The news on Thursday of an unemployment rate for June of 4.3 per cent should ring alarm bells at the Reserve Bank’s Martin Place headquarters.

The jobless rate has risen to its highest level since November 2021, which was smack bang in the middle of the Covid-19 pandemic.

The board should have cut the cash rate at its last meeting. What is it waiting for? A good, old-fashioned recession?

As explained in my recent column in The New Daily, the Reserve Bank board is deliberately keeping the cash rate well above its own estimate of the neutral rate – the rate that is neither stimulatory nor restrictive. Its estimate of the neutral rate is 2.7 per cent. But the cash rate is much higher, at 3.85 per cent, making it very restrictive.

The other number estimated by the RBA’s models is that of unemployment at which inflation is not accelerating – the Non-accelerating Inflation Rate of Unemployment, or NAIRU. The bank’s models estimate the NAIRU at about 4.25 per cent. But the actual rate is now above that.

What on Earth is the Reserve Bank board waiting for? A full-blown recession?

The Reserve Bank is required to set the cash rate at a level that achieves not only inflation in the range of 2-3 per cent a year but also full employment.

Yet the board seems to prioritise achieving a 2-3 per cent inflation rate over full employment. It’s not as if the inflation rate is above that band. For the March quarter it was 2.4 per cent, in the middle of the bank’s target range. And its preferred measure, the so-called trimmed mean inflation rate, was 2.9 per cent – also within the bank’s range, and the lowest since December 2021.

When the RBA board met earlier this month, it decided the keep the cash rate unchanged, by a majority of six members to three. The three got it right and the six got it wrong.

The six are waiting for more data, explaining that the outlook is uncertain. But the outlook is always uncertain.

Experience has taught us that when the economy slows it is not easy to get it moving again. The most recent statistics indicate that the economy grew at just 1.3 per cent a year which, in per capita terms, equates to -0.4 per cent.

Clearly the economy has slowed and yet the Reserve Bank continues to apply the brakes in the hope of slowing it more. This is bizarre.

At least it’s not as bad as the commentators in The Australian Financial Review, who I named the “recessionistas”. As late as the end of last year, and in some cases into this year, they were demanding further cash rate increases. One suggested that if the RBA didn’t lift interest rates, it was because it had kow-towed to the federal Labor government in a pre-election period.

An inflation rate already within the Reserve Bank’s range, unemployment rising to its highest level since the pandemic and per capita economic growth in negative territory are compelling reasons for the board to cut the cash rate at its next meeting.

But there were compelling reasons to cut at its most recent meeting – and yet six out of nine board members didn’t see it that way.

Craig Emerson is director of Emerson Economics, executive director of RMIT’s APEC Study Centre, Adjunct Professor at Victoria University’s College of Business, a former minister for trade and a former economic adviser to prime minister Bob Hawke