Jobs data, not inflation, will determine how fast and how far the Reserve Bank will cut interest rates, a snapshot into its latest board meeting has revealed.
Minutes from the central bank's August meeting, released on Tuesday, confirmed more mortgage relief is on the way, but there's disagreement over how quickly it should happen.
The RBA board cut the cash rate to 3.6 per cent at that meeting and agreed that more cuts would be needed to meet inflation and unemployment targets.
"Preserving full employment while bringing inflation sustainably back to the midpoint of the target range appeared likely to require some further reduction in the cash rate over the coming year," the minutes said.
But how quickly they would come depended on upcoming inflation and unemployment data.
With the board acknowledging that inflation was basically under control, its focus was clearly shifting to the jobs market, said CBA head of Australian economics Belinda Allen.
"A deterioration in the labour market would see a faster pace of easing by the RBA," she said.
Unemployment has climbed in recent months but remains relatively low at 4.2 per cent.
RBA board members noted some indicators, like the subdued rate of job-switching, suggested the labour market has become more balanced.
But others, like the high rate of job vacancies to unemployed workers, suggested some tightness remained.
JP Morgan economist Tom Kennedy said the minutes showed the RBA retained a dovish bias, while reiterating policy will remain dependent on data going forward.
He expects the bank to hold off cutting in September after the unemployment rate fall from 4.3 to 4.2 per cent following the August meeting.
"Importantly, the August policy decision was held prior to the release of the July labour data, which saw the jobless rate partially reverse the previous month's unexpected turn higher," Mr Kennedy said.
"We think the highly data-dependent nature of August's discussion reflects this uncertainty, with the tick lower in the jobless rate broadly aligned with our view for a gradual and modest pace of easing."
The bank has so far been happy to lower interest rates gradually as inflation has eased over recent years.
It has cut interest rates at its first meeting following each of the Australian Bureau of Statistics' last three quarterly inflation read-outs, while pausing at intervening meetings.
Money markets have picked up on the pattern, assigning less than a one-third chance for a cut on September 30, while a cut at the following meeting in November was almost fully priced in.
Labour force figures, GDP data and two monthly inflation prints - including one on Wednesday - were due out ahead of the September meeting and would be crucial to the RBA's decision, Ms Allen noted.
The RBA was also keeping a close eye on developments abroad.
If the global economy deteriorated more than expected or the private sector failed to pick up the slack from lower government spending, it would also raise the urgency for more rate relief.
While interest rate cuts have buoyed households and businesses, insolvency data suggest the economy is still not out of the woods.
Insolvencies remained at near-record levels in July, credit reporting agency CreditorWatch said on Tuesday.
The hardest-hit industries of construction and hospitality have stabilised, but weakness is emerging in traditionally low-risk sectors like healthcare and financial and insurance services.
"The latest reduction in interest rates by the RBA will, in time, be beneficial to both consumers and businesses, however, domestic energy prices and wages continue to rise, while US trade policy is expected to slow global growth," said CreditorWatch chief economist Ivan Colhoun.
"This is expected to keep the level of insolvencies relatively elevated in the foreseeable future."