Worrying sign that another rate hike is on the way, pointing to further economic pain for Aussies
- Jobs data shows lower unemployment rates
- More people in work point to an increase in the cash rate
- Global economic uncertainty may affect the RBA
Economists believe positive job numbers will give the Reserve Bank food for thought ahead of their next meeting, which could spell bad news for mortgage holders.
The Australian Bureau of Statistics (ABS) released its February job data on Thursday, showing an improvement of 0.2 percent from the seasonally adjusted figure of 3.7 percent announced in the previous month’s figures.
The data shows an increase of 64,600 jobs for Australian workers and a decrease in the number of unemployed by 16,500.
The RBA had been tipped to consider a pause in raising its cash rate in April before releasing strong jobs numbers Thursday.
Reserve Bank of Australia may rethink pausing April cash rate hike after positive jobs data (stock image)
RBA Governor Philip Lowe (pictured) indicated he would examine key economic data ahead of the April meeting
AMP chief economist Shane Oliver said that without the foreign influence, Thursday’s numbers likely would have forced the hand of the RBA board.
But the collapse of several banks in the United States and the fall in value of some European banks have led to global economic uncertainty.
“The jobs data was solid… taken on its own it would have tipped the Reserve Bank in another rate hike,” Mr Oliver said.
“The other thing that will affect the RBA is the closure of banks worldwide…
“So I think we’re still on track for a break in April, but we’ll have to wait for inflation and retail data to come out in the coming weeks.”
RBA Governor Philip Lowe indicated in a recent speech that he would examine key economic data ahead of April’s meeting, with retail sales figures and CPI reports from the ABS set to be released on March 28 and 29, respectively.
Mortgage comparison website RateCity.com.au ran the numbers and determined that an interest rate hike of another 25 basis points in April would cost the average owner-occupier, with a $500,000 loan with 25 years to go, and an additional $78 per repayment.
“The unemployment rate is currently nearly three percentage points lower than before the pandemic, with declines over the past year supported by stronger growth in hours worked than in employment,” said Bjorn Jarvis, ABS’ head of labor statistics.
Global economic uncertainty and global bank shutdowns could affect RBA’s decision (stock image)
“In February, there were also no major disruptions affecting people’s ability to work their normal hours, such as the widespread disease or natural disasters we’ve seen in recent years.”
Sean Langcake, head of macroeconomic forecasting at BIS Oxford Economics, said Thursday’s ABS data “largely settled” last month’s weak data.
“There was an unusually large cohort of people waiting to get a job,” he said.
With this group working this month, the market is largely back to where it was at the end of 2022.
“The labor market remains in a very strong position and is starting to generate faster wage growth.”
Although he went on to say that unemployment is expected to rise again this year due to interest rate hikes that are reducing demand.