Spring has sprung, the birds are singing and everyone in Melbourne is gearing up for the race that stops a nation.
The one time of the year all of us are willing to become avid punters is on Melbourne Cup Day, but for home buyers and property investors, the gamble is not on a horse, but on what the Reserve Bank will choose to do with regard to interest rates at its monthly monetary policy meeting.
A recent Property Observer article cites CommSec chief economist Craig James as suggesting that the fly in the proverbial ointment when it comes to the RBA’s decision in November will be employment; namely the latest jobs data.
The Australian Bureau of Statistics recently released figures that show a rise in unemployment from 5.1 to 5.4 per cent in September, as the number of people entering the job market outpaced the number actually finding work.
Contradictory data from the ABS indicates that at the same time, employment rose by 14,500 in September after a revised loss of 9,100 jobs in August (previously down 8,800).
“A surge in both job growth and the unemployment rate in the same month makes it more difficult to know what the true situation is,” says James.
“But looking across a raft of indicators, the best appraisal is that the economy is in a holding pattern. As such, rate cuts still remain on the agenda, but the size of job growth in the latest month does make it harder for the Reserve Bank to justify a rate cut in November,” he says.
Professional services firm Grant Thornton said of the data that the “significant rise in the unemployment rate during September … not only represents a deterioration in the Australian labour market, but also important rationale for the Reserve Bank of Australia’s decision last week, to cut the cash rate by 25 basis points”.
“Any further weakening in employment trends over the next few months could easily jeopardise the income side of the Australian economy. This is something which has played an important part in underpinning the internationally stronger than average economic performances of recent times,” says Grant Thornton.
As with the winner of the Melbourne Cup, which way the RBA decides to go with the official cash rate on November 6th is anyone’s guess.
Westpac’s Bill Evans plus 19 other economists are still expecting a rate cut as I mentioned in yesterday’s blog . The odds are definitely in the Australian mortgage holders’ favour, but they’re shortening a little now that inflation has moved up a notch.
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