Weekend Edition: Is Australia’s soft landing sustainable?
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Is Australia actually achieving a soft landing after the recent inflation slowdown?
Australia is supposedly coming in for a soft landing. We've done better than most at bringing down the inflation rate without crashing the economy. But can it be sustained? That's this week. The morning call from NAD with Phil Dobby. The weekend edition. So on Friday morning's morning call we asked the question, could a rate rise from the RBA actually come sooner than many had expected? I mean it wasn't that long ago, was it, that the talk of a rate cut in May was on the cards. And even that was seen as a bit of a stretch because it was pushing back from uh an expectation that maybe we'd be getting one in December next week from the RBA. So it's quite a turnaround to talk about rate hikes. But uh we are of course coming.
Coming in for a soft landing, supposedly. And the question is, can central banks ever really get rates down without a bump? Is a soft landing too much to hope for? Well Nab Sally Old is here to talk through all of this. So Sally, I mean a soft landing, is that what Australia is seeing? And if so, I mean maybe we should start by defining that what what that is, I guess. Because I mean a a hard landing is when interest rates cripple demand, people lose their jobs, there's less than a little bit. Less money being spent and the government has to do more of the heavy lifting, ensure we get a recession. A bad landing, which is possible, isn't it, is when interest rates are too low, people spend too much, it outstrips capacity, and inflation returns.
So have we really avoided those and and taken the middle path, do you think? Yeah, and Phil it's it's really
Interesting, I think. Um, you know, especially because in our little neck of the woods we've got um, you know, two really different examples. So New Zealand would be the classic case of uh, you know, like the RBA and and here in Australia a couple of years ago facing into a pretty material inflation problem. Uh and they basically chose a path where they said, and they were upfront and explicit about it, uh said the only way that we're going to deal with this inflation problem. is to do it the old fashioned way and put the economy into recession, create genuine spare capacity, and that will bring inflation down. Uh and and the Kiwis I think have done a a pretty good job of achieving that outcome. Inflation is lower, the economy's been in recession.
Uh and so that that is not what we would call a a soft landing. Um Lots of spare capacity in the labor market, unemployment rate moved considerably higher. In contrast, the RBA took a different approach where they basically said, look, we think we're lucky we've got a bit more flexibility in the way that our inflation target is constructed. And so, you know, we did actually create all these jobs in that post-pandemic reopening. We got to the point of full employment. where anyone who wanted a job could get a job. And that's actually, you know, effectively the the holy grail when it comes to macroeconomic management. Um
How does the RBA’s “soft‑soft” approach differ from the RBNZ’s harder stance?
And so wouldn't it be good if we could basically have our cake and eat it as well and and maybe take a slightly slower, slightly more cautious approach in terms of lifting rates? And we still think we can get inflation down over a reasonable time period, uh, but but do that in a way that preserves so many of those job gains and and effectively minimizes the disruption in the labour market. And so, you know, you you you try to keep the labor market as close to full employment. Yeah.
Right, but you are buffering the buffering the edge of capacity on that, huh?
Yeah, that's right. And so and so I think to all intents and purposes, you know, largely the RBA achieved that. And there were times, you know, as they were moving towards that outcome that they they did feel like they were on a pretty narrow path, which was that, you know, maybe they weren't going to get there. But, you know, the the governor definitely re retired that um that narrative earlier this year and I think, you know, in doing so basically was saying, Look, we think we're we're basically there.
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Chapters
8 chapters
1
Is Australia actually achieving a soft landing after the recent inflation slowdown?
0:01–2:47
2
How does the RBA’s “soft‑soft” approach differ from the RBNZ’s harder stance?
2:47–6:20
3
What defines a hard landing versus a soft landing for the Australian economy?
6:20–9:56
4
Why does Australia have less spare capacity than New Zealand and how does that affect growth?
9:56–13:21
5
Can limited capacity be expanded through corporate borrowing or productivity gains?
13:21–16:50
6
What do the latest GDP and household‑spending numbers tell us about near‑term inflation risk?
16:50–20:01
7
How likely is another RBA rate hike in early 2026 and what would trigger it?
20:01–23:55
8
What are the two most plausible scenarios for Australia’s monetary policy and growth in the coming year?
23:55–25:56