact, it is slowing in the private sector:If the graph does not display click hereThe number of unemployed for each job vacancy remains at historic low levels, but has been rising slowly, yet steadily, for three years now:If the graph does not display click hereBut the worry is that even if unemployment rises and it becomes harder to get work, the RBA will just use that as a reason to keep rates on hold whereas, if inflation rises or stays around where it is now, it will use that as a reason to increase rates.As ever the “dual mandate” on the RBA of stable prices and full employment is more heavily biased to stable prices.The RBA in its statement and in Bullock’s comments seems very excited that the private sector is recovering and is now contributing more to economic growth than the public sector.But, as I noted last week, the big cause of the increase in household spending was on essentials like insurance, healthcare and energy rather than an exuberance for shopping.
Similarly, the contribution of private sector investment to economic growth remains pretty mild and driven mostly by an abnormal investment in new datacentres, which is unlikely to produce many jobs:If the graph does not display click hereWe now wait for Thursday’s unemployment figures and the economic data that comes out in January before the RBA gets back from its summer holiday on 3 February,That coincides with the first parliament sitting day of the year,If the RBA does decide to increase rates, it will no doubt colour the rest of the political year and mean those speculating more than one rate rise next year, will probably be right, regardless of whether the economy needs them,Greg Jericho is a Guardian columnist and policy director at the Centre for Future Work
How to use a spent tea bag to make a boozy, fruity treat – recipe | Waste not
Save a used teabag to flavour dried fruit, then just add whisky for a boozy festive treatA jar of tea-soaked prunes with a cheeky splash of whisky is the gift you never knew you needed. Sticky, sweet and complex, these boozy treats are wonderful spooned over rice pudding, porridge, yoghurt, ice-cream or even panna cotta.Don’t waste a fresh tea bag, though – enjoy a cuppa first, then use the spent one to infuse the prunes overnight. Earl grey adds fragrant, citrus notes, builders’ tea gives a malty depth, lapsang souchong brings smokiness, and chamomile or rooibos offer softer, floral tones. It’s also worth experimenting with other dried fruits beyond prunes: apricots, figs and/or dates all work beautifully, too
Christmas food gifts: Gurdeep Loyal’s recipes for Mexican-spiced brittle and savoury pinwheels
Edible Christmas gifts are a great excuse to get experimental with global flavours. For spice lovers, this moreish Mexican brittle, which is inspired by salsa macha (a delicious chilli-crunch), is sweet, salty, smoky, crunchy and has hints of anise. Then, for savoury lovers, some cheesy pinwheel cookies enlivened with XO sauce. XO is a deeply umami condiment from Hong Kong made from dried seafood, salty ham, chilli and spices. Paired with tangy manchego, it adds a funky kick to these crumbly biscuits
Festive treats: Adriann Ramirez’s recipes for pumpkin loaf and gingerbread cookies
As a self-proclaimed America’s sweetheart (Julia Roberts isn’t using that title any more, is she?) who moved to the UK nearly 10 years ago, there are a few British traditions and customs that I have adopted, especially around Christmas time. However, there are also a few American ones that I hold on to staunchly: one is the pronunciation of “aluminum”, and another is the importance and beauty of a soft cookie. In both of these easy but delicious bakes to share, I use spice and heat to balance the usual sweetness with which the season can often overload us.Prep 5 min Chill 1 hr Cook 50 min, plus cooling Makes 10-12520g plain flour, plus extra for dusting 8g cocoa powder 8g ground ginger 3g ground cloves 5g ground cinnamon 3g aleppo pepper 4g coarsely ground black pepper 7g table salt 3g bicarbonate of soda 225g soft unsalted butter 175g caster sugar 1 large egg (60g) 77g treacle 77g pomegranate molasses 40g golden syrupFor the icing120g icing sugar 30g waterWhisk the first nine ingredients in a bowl and set aside. Either in the bowl of a stand mixer or using a handheld mixer, beat the butter for a few minutes until light and creamy
Nutcracker stocking fillers: Brian Levy’s recipe for sugar plum and coffee cookies | The sweet spot
These festive cookies are inspired by The Nutcracker’s Land of Sweets sequence, in which coffee and sugar plums are two of the flavours used to conjure a fanciful world of decadent diversion. Anything from a hard candy to a candied fruit can qualify as a “sugar plum” and, in the case of these cookies, the sugar plum is represented by the amarena cherry. Coffee’s bitterness balances the sweetness of the fruit and the rich butteriness of the dough, while the oat flour adds a dash of shortbread-like delicateness.Prep 10 min Chill 30 min+ Cook 35 min, plus cooling Makes 36185g room-temperature butter75g sugar2 tsp instant coffee/espresso powder1 tsp unsweetened cocoa powderFinely grated zest of ½ lemon½ tsp vanilla extract⅛ tsp fine salt 180g plain flour 85g oat flour 36 amarena cherries in syrupTurbinado sugar, or pearl sugar or icing sugar, for dippingIn the bowl of a stand mixer fitted with the paddle attachment, beat the butter, sugar, coffee powder, cocoa, lemon zest, vanilla and salt, at first on low and then medium speed, until creamy and fluffy.Add both flours and beat just until combined with no dry flour remaining; don’t overbeat because this can toughen the texture
How to make the perfect Dubai chocolate bar - recipe | Felicity Cloake's How to make the perfect …
If you’re asking what on earth chocolate has to do with a city with an average annual temperature of 28C, then you must have been stuck in the desert for the past three years. Because, since its creation in the UAE in 2022, apparently to satisfy chocolatier Sarah Hamouda’s pregnancy cravings for pistachio and pastry, this bar has taken over the world. Though food (among those with the luxury of choice, at least) has never been immune to the absurdities of fashion, the internet has supercharged and globalised the process, so much so that pistachios, which back in January were dubbed “the new pumpkin spice” by this very newspaper, are now everywhere, from Starbucks lattes to Aldi mince pies.The thing is, however, that whatever your thoughts on green, sugary, coffee-adjacent beverages, Hamouda’s Dubai chocolate developed for Fix Dessert Chocolatier has triumphed, because it really does taste as good as it looks: crunchy pastry, sweet chocolate and rich, slightly savoury nut butter are an incredibly satisfying combination, so a big bar of it is guaranteed to impress under the Christmas tree. Experience demands that I suggest you wrap it in a pet-proof box, however – emergency vet bills are no one’s idea of a great present
The ultimate unsung superfood: 17 delicious ways with cabbage – from kimchi to pasta to peanut butter noodles
Over the last 50 years, cabbage consumption in Britain has declined 80%. But it’s versatile, full of vitamins, and perfect on a winter night. Here’s how to make the most of itIt’s not good news: despite a lot of messaging about healthy eating, Britons consume 12% less vegetables per week than they did in 1974, when the government’s Family Food survey began. And while the consumption of some specific vegetables – courgettes, say – has risen over the past 50 years, others have experienced a sharp decline. Among the biggest losers is cabbage
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