How we tested prices, jobs and credit
The data, how each link was graded, and every test behind Prices, jobs and credit.
General information, not legal or financial advice.
Data
- Prices: ABS CPI, quarterly, 1972–2026: all groups and 28 groups, sub-groups and items; seasonally adjusted items from CPI_Q; essentials (non-discretionary) from 2005; capital cities’ changes over the year to September 2025. Rent and power combine rents and electricity by their CPI weights: the ABS’s 2018 weights, carried through time by each item’s price against the CPI (a fixed basket).
- Labour, rates and credit: ABS unemployment, seasonally adjusted; RBA cash rate (F1.1), indicator lending rates (F5), outstanding mortgage rates (F6), credit by sector (D1, break-adjusted), card balances accruing interest (C1), trimmed mean (G1), wages (H4).
- Arrears: APRA housing loans non-performing (2019–2026); banks’ loans 90 days or more past due but well secured, 2004–2026, joined in March 2022 when APRA’s definitions changed (gap 0.11 points); all loans impaired or past due (gap 0.05).
- Insolvencies: AFSA, people entering a personal insolvency not related to a business, by state, 2007–2026. Windows touching July 2019 to September 2022 are left out nationally; across states, each quarter’s national swings are removed instead.
Grading the arrows
Strong: the main test has the expected sign with t of 2.5 or more; the expected sign with t of 1.65 or more in at least two-thirds of the checks; no test significant the other way; and the reverse test not significant. Some: no test significant the other way, and the expected sign with t of 2 or more in the main test or in at least two checks. Not found: anything else. Checks are the same link on other samples, with more controls (inflation, wages, the terms of trade), on another measure, and our earlier pieces’ tests of the same link. t is an estimate divided by its standard error (Newey–West, or Driscoll–Kraay across states); beyond about 2 it is unlikely to be chance.
| Link | Grade | Main test, b (t) | Checks, t | Reverse, t |
|---|---|---|---|---|
| Inflation above target → Cash rate rises | Some | 0.066 (t 1.0) | 1.0 · −0.4 · 6.8 · 1.5 · 0.4 · 0.5 · 4.6 | t −0.1 |
| Unemployment rises → Cash rate cut | Strong | −0.178 (t −2.6) | −2.0 · −1.9 · −5.3 · −2.3 · −2.1 · −2.1 | — |
| Cash rate → Mortgage rates | Strong | 0.946 (t 15.2) | 18.3 · 8.3 | — |
| Cash rate rises → Home lending slows | Strong | −2.349 (t −3.5) | −2.5 · −1.7 · −2.3 | — |
| Cash rate rises → Business credit falls | Not found | 4.590 (t 2.4) | 2.6 · 1.4 | — |
| Cash rate rises → Home-loan arrears rise | Some | 0.006 (t 0.5) | −0.2 · 5.2 · −0.2 · 0.6 · 5.2 · 2.1 | t −0.1 |
| Cash rate rises → Personal insolvencies rise | Some | 1.815 (t 2.2) | 1.2 · 1.6 · 0.5 · 0.6 | t −0.1 |
| Unemployment rises → Home-loan arrears rise | Strong | 0.055 (t 4.2) | 3.6 · 3.8 · 0.6 · 1.3 · 6.4 · 13.2 | — |
| Unemployment rises → Business credit falls | Strong | −7.696 (t −3.2) | −3.6 · −2.6 · −2.8 · −3.9 | — |
| Unemployment rises → Personal insolvencies rise | Not found | 4.049 (t 1.3) | 0.8 · 1.5 · 1.5 · 0.5 · 1.1 · 1.8 | — |
| Inflation → arrears, beyond rates | Not found | 0.021 (t 2.1) | 0.6 · −2.1 | — |
| Inflation, on its own → Credit or arrears | Not found | 0.249 (t 0.5) | 0.4 · −1.3 · −0.6 · 2.5 | — |
Main tests: next quarter’s change in the cash rate on underlying inflation’s distance from 2.5% and the past year’s change in unemployment (1993–2026); lending rates’ quarterly change on the cash rate’s (1993–2026); credit after a 1-point cash-rate change, four quarters on (local projections, 1993–2019); the yearly change in loans 90+ days past due on the same year’s change in unemployment and the cash-rate change four quarters before (2005–2026, a COVID dummy); the yearly change in insolvencies the same way (2008–2026, 2019–22 out); business credit after a 1-point jump in unemployment (local projection, four quarters). The reverse test puts the other variable first.
