Worrying sign that another rate hike is on the way, signaling even more economic pain for Australians.
- Employment data showing lower unemployment rates
- More people in jobs point to cash rate hike
- Global economic uncertainty may influence the RBA
Economists believe that the positive jobs numbers will give the Reserve Bank pause before its next meeting, which could spell bad news for mortgage holders.
The Australian Bureau of Statistics (ABS) released employment data for February on Thursday, an improvement of 0.2 percent on the seasonally adjusted rate of 3.7 percent announced in the previous month’s figures.
The data shows an increase of 64,600 jobs for Australian workers, and the number of people out of work fell by 16,500.
It had been suggested to the RBA that they consider a pause in the cash rate hike in April before the strong jobs data was released on Thursday.
Reserve Bank of Australia may reconsider stopping cash rate hike in April after positive jobs data (file image)
RBA Governor Philip Lowe (pictured) indicated he would review key economic data before the April meeting.
AMP chief economist Shane Oliver said that without foreign influence, Thursday’s figures were likely to have forced the RBA board’s decision.
But the collapse of several banks in the United States, and the value of some European banks plummeting, has created global economic uncertainty.
“The jobs numbers were strong… taken by themselves, they would have led the reserve bank into another rate hike,” Oliver said.
“The other thing that will influence the RBA is the closure of the banks globally… that would be kind of a warning sign that the global economies are going to slow down, which will cause the RBA to pause.”
“So I think we’re still on track for an April break, but we’ll have to wait for the retail sales and inflation numbers to be released in the coming weeks.”
RBA Governor Philip Lowe indicated in a recent speech that he would review key economic data ahead of the April meeting, with retail figures and ABS CPI reports due on March 28 and 29, respectively.
Mortgage comparison website RateCity.com.au crunched the numbers and determined that a further 25 basis point rate hike in April would cost the average owner-occupier, with a $500,000 loan and 25 years remaining, and Additional $78 per payment.
“The underemployment rate is currently almost three percentage points lower than it was before the pandemic, with declines over the past year supported by stronger growth in hours worked than employment,” said ABS’s head of labor statistics, Bjorn Jarvis.
Global economic uncertainty and global bank closures may influence the RBA’s decision (file image)
“In February, there were also no major disruptions to people’s ability to work their normal hours, like the widespread illnesses or natural disasters we’ve seen in recent years.”
Sean Langcake, Head of Macro Forecasts at BIS Oxford Economics, said Thursday’s ABS data “largely removed” the weak figures released last month.
“There was an unusually large cohort of people waiting to start work,” he said.
“With this group entering employment this month, the market is largely back to where it was at the end of 2022.
“The labor market continues to show a very strong position and is starting to deliver faster wage growth.”
Although he went on to say that the unemployment rate is expected to rise again this year as interest rate hikes dampen demand.