The Reserve Bank of Australia (RBA) has lifted the cash rate by 25 basis points at its latest meeting, signalling the start of a more prolonged tightening cycle. While many economists believe the RBA will need only two more rate hikes, Michael Knox argues that this view does not account for structural inflation pressures already building within the Australian economy.His modelling and economic analysis suggest the real requirement is at least four rate hikes before inflation begins to ease.

In this episode, Michael Knox and Stephen Austin from the ABC unpack the economic challenges Australia faces in 2025. With electricity subsidies ending and energy supply constraints persisting, households are bracing for higher power bills and rising inflation. Here’s what’s on the horizon:

Beginning on the 1st of October 2025, the US government began its current Federal government shutdown.

The shutdown occurred because Democratic Party Senators refused to support a Continuing Resolution to provide funding for the US government. At the time of writing, Republican Senators have now put up Continuing Resolutions for funding to the Senate 11 times, and Democrat Senators have refused to support them 11 times.

On 7 July the AFR published a list of 37 Economists who had answered a poll on when the RBA would next cut rates. 32 of them thought that the RBA would cut on 8 July. Only 5 of them did not believe the RBA would cut on 8 July. I was one of them. The RBA did not cut.

Morgans Chief Economist Michael Knox says that for the RBA to get inflation down to 2.5%, unemployment must rise above 4.5% in Australia.

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Morgans Chief Economist Michael Knox says that though the FED are easing quantitative tightening, US consumer demand is still too healthy to allow rate cuts.

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Our Model of US GDP says steady growth just below trend. Just where the Fed needs it to keep US Inflation falling.

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Morgans Chief Economist Michael Knox gives an update on the Fed Funds and the RBA Cash Rate. 

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Strong corporate profits drive corporate yields lower and stock prices higher.

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