What moves the cash rate, in counts
Of the 134 quarters from 1993 to mid-2026, a rise followed 36 and a cut 38. Granger tests with four lags (1993–2026, a dummy for each COVID quarter): inflation helps predict the cash rate (p 0.025), unemployment too (p 0.001); the cash rate does not help predict inflation (p 0.79). With this quarter’s own move held, neither adds much: once a cycle is under way, the Bank keeps going.
Runs and what followed
A quarter counts when the cost rose faster than all prices: seasonally adjusted quarter on quarter for rents, electricity, insurance and fuel (rent and power combined by weight); over the year for essentials, food and wages, which have no seasonally adjusted pair. A run reaches k quarters in the first quarter of k in a row; each run counts once for each k. What followed is the change over the next four quarters. Similar quarters are the three nearest with no run, by the past year’s change in unemployment and in the cash rate. The p-value comes from shifting the pattern of runs around the calendar 2,000 times. Then one regression over every quarter: next year’s change on the past year’s gap, holding unemployment, the cash rate and the outcome’s own past year (Newey–West), with three variants (underlying inflation, without 2008–09, wages and the terms of trade) and the reverse. For insolvencies, a panel of six states with state and quarter effects (Driscoll–Kraay).
| Squeeze → outcome | Grade | Every quarter, b (t) | Variants, t | Reverse, t | Runs of 3: n; after vs similar; p |
|---|---|---|---|---|---|
| Rent and power quarter on quarter → Insolvencies | Not found | −2.186 (t −3.9) | t −4.7 · t −4.3 · t −4.4 | t −0.5 | 1 run; 8.68 vs −20.43; p 0.21 |
| Rent and power quarter on quarter → Arrears | Not found | 0.009 (t 1.2) | t 0.5 · t −0.2 · t 2.1 | t 1.1 | 2 runs; 0.03 vs 0.03; p 0.61 |
| Rent and power quarter on quarter → Card debt | Not found | −0.619 (t −2.2) | t −2.6 · t −1.9 · t −2.4 | t 2.2 | 3 runs; 4.69 vs 6.99; p 0.71 |
| Rent and power quarter on quarter → Personal credit | Not found | 0.054 (t 0.1) | t 0.1 · t 0.1 · t −1.4 | t 0.4 | 6 runs; 3.71 vs 3.95; p 0.53 |
| Rent and power quarter on quarter → Housing credit | Not found | −0.079 (t −0.5) | t −0.6 · t 0.1 · t −2.6 | t −1.5 | 6 runs; 10.15 vs 13.41; p 0.62 |
| Rents alone → Insolvencies | Not found | 0.739 (t 0.6) | t 0.1 · t 0.7 · t 0.5 | t −0.9 | 3 runs; 0.47 vs −0.60; p 0.88 |
| Rents alone → Arrears | Not found | 0.003 (t 0.3) | t −1.1 · t −1.1 · t 0.5 | t 0.1 | 4 runs; −0.01 vs −0.02; p 0.60 |
| Rents alone → Card debt | Not found | −0.039 (t −0.1) | t −0.2 · t 0.4 · t 0.2 | t 2.3 | 4 runs; 1.18 vs 3.53; p 0.84 |
| Rents alone → Personal credit | Not found | 0.235 (t 0.6) | t 0.6 · t 0.7 · t −1.2 | t 0.8 | 6 runs; 3.88 vs 4.23; p 0.87 |
