Why Australia's strengthening economy could mean no RBA cuts in 2020

The RBA may not cut interest rates in 2020 as Australia's economy strengthens, according to the latest ABS unemployment stats.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The RBA may not cut interest rates in 2020 based on today's latest job figures.

A key part of the RBA's decision making is looking at the economy and how the jobs market is faring. During 2019 the unemployment rate had been steadily rising from under 5% to 5.3%.

But the country can have a Christmas cheer about the November 2019 figures released by the Australian Bureau of Statistics (ABS) today.

The unemployment rate declined from 5.3% in October to 5.2% in November 2019. Using the seasonally-adjusted numbers, employment increased by 39,900 people with an extra 4,200 full-timers and an additional 35,700 part-timers. The number of unemployed people decreased by 16,800 to 708,100 people.

RBA governor Dr Lowe said that the economy may have reached a gentle turning point and it seems he may be right.

Considering the Australian property market is now flying, the RBA may decide to hold back on any further cuts in the first half of 2020.

Many economists had been pencilling in a rate cut as early as February next year, which is the earliest opportunity for the RBA to take action after Christmas.

We've already seen and heard from various areas of the economy that things might be starting to turn around. Brickworks Limited (ASX: BKW) is reporting a growing order book, house prices are jumping, Afterpay Touch Group Ltd (ASX: APT) reported very strong sales on Black Friday and Cyber Monday, and so on.

It may be a bit too early to tell if things are fully on the mend, but an end to interest rate cuts would help savers feel a bit more confident to return to normal spending.

Foolish takeaway

A lower unemployment rate is good news for Commonwealth Bank of Australia (ASX: CBA), SEEK Limited (ASX: SEK), JB Hi-Fi Limited (ASX: JBH) and plenty of other economy-facing businesses. Regardless of what happens next, I want to stay invested in high-quality ASX shares with good growth potential.

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Brickworks and SEEK Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

A neon sign says 'Top Ten'.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a Garfield kind of Monday for investors.

Read more »

A happy male investor turns around on his chair to look at a friend while a laptop runs on his desk showing share price movements
Broker Notes

Buy, hold, sell: Catapult, Step One, WiseTech Global shares

Morgans has given its verdict on these shares. Are they buys, holds, or sells?

Read more »

Broker written in white with a man drawing a yellow underline.
Broker Notes

Leading brokers name 3 ASX shares to buy today

Here's why brokers believe that now could be the time to snap up these shares.

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Share Market News

These are the 10 most shorted ASX shares

Let's see which shares short sellers are targeting this week.

Read more »

Happy shareholders clap and smile as they listen to a company earnings report.
Share Gainers

Why Artrya, Clinuvel, Imugene, and Pilbara Minerals shares are storming higher today

These shares are starting the week in a positive fashion. But why?

Read more »

Woman calculating dividends on calculator and working on a laptop.
Share Market News

Charter Hall Group declares interim distribution for 1H FY26

Charter Hall Group declares a 24.83-cent half-year distribution for the six months to 31 December 2025, with most of it…

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why Andean Silver, Boss Energy, Chalice Mining, and Rio Tinto shares are falling today

These shares are starting the week in the red. But why?

Read more »

A man leaps from a stack of gold coins to the next, each one higher than the last.
Broker Notes

Up 300% this year, 3 reasons to buy this ASX All Ords gold stock today

A leading broker sees further ‘clear upside’ potential for this rocketing ASX gold stock.

Read more »