Betashares’ chief economist believes December’s strong employment figures do not guarantee an interest rate hike by the Reserve Bank (RBA) at its February policy meeting. However, the economist added that the figures heighten the importance of next week’s inflation report, calling it a ‘make or break’ moment for mortgage holders.
While employment bounced by 65,200 in December, the average monthly employment gain over the past two months is a more moderate 18,000. This suggests the labour market remains firm rather than overheated. The economist noted that the lift in economic growth since late 2025 is starting to feed through into renewed labour market strength, given the easing in the unemployment rate from a recent peak of 4.4 per cent in September 2025.
As a result, next week’s December quarter inflation report is now a pivotal moment for the near-term interest rate outlook. The economist’s base case remains that the quarterly gain in trimmed mean inflation will be 0.8 per cent, which should be enough to keep the RBA sidelined in February. He added that US President Donald Trump’s temporary backdown on European tariff threats will probably ease any recently renewed RBA concerns over the global trade and geopolitical outlook.
The economist said that the re-instigation of the ‘TACO trade’ is good news for equity investors, suggesting the recent market volatility could well be short-lived. Betashares is an Australian investment firm offering a range of exchange-traded funds (ETFs). These funds provide investors with access to various asset classes and investment strategies.
