Jobs surge fuels rate rise fears + How to save on back to school

Hi everyone,

Happy Australia Day long weekend - traditionally the end of the summer holidays with kids back at school in the next week or so.

It’s been another wild week on the financial markets which follows the Trump rollercoaster. We really have seen nothing like it before.

The December quarter CPI figure is released next week ahead of the RBA board meeting on 3 February. Some interesting economic data is also coming out soon that will play a role in the RBA’s thinking.

In this newsletter:

• Job market is surprisingly strong.

• Australia is building more houses, but it’s still not enough.

• Momentum returns to the cost spiral in the building sector.

• New Year, new financial you: How to build good money habits.

• How to cope with back-to-school costs.

• Australia’s government debt compared with the rest of the world.

Jobs market surprisingly strong

The Reserve Bank worries about inflation and jobs when it sets, or changes, interest rates. That’s all ... jobs and inflation.

Those two factors form the basis of its charter.

Next week we’ll get the latest December quarter CPI figure (on 28 January) ahead of the next RBA board meeting on 3 February. That figure will form a key basis of any rate decision.

In the September quarter, the CPI came in at a higher-than-expected 3.2 per cent - above the 2-3 per cent RBA target range. If the December quarter result next week is above the September quarter, you’d think the RBA board would have to seriously think about raising interest rates to dampen inflation.

In fact, the case for a rise in rates has been reinforced by yesterday’s employment figures which saw an unexpected 65,000 new jobs created in December and the unemployment rate drop from 4.3 per cent to 4.1 per cent - economists had predicted a rise in unemployment to 4.4 per cent.

It shows the labour market is tightening again, rather than weakening. The RBA won’t like that at all.

The economic theory is that when unemployment is low, and it’s hard for bosses to find staff, wages will rise which then feeds into inflation, which is already above the target range. It becomes a bit of a vicious cycle.

The bottom line is December’s fall in unemployment just adds to the case for a rate rise.

Australia is building more houses … but it’s still not enough

You’re probably bored of me constantly saying property is all about demand and supply. If there’s strong demand to buy property but limited supply of houses on the market then values will go up. And vice versa.

The reason behind last year’s boom in property values was a critical shortage in new houses being built combined with increased buyer demand from cuts in interest rates and the introduction of the Australian Government 5% Deposit Scheme for first home buyers.

But this week the Bureau of Statistics released its Building Activity data for the September quarter which showed a 11.2 per cent increase in dwelling commencements to 184,460 new homes.

On the surface that’s great news. The only problem is that 240,000 are needed to be built to meet the federal government’s target of 1.2 million new homes over five years. And the gap widens the longer we leave it to meet the target. The solution has to be a whole lot of government collaboration- federal, state and local - to reduce bottlenecks for new construction.

All states lifted their housing construction numbers.

Momentum returns to costs within the building sector

With the increase in building activity, it looks as though building costs are on the rise as well. Again, that’s not good for inflation either.

Cotality’s latest Cordell Construction Cost recorded a 1 per cent increase in construction costs nationally over the December 2025 quarter, the strongest quarterly growth of the year. The previous 2025 quarterly cost increases averaged 0.4-0.6 per cent.

Despite this big December quarter rise, annual growth over the 12 months to December was 2.5 per cent - down from the 3.4 per cent annual increase recorded at the end of 2024, and the smallest annual rise since March 2002.

Western Australia and South Australia led the nation with the strongest quarterly increases, each rising by 1.2 per cent in the December quarter. No surprises given these two states had the biggest increase in construction activity.

More broadly, all states except WA and SA remain below their pre-COVID decade-long averages, highlighting tighter construction input conditions relative to demand in these markets compared with the rest of the country.

A big increase in the price of timber and higher wages from the increase in the minimum wage were the major drivers of the December quarter rise. Price suppliers and the ongoing shortage of skilled trades will remain the primary hurdles for the sector.

New year, new financial you

The summer holidays are a time to kick back and recharge. It’s also a time to take stock of life over the last year and set some new priorities for 2026 to continue to improve your life.

While you’re assessing career, relationships and parenting, don’t forget to add improving financial decision-making to the list as well.

Money doesn’t buy happiness, but it can certainly help. And the key is building healthy financial habits. So here are my top financial ‘thought starters’ to help begin the process of a new financial you.

Money to-do list

1. Create a financial plan and spend some time each week developing and reviewing that plan to make it happen. With every financial transaction, top of mind should be “how does this fit in with my financial goals?”

2. Take five minutes to review your main accounts each day. Make certain that all charges are accurate and review any purchases you may regret later.

3. Every week, review all transactions to help maintain your financial goals.

4. Review accounts monthly to make sure all bills are paid on time. If the funds aren’t there then call the institution to alert them of an expected payment date or work out a payment plan.

5. When creating an annual financial plan, create quarterly milestones that benchmark progress. For example, if the plan is to pay off $10,000 from the mortgage in 12 months then by month three, you should have $2500 paid off. If that doesn’t happen then readjust the plan, move the goal or play catch up.

6. Set your finances on autopilot. Set up every recurring expense using BPAY or via direct debit.

7. Create a goal statement: My intention is to ________________ in order to achieve financial freedom.

8. Save 10 per cent of income for savings and retirement.

9. Pay down non-mortgage debt to less than 15 per cent of income.

10. Read or watch the financial media to keep abreast of emerging financial issues that impact your life.

11. Be mindful of emotional impulse spending. Shopping when you’re sad, mad or depressed often leads to purchases you’ll regret later.

