I've been in a running debate with fellow ABC economics nerd David Taylor about what the Reserve Bank will do with interest rates on September 29: to hike or hold?
To this point, I've been firmly in the hold camp and DT has generally been in favour of a hike.
Our office argument is a microcosm of the same debate playing out in banks, trading rooms and probably at the RBA headquarters.
The traders have swung decisively to a rate hike, priced in at an 87 per cent probability according to LSEG data.
The economists are more divided. Of the big four banks, so far, only NAB has a September rate rise as its "base case", but the other three expecting the RBA to wait until November all acknowledge the September meeting is very much "live".
So, what are the main arguments for and against a September rate hike in Australia?
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The key arguments for a September rate hike
First to the case for a rate hike sooner rather than later.
Australian inflation, like the US, is above our central bank's target band, which is 2-3 per cent here.
While the annual headline Consumer Price Index (the Australian Bureau of Statistics' key inflation measure) fell from 3.8 to 3.5% in July, that was higher than economists were predicting.
The RBA's preferred trimmed mean number, that strips out the most volatile price moves, also remained stuck at 3.6 per cent.
Moreover, the detail showed that services price rises remained stubbornly above the RBA's target, telling economists that there are domestic price pressures rather than just imported inflation from higher fuel costs.
Those inflation numbers, released in August, already had some economists pencilling in a rate rise for September, or at least the risk of one.
Then there were stronger than expected economic growth numbers.
The Australian economy grew 2.1 per cent over the 12 months to June, once again a bit ahead of economist forecasts.
Historically, 2.1 per cent is a pretty mediocre annual growth rate for Australia, but the RBA now reckons the nation's economic speed limit is about 2 per cent, due to very weak productivity.
One of the factors driving growth over the past year has been a surge in business investment, mostly led by AI and related data centre construction.
This building frenzy is happening at such speed and there's so much cash behind it that crazy money is being hurled at tradespeople and technicians to get these things erected in a hurry, which is then flowing through to broader construction inflation.
Finally, today's US rate rise, on top of a move from the European Central Bank last week and the virtual certainty of one from the Bank of Japan tomorrow, is heaping pressure on the RBA to follow.
The relative fall in the Australian dollar against the currencies of countries that are raising rates will push up import costs and add to inflation, while also making Australia's exports a bit more competitive, adding to growth.
Australia's economy is very different from the US
So, the market's right? I hear you ask. A September rate rise is a done deal?
Not quite.
Australia is in quite a different position from the US.
First, as all the RBA's senior officials have pointed out repeatedly, our central bank has already raised rates three times this year.
Unlike post-COVID, where Australia lagged the rest of the developed world on rate rises, this time we are leading the way.
Secondly, as US President Donald Trump was keen to point out in his Truth Social post this morning, the American economy is genuinely booming.
Unemployment is falling (most recently to 4.1 per cent), investment is surging and consumer spending is strong.
While the latter two are also broadly true for Australia, our jobs market is the inverse of the US.
Over there, the unemployment rate started the year at 4.3 per cent and has fallen to 4.1 per cent.
Here, the seasonally adjusted jobless rate started the year at 4.1 per cent and has risen to 4.5 per cent.
Australia is in a rapid housing downturn
A third key difference is the prevalence of variable-rate mortgages here, which has meant that the three rate rises early this year, along with major tax changes, have sent the housing market into a rapid reverse from last year's boom.
Chief economists Paul Bloxham from HSBC and David Bassanese from Betashares both expect the RBA to hike rates in September, but both also acknowledge the effect that is likely to have on housing.
Bloxham now expects a national 13 per cent peak-to-trough fall in house prices, and explains there are four ways this will slow Australia's economy.
There's the wealth effect, with every 5 per cent fall in house prices expected to reduce consumer spending by 0.8 per cent over two years.
"Our 13 per cent assumed peak-to-trough decline would mean around 0.4 per cent less GDP in two quarters, and 1 per cent less GDP over time," Bloxham notes.
There's less economic activity generated from fewer property transfers and moves.
Falling stamp duty revenues will eat into state budgets, potentially forcing spending cuts.
Finally, falling prices tend to stop a lot of property development in its tracks, especially when rates and building costs are rising too.
That will free up some workers for the data centre boom and keep something of a lid on construction costs, although fewer new dwellings won't help rental inflation.
Is the risk of moving rates too early greater than the risk of waiting?
There are two other questions the RBA board members need to ask before raising rates in September.
The first is, how much do they trust that monthly inflation read from July.
"The monthly CPI does not provide enough information to confirm this in either direction."
Waiting until the November meeting gives the RBA the chance to get the full September quarter data, which it trusts far more than the relatively new monthly figures.
The second is how far the RBA can push rates before something in the economy snaps.
There was evidence that a lot of recent home buyers were struggling with their mortgage repayments the last time the cash rate was 4.35 per cent.
The cash rate hasn't been at 4.6 per cent or above since 2011, so the RBA would be taking a leap into the unknown if it goes there.
It won't want to take tens or hundreds of thousands of Australian borrowers off a mortgage cliff with it.
If it hikes in September and that proves to be a mistake, the earliest the RBA could realistically change course without totally losing face would be February.
Having moved early, it still feels to me like the RBA has bought itself time to swim against the current tide of rising interest rates for a bit longer. We'll find out soon whether the majority of its board members agree.
