Explore Economics

Maddy Terrell

So I think working as an economist, I don’t know about you, but I was shocked at the amount of impact you can have in your role and by impact I mean influencing people’s decision making or influencing policy outcomes to improve the welfare of the Australian people or broader society as well.

Natasha Cassidy

The people I know that are economists do such a wide range of things. So you might be working and thinking about what the impact of climate change or geopolitical shocks might be on the Australian economy; you might be looking at housing affordability or improving education outcomes for preschoolers. And then I think about friends of mine that are economists that are in the private sector – they’re thinking about the cost benefit analysis of big investments projects for firms.

Emma Chow

So I’m working in the Education team so one of the really big problems we’re trying to address is this declining size and diversity in the economics student population. It’s a really complex issue so I guess you need to look into the data and do some research to really understand what are the drivers behind this.

Chris Schwartz

I guess a big impact that the team that I’m in, the media team, tries to have is how can we explain the decisions the we or the RBA make to as broad of an audience as possible.

So being able to work to explain those in a way that people will be able to understand is probably the most rewarding for sure and impactful thing that I’ve worked on.

Geneve Bullo

Having impact and influence is one of the highlights of a career in economics.

Geneve Bullo

I think as an economist, throughout your career, you’re always going to be answering different questions, the project that you’re working on is probably going to be different to the last and you’re going to be picking up different topics of expertise.

Natasha Cassidy

I think for me I have to think back to the big events that happened internationally during my time as an economist and most recent was obviously the pandemic and at the time my role was leading a team where we trying to think about what would be the outlook for the labour market and inflation over that period.

If you remember sort of in those early days of 2020, you had these pictures of people queuing outside Centrelink because their hours had been drastically cut or so forth at the same time there was really strong demand for health care workers and the models that we normally use well they’re not set up to answer these kinds of questions and so we sort of had to the team had to sort of think about things, throw the playbook out if you like, and think about things about it more intuitively.

Ashwin Clarke

One of the most memorable things for me was analysing how the trade tensions we faced over the past few years have impacted Australia and one of the really unique things that we can bring as an institution that I realised at that time was it’s not just about the models, and we had really good models to kind of think through these problems, but we complemented that with information from people who are feeling it on the ground.

Maddy Terrell

With a career as an economist you can tackle all sorts of problems. It’s not just the obvious things like bringing inflation down or keeping unemployment low, but it also includes a range of things like other big issues facing society. Things like climate change, inequality, the gender pay gap and the impacts of artificial intelligence.

Maddy Terrell

So a typical day as an economist usually starts with a team meeting where we talk about what we’ve got for the day ahead We then often have a data release. And so data is the backbone of the work we do as an economist.

Geneve Bullo

As an economist you’re always constantly working with data but also more importantly how to communicate to that to your audience.

At the Bank we have a lot of data and a lot of questions that we need to answer so essentially what we’re doing is that all our data and evidence are little puzzle pieces in a story about the Australian economy

And so in my role kind of what I have to do is square all those pieces of information and come up with an narrative about how businesses are faring right now after a few years of challenges.

Ashwin Clarke

Some of the great things about a career in economics are that it gives an entry into a really wide range of fields. Just to take my friends that I went to university with as an example: one is a product executive who is responsible for creating new products for a healthcare company, another is an economics adviser at the most senior levels of government; and another is a data scientist who’s able to analyse the vast reams of data produced by transportation companies. So the most interesting job by far is a friend of mine who is a board game designer and he’s used economics to fine tune the mechanics of his games to make them interesting and keep people playing.

Hi, I’m Serena. Thanks for joining me!

Let’s have a look at what’s happening in the economy.

Gross Domestic Product – also known as GDP – grew strongly over the second half of 2025. GDP is the total value of spending – or demand – in the economy and it’s made up of four key components: household consumption, businesses investment, government spending, and net exports.

Here is a chart of GDP growth. You can see this black line is increasing. So what drove this GDP growth? Put simply, it was more spending by households and businesses.

First, let’s start with households. Growth in household incomes was strong. This meant that households had more money available to spend on goods and services, which boosted demand in the economy.

Second, we have businesses. Many businesses increased their investment, including in AI and data centres. Investment in building new housing has also gone up.

So, GDP grew quite strongly in the second half of last year. Knowing this, we can use the concepts of supply and demand to show how this could impact inflation. Remember, inflation is a measure of how fast prices are rising.

Here we have a chart showing Aggregate Demand and Aggregate Supply.

Aggregate demand – the blue line – shows total spending on goods and services in the economy

Aggregate supply – the red line – shows the total amount of goods and services that can be produced

We can look at where these two lines cross – otherwise known as the equilibrium - to work out the average price of goods and services purchased in the economy.

When there is extra demand in the economy from households and businesses, the aggregate demand curve moves outwards to the right …

And if supply remains about the same, the point at which the two lines meet is higher, which in turn means higher prices.

So that’s the theory, but what does the data tell us?

Well, headline inflation rose to 3.6 per cent at the end of last year. One reason for this, was a sharp rise in electricity prices due to the end of government energy rebates. And these rebates had previously been helping to lower electricity bills. Inflation for some other more volatile items, like fuel and travel, also rose strongly.

But even after removing these volatile items from the equation, there was still evidence of broader inflation pressure. Underlying inflation rose to 3.4 per cent. This measure excludes unusually large price changes and provides a better understanding of overall inflation trends.

Although underlying inflation is a bit lower than the headline measure, it’s still above the RBA’s 2–3 per cent target range. And this is a sign that there is more inflationary pressure in the economy than we previously thought.

Let’s turn our attention to the labour market, because this is also part of the RBA’s mandate.

Overall, the labour market has been stable, and we think it is a little tight. But what does ‘tight’ actually mean?

There are lots of ways to answer this question, and we look at a lot of measures, but to pick a few, a tight labour market means most people who want a job already have one or can find one pretty easily. When this happens, unemployment will be low.

This chart looks at the unemployment rate. The unemployment rate tells us the proportion of people who want a job, and are able to work, but don’t have one. The unemployment rate was 4.1 per cent in the month of December and has been pretty stable over the past few months. In comparison to history, the unemployment rate is still very low, and this suggests the labour market is tight.

A tight labour market also means businesses want to hire new staff, but they struggle to find the right people.

This chart shows the layoffs rate. The layoffs rate tells us how many workers lose their job because their employer let them go – such as through a redundancy. The layoffs rate gives us a sense of how secure jobs are, and whether or not firms are willing to reduce staff. When layoffs are low, it suggests employers are trying to hold on to their workers, often because new workers are hard to find.

The current layoffs rate is very low compared to history, which is another piece of evidence that suggests the labour market is a little tight.

Why does the tightness of the labour market matter? Well, one reason is that it may mean businesses will need to pay more to attract new workers. Higher wages can increase business costs, which may be passed on to consumers in the form of higher prices. This can put upwards pressure on inflation.

So, how does the RBA see the economy developing in the future?

The Australian economy is likely to grow a bit faster in 2026 than we previously thought.

The labour market is expected to remain a little tight. And the unemployment rate is expected to remain low in the near term.

And finally, inflation is expected to be above our 2-3 per cent target range until the middle of 2027.

With these things in mind, the RBA Monetary Policy Board decided to raise the cash rate to 3.85 per cent at the February meeting. All else equal, a higher cash rate should dampen growth in aggregate demand and help to reduce inflation.

That concludes our look at what’s happening in the economy. For more student resources, please visit our education page. Thanks for watching and see you next time.