👉 Background: The Reserve Bank of Australia is Australia’s central bank. Its main role is to ensure the economic prosperity of the people of Australia. And it has a pretty powerful lever to control prosperity - the ability move the cash rate up and down.

👉 What happened: After cranking up the cash rate from 0.1% to 4.35% in less than 18 months, the RBA has decided to pause the cash rate once again at 4.35% in its final meeting of 2024. And this is the 9th month in row that the rates have been paused.

👉 What else: And while the RBA is also responsible for ensuring full employment in the economy, they currently reckon that employment is actually too hot right now.

What's the key learning?

💡While low unemployment is generally positive for an economy, sometimes having too many people working, or "overfull employment", can cause problems too.

💡When nearly everyone has a job, businesses might struggle to find workers. And then to attract staff, they offer higher wages. The catch is that businesses often raise their prices to cover those extra costs, which can make everything more expensive… and this is when inflation kicks in again.

💡The idea is to find a balance: lots of jobs, but not so many that inflation spirals out of control. And right now, the RBA believes that employment is still to "full" to drop the cash rate.