When the Reserve Bank decided not to cut interest rates at the end of September, numerous reasons were given, but one stands out because it appears to be completely wrong.
Fri 24 Oct 2025 11.00
Photo: AAP Image/Nikki Short
The minutes of the RBA’s monetary policy board meeting state that “Members also considered the evolving composition of employment growth. The bulk of employment growth over the first half of 2025 had been in the market sector, following strong growth in non-market sector employment in 2024”. (my emphasis)
The market sector is all those areas that are fully private sector – agriculture, mining, manufacturing, retail, construction and hospitality and the rest. Conversely the non-market sector is the industries of public administration and safety (public servants and police etc.), education and training, and health cares and social services. These are not totally public sector, but public funding is a major source and they don’t compete for services in the way the market sector does.
It is important to separate the two because if the market sector is growing strongly, that suggests the economy is performing well because people have lots of money to spend and demand for goods and services is increasing.
Conversely if it is not growing well, that suggests people are not spending much and as a result shop owners and other businesses are deciding not to hire more people and possibly even cutting back shifts.
So it is a pretty important detail to get right.
Given we have both monthly and quarterly labour force figures, it is a pretty easy thing to check.
The most recent labour force figures released last week revealed that in the first 6 months of this year the hours worked in the non-market sector rose 2.9% while hours worked in the market sector fell 0.3%.
That is the exact opposite of what the RBA was claiming happened. Not only was the bulk of employment growth not in the market sector, but employment in the market sector dropped. There was less work being done!
We also now have the data to the September quarter. Was the picture any better when we counted the first 9 months of the year?
No.
The amount of hours worked in the market sector in the September quarter was 0.8% lower than the amount of hours worked in the December 2024 quarter. Conversely the amount of hours worked in the non-market sector was 4.2% higher.
But what about actual employment. Maybe the Reserve Bank was just talking about jobs and not hours worked?
The most recent figures we have for jobs by industry is to August. Looking at these figures it is again clear that the growth in employment in the first half of the year (or up to August to be previse) came in non-market sector – the opposite of what the RBA was suggesting:
Even worse, these figures were released on 18 September – 10 days before the Reserve Bank board met.
It is extraordinary that the RBA would get this basic and important detail so utterly wrong.
This suggests the RBA believes the economy is growing more strongly that it actually is and made the decision to keep rates steady based on a false understanding of the economy.
Australians should be very concerned that the RBA is getting such basic information wrong – especially given unemployment has now hit 4.5% and will almost certainly keep rising unless the RBA cuts rates.
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