| Rents alone → Housing credit | Not found | −0.017 (t −0.1) | t −0.2 · t 0.4 · t −2.2 | t −1.3 | 6 runs; 9.02 vs 11.48; p 0.38 |
| Electricity alone → Insolvencies | Not found | −0.712 (t −3.9) | t −3.7 · t −4.0 · t −3.6 | t −0.7 | 2 runs; 12.34 vs −7.19; p 0.07 |
| Electricity alone → Arrears | Not found | 0.002 (t 1.4) | t 1.1 · t 0.4 · t 2.0 | t 0.6 | 3 runs; −0.01 vs 0.03; p 0.58 |
| Electricity alone → Card debt | Not found | −0.175 (t −3.2) | t −3.4 · t −3.2 · t −3.1 | t 0.9 | 4 runs; 2.63 vs 4.95; p 0.64 |
| Electricity alone → Personal credit | Not found | −0.056 (t −0.7) | t −0.7 · t −0.7 · t −1.5 | t −1.0 | 8 runs; 3.79 vs 5.03; p 0.17 |
| Electricity alone → Housing credit | Not found | −0.023 (t −0.7) | t −0.7 · t −0.2 · t −1.6 | t −1.5 | 8 runs; 10.85 vs 12.59; p 0.69 |
| Essentials against all prices → Insolvencies | Not found | −4.608 (t −1.9) | t −2.7 · t −4.8 · t −2.3 | t −1.5 | 2 runs; −3.10 vs 9.47; p 0.47 |
| Essentials against all prices → Arrears | Not found | −0.003 (t −0.1) | t −0.7 · t −1.2 · t 0.3 | t 0.3 | 3 runs; −0.01 vs 0.02; p 0.61 |
| Essentials against all prices → Card debt | Not found | −1.618 (t −1.7) | t −1.7 · t −2.1 · t −1.4 | t 3.8 | 3 runs; 4.36 vs −4.21; p 0.26 |
| Essentials against all prices → Personal credit | Not found | −0.863 (t −0.9) | t −1.0 · t 0.6 · t −1.5 | t 1.6 | 3 runs; 2.59 vs −2.58; p 0.47 |
| Essentials against all prices → Housing credit | Not found | −0.182 (t −0.8) | t −0.8 · t −1.5 · t −1.0 | t 1.6 | 3 runs; 7.28 vs 4.97; p 0.35 |
| Essentials against wages → Insolvencies | Not found | −2.170 (t −1.2) | t −1.4 · t −2.1 · t −1.2 | t −0.4 | 4 runs; −2.95 vs 4.74; p 0.59 |
| Essentials against wages → Arrears | Not found | 0.016 (t 1.4) | t 0.7 · t 0.5 · t 1.9 | t −0.5 | 4 runs; 0.01 vs 0.02; p 0.83 |
| Essentials against wages → Card debt | Not found | −0.716 (t −1.4) | t −1.6 · t −1.2 · t −1.3 | t 0.6 | 4 runs; −0.31 vs 2.04; p 0.48 |
| Essentials against wages → Personal credit | Not found | −0.459 (t −0.7) | t −0.9 · t 1.0 · t −0.5 | t 0.3 | 4 runs; −1.69 vs −0.14; p 0.15 |
| Essentials against wages → Housing credit | Not found | −0.116 (t −0.9) | t −0.9 · t −0.7 · t −0.8 | t −0.4 | 4 runs; 5.86 vs 6.19; p 0.37 |
| Insurance → Insolvencies | Not found | 0.316 (t 0.7) | t 0.5 · t 1.1 · t 0.5 | t 0.8 | 5 runs; 2.12 vs 5.19; p 0.97 |
| Insurance → Arrears | Not found | 0.001 (t 0.3) | t −0.1 · t 1.2 · t 0.1 | t 0.1 | 6 runs; 0.05 vs −0.01; p 0.16 |
| Insurance → Card debt | Not found | −0.004 (t 0.0) | t −0.1 · t 0.2 · t 0.1 | t −0.3 | 6 runs; −0.25 vs 2.85; p 0.08 |
| Insurance → Personal credit | Not found | 0.100 (t 0.9) | t 0.8 · t 0.2 · t 0.7 | t 0.7 | 9 runs; 2.41 vs 3.01; p 0.30 |
| Insurance → Housing credit | Not found | 0.015 (t 0.3) | t 0.4 · t 0.4 · t 0.7 | t −0.6 | 9 runs; 8.25 vs 8.67; p 0.00 |
