Hedge Clippings | 20 February 2026

With yesterday's continued strong employment figures giving no respite to inflationary pressures, it reinforces the view that interest rates are going to be on hold (at best), or on an upward path over the next six months (at worst). Following the RBA's February meeting, that won't come as a great surprise to most, although it will be unwelcome news for those with a mortgage.

It's not great news for Jim Chalmers either, although being a politician trying to defend the obvious, he wasn't going to admit to that; instead, it was a "reminder of the resilience of our labour market", which is undoubtedly true. Unfortunately, that's not what the RBA would have been wanting to hear. Jim was quick to quote Michele Bullock's comments last week that the state of the labour market was good news for the economy.

Meanwhile, Chalmers was equally quick to denigrate Bullock's predecessor, Philip Lowe, who had the temerity to criticise the government's record when it came to handouts and spending, and productivity growth. Both Chalmers and Albo had a crack at Philip Lowe to try to deflect his comments and criticism by playing the man, and not the ball, which is unsurprising, even if they would be better off listening to Lowe and nearly every other economist and trying to fix the problem.

And their problem is this: The government is addicted to handouts because they help them get re-elected at election time, even though inflation may be higher than it should be as a result. As Paul Keating once famously said, "In the race of life, always back self-interest. At least you know it's trying".

So we're stuck in the slow lane (productivity-wise) and the too-fast lane when it comes to inflation (+3.8% to December), which is outstripping growth in wages, which only grew by 3.4% over the same period.

Once again, Jim Chalmers tried to put a positive spin on it (as he would) by saying that workers are earning more now than they were a few years ago. Unfortunately, they're no better off than they were.

Looking forward, it's likely the RBA will sit on their hands in March, but that may not be the case by May, with NAB and other bank economists expecting further rate rises just as Chalmers delivers his next budget.

Look out!

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