12. Spend more time with those who are where you want to be financially. It helps you compare how you operate while helping you make changes along the way.

13. Every day, daydream and feel what it will be like when you reach your financial goals: debt free, 6-12 months of emergency fund savings - whatever it is, dream about it, talk about, write about it and make it happen.

14. Give back. This can be with your time or money. Spend time giving back to others less fortunate than yourself to maintain a balanced life with a good sense of priorities.

15. De-clutter your finances. What are some things that you’re paying for that leech money (automated subscriptions, the latest tech gadget, fast fashion for instance?) and hinder you from reaching your financial goals.

16. Don’t stress about the past. Leave financial regrets behind as they took place in order to teach you lessons for the future. The coming year won’t be perfect, but commit to learning from mistakes to avoid making them again.

17. Don’t compare your financial situation to others who are in a better position. Like you, they had to work to get where they are and if you take anything from their situation, it should be that you can one day be financially free yourself.

18. Make some hard decisions about your spending habits. The more insight you have into this area, the better decisions you’ll make.

19. Find ways to earn more money. Developing multiple streams of income is key to financial freedom. Think about things like a part-time job or a home-based business.

20. Sell anything you haven’t touched in six to eight months and use the proceeds to pay down debt or plug into savings.

21. Discuss your financial plans for the coming year with your partner or spouse. Make sure you are both on board with goals and how you will address setbacks.

22. Give children gifts that will last long past the next birthday. Set up, or add money to, an education fund.

Coping with back-to-school costs

It’s that time of year again - the school holidays are at the “I’m bored” stage, and parents, while quietly looking forward to their kids returning to school, are also bracing for the cost.

I feel for them, because this annual spend goes well beyond pencils and notebooks these days. When our kids were at school, Libby and I didn’t have to budget for devices - but laptops and tablets for school can now take a big bite out of the family budget.

According to Finder research, in 2026 parents will spend an average of $2,847 a year on sending a primary-school child to school and $5,310 on a high schooler. The first hit of back-to-school expenses - stationery, uniforms, and, of course, tech - can cost around $712 for primary-aged kids and $1,166 for secondary students. Multiply that by however many kids you have … and it adds up fast.

The good news? There are ways to soften this financial blow. Here are a few tricks to help with back-to-school costs.

Start with a stationery ‘stocktake’

Before heading to Smiggle, Officeworks, or filling an online cart (tip: don’t attempt this with a stationery-loving child in tow!), take a look at what you already have. Leftover pens, rulers, last year’s pencil case, calculators - they’re often hiding at the bottom of school bags or under bedroom clutter.

Get your kids to gather them all up, and you might be surprised by how much you already have.

Save big on tech

A parent at work told me she budgets for a new laptop for her high school kids every two years.

I get it. Tech in the hands of kids who swing their school bags like wrecking balls is risky, so a sturdy laptop or tablet case is essential, and maybe also the replacement warranty ….

When buying tech, ask sales staff about education/student discounts and ex-display models. These are often heavily discounted as they need to refresh stock.

Consider refurbished devices too, which are certified and come with a warranty.

Pool with other parents

One of the most overlooked ways to save is pooling with others. Chat with parents in your child’s class or year group about buying in bulk. Stationery, printer ink, art supplies, and even textbooks can be cheaper when purchased in larger amounts.

The same goes for tech. Approaching a salesperson for multiple laptops - say, for your child and two friends - can result in a bigger discount, but you have to ask.

Reuse and repair

Uniforms, backpacks, and lunchboxes don’t always need replacing every year. Check if last year’s items are still in decent condition. If not, can they be repaired?

A uniform might just need a new button, shoes, a fresh pair of laces, and pencils can be sharpened. Even devices may only need a battery replacement or servicing rather than a full upgrade.

Ask the school what’s actually required

Public schools often request classroom supplies like tissues and whiteboard markers, but these are generally voluntary contributions.

While it’s great to support your school if you can, a few years ago some principals were given a slap on the wrist by the education department for asking parents to supply unreasonable stationery lists.

If anything on your child’s supplies list seems unnecessary or too expensive, don’t hesitate to ask the school what’s actually required.

Save on uniforms

Uniforms with the school crest are usually non-negotiable, but cheaper non-branded items like generic school shorts and plain white shirts, can be bought for less elsewhere.

Also, buying a uniform a few sizes up saves money in the long run. It might look big now, but kids grow fast. Don’t forget to check the school’s second-hand rack for pre-worn uniforms which are bargain buys as many are still in good condition.

Buy quality where it counts

Not all school supplies are equal. Invest in items that need to go the distance, like durable backpacks and pencil cases, so they’ll last years.

For items which are easily lost though - think drink bottles and snack containers - budget-friendly brands are fine. There’s no point spending a lot on something that will need replacing.

Plan to save

Now for some higher-tier financial strategy.

Some Aussie parents plan ahead for back-to-school costs by setting money aside early with various investment strategies.

One option is an education bond - a long-term savings investment for education expenses. Your money grows over time and is taxed at a flat 30 per cent within the bond - so it can be less than your marginal rate. But held for 10 years and used for education purposes, withdrawals can also sometimes be completely tax-free.

Get some financial advice before committing.

A better start to the year

Back-to-school costs are a reality for most families, but with a little thought and creativity, you can keep them under control.

So when the school bell rings and you sigh with relief that the kids are back in class, I hope you’ll also be able to smile, knowing there’s a little extra money in the bank.

How Australia rates when it comes to global government debt

I found this interesting …

Have a great week, everyone.