| Fuel → Insolvencies | Not found | −0.422 (t −2.5) | t −2.7 · t −3.6 · t −2.2 | t −0.7 | 3 runs; −13.97 vs −0.55; p 0.02 |
| Fuel → Arrears | Not found | 0.001 (t 0.8) | t 1.1 · t 0.9 · t 1.7 | t 1.3 | 5 runs; 0.05 vs 0.00; p 0.34 |
| Fuel → Card debt | Not found | −0.089 (t −1.7) | t −1.7 · t −1.5 · t −1.4 | t 1.6 | 6 runs; 4.19 vs 6.29; p 0.45 |
| Fuel → Personal credit | Some | −0.172 (t −2.7) | t −2.7 · t −2.0 · t −1.1 | t 1.8 | 8 runs; 2.79 vs 6.35; p 0.34 |
| Fuel → Housing credit | Not found | −0.040 (t −1.6) | t −1.6 · t −2.0 · t −0.9 | t 1.7 | 8 runs; 8.96 vs 10.61; p 0.44 |
| Food → Insolvencies | Some | 2.302 (t 2.6) | t 2.5 · t 3.6 · t 2.8 | t 1.5 | 5 runs; 3.90 vs −3.19; p 0.26 |
| Food → Arrears | Not found | −0.005 (t −1.9) | t −3.2 · t −3.1 · t −1.4 | t 1.8 | 6 runs; 0.02 vs 0.01; p 0.88 |
| Food → Card debt | Not found | −0.195 (t −0.5) | t −0.5 · t −0.6 · t −0.5 | t 2.6 | 7 runs; 5.08 vs −0.55; p 0.06 |
| Food → Personal credit | Not found | 1.035 (t 4.3) | t 4.2 · t 3.8 · t 2.8 | t 2.3 | 11 runs; 5.91 vs 1.83; p 0.02 |
| Food → Housing credit | Not found | 0.360 (t 2.5) | t 2.5 · t 2.9 · t 2.0 | t 0.7 | 11 runs; 11.10 vs 8.21; p 0.04 |
| Across six states, insolvencies next year | b (t) | n |
|---|---|---|
| Rent and power gap, over the year | −0.05 (t −0.3) | 408 |
| The same, without 2019–22 | 0.48 (t 2.2) | 282 |
| Rents only | 0.00 (t 0.0) | 408 |
| Electricity only | −0.02 (t −0.6) | 408 |
| Food | −0.64 (t −0.5) | 408 |
| Fuel | −0.17 (t −0.4) | 408 |
| Insurance | 0.05 (t 0.2) | 408 |
| Unemployment, change on a year | 0.93 (t 0.5) | 408 |
| Reverse: insolvencies → next year’s gap | −0.04 (t −0.8) | 390 |
Credit, jobs and prices (from 1993)
| p-value (Granger, 4 lags, 1993–2019) | Inflation → credit | Unemployment → credit | Cash rate → credit | Credit → unemployment | Credit → inflation |
|---|---|---|---|---|---|
| Owner-occupier | 0.024 | 0.785 | <0.001 | <0.001 | 0.044 |
| Investor | 0.391 | 0.643 | 0.557 | <0.001 | 0.460 |
| Personal | <0.001 | <0.001 | <0.001 | <0.001 | 0.019 |
| Business | 0.427 | 0.504 | 0.095 | 0.069 | 0.232 |
| Across states, 2003–2026 | Unemployment +1 → lending, % | Inflation +1 → lending, % | 10% more lending → unemployment, points | 10% more lending → inflation, points |
|---|---|---|---|---|
| All new home loans | −3.2 (t −3.2) | −1.5 (t −1.0) | −0.16 (t −4.8) | +0.24 (t 6.1) |
| Owner-occupier | −2.5 (t −2.7) | −1.1 (t −0.7) | −0.16 (t −5.3) | +0.20 (t 4.7) |
| Investor | −4.8 (t −2.9) | −2.3 (t −1.2) | −0.09 (t −3.4) | +0.18 (t 6.3) |
The code runs every test first on invented data with known answers and stops if one is missed. Six scripts: fetch.py downloads the files and records each one’s address, time, licence and checksum; build.py makes the tables; analyse.py, runs.py and chain.py run the tests; page.py writes this page. Python 3.13 with pandas, statsmodels and openpyxl.
