The better-than-expected job print reported yesterday was not a surprise.

The huge fiscal and monetary nuclear bombs thrown at the economy during consecutive lockdowns have done their job. In fact, they’ve probably been too effective in that we now have a problem that things are improving much quicker than expected.

Australia’s record-low unemployment is not an isolated number and now forms a very compelling string of data that suggest the Reserve Bank of Australia (RBA) will need to re-evaluate its stance when it meets in February.

We don’t yet have an inflationary issue to the extent seen in the United States, but it’s coming.

The RBA will completely save face and change its tone at the coming meeting.

Bottom line: We think the RBA will raise rates higher in the third quarter of the year. Banks will continue to price their mortgages higher.

The transitory nature of inflation might be true, though the period of transition is probably longer than expected.

We’re already seeing stock prices adjust and earnings miss their market, which suggests there is some downside pressure in the near term.

The real estate market probably peaked late last year and we’re likely to see some modest adjustments in coming months. Melbourne is set for a comeback and likely to outperform, Brisbane has probably peaked and caution is warranted there.

Published by Peter Esho, co-founder at Wealthi