Sources
- ABS, Consumer Price Index, Australia, September 2026: monthly and quarterly index numbers by group, sub-group, item and capital city (ABS Data API, dataflows CPI 2.0.0, CPI_Q 1.0.0 and CPI_WEIGHTS 1.0.0) and the analytical series, released 28 October 2026. https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/latest-release. CC BY 4.0. Retrieved 4 November 2026.
- ABS, Consumer Price Index, Australia, September quarter 2025 (the last quarterly release): Table 8, analytical series, and Table 10, change on a year by capital city, released 29 October 2025. https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/sep-quarter-2025. CC BY 4.0. Retrieved 4 November 2026.
- ABS, Labour Force, Australia, September 2026 (ABS Data API, LF_UNDER 1.0.1), released 15 October 2026. https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/latest-release. CC BY 4.0. Retrieved 4 November 2026.
- ABS, Lending Indicators, June quarter 2026 (LEND_HOUSING 1.1), released 14 August 2026. https://www.abs.gov.au/statistics/economy/finance/lending-indicators/latest-release. CC BY 4.0. Retrieved 4 November 2026.
- RBA statistical tables C1, D1, D2, F1.1, F5, F6, G1, H1 and H4 (the ABS Wage Price Index). https://www.rba.gov.au/statistics/tables/. CC BY 4.0. Retrieved 4 November 2026.
- RBA, cash rate target and each decision. https://www.rba.gov.au/statistics/cash-rate/. CC BY 4.0. Retrieved 4 November 2026.
- RBA, Statement by the Monetary Policy Board: Monetary Policy Decision, 3 November 2026. https://www.rba.gov.au/media-releases/2026/mr-26-30.html. CC BY 4.0. Retrieved 4 November 2026.
- APRA, Quarterly ADI Property Exposures, June 2026, and Quarterly ADI Performance Statistics, September 2004 to June 2026, released 17 September 2026. https://www.apra.gov.au/quarterly-authorised-deposit-taking-institution-statistics. CC BY 3.0 AU, as each workbook states. Retrieved 4 November 2026.
- Australian Financial Security Authority, Quarterly Personal Insolvency Statistics, September 2007 to June 2026, on data.gov.au, released 25 August 2026. https://data.gov.au/data/dataset/quarterly_personal_insolvency_statistics. CC BY 2.5 AU. Retrieved 4 November 2026.
- Release dates: ABS release calendar; RBA Monetary Policy Board schedule; APRA statistics page. https://www.abs.gov.au/release-calendar/future-releases. CC BY 4.0. Retrieved 4 November 2026.
- AFSA’s September quarter release date is from its statistics release schedule, read 4 November 2026: https://www.afsa.gov.au/about-us/statistics-and-insights/statistics-support/statistics-release-schedule.