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RBA Rates to Rise in August? – Nonsense

A sharp decline in the national jobless rate has predictably resulted in another wave of speculation suggesting the official interest rates may rise significantly sooner than the RBA’s current outlook.

According to the ABS, the national unemployment rate fell to 4.2% [seasonally adjusted] over December - the lowest rates is August 2008.

This low unemployment rate unsurprisingly fuelled predictions from the usual suspects of a surge in wages growth stroking higher inflation and resulting in the RBA interest rate increases this year.

The national result however was significantly influenced again by the NSW and Victoria recoveries from the severe Covid lockdowns of previous months.

Employment Growth Aw

In the short term outlook for the national labour market remains patchy, reflecting the self-imposed, voluntary lockdowns which are set to impact economic performance through January February and perhaps beyond.

In those circumstances employment will likely decline, and unemployment rates will rise as the COVID rollercoaster continues.

The RBA clearly details detailed in his most recent statement they will not raise interest rate until wages growth is materially higher then if he's currently and this is likely to take some time and the board is prepared to be patient.

The RBA current outlook for rate increases remains at 2024 - a prediction that was made prior to the re emergence of the Covid scourge.

Reflecting current data, the latest RBA statements and depressing covid outlook predictions, of official interest rate rises as soon as August are clearly non- sensical.

 

About Dr Andrew Wilson, Chief Economist of www.MyHousingMarket.com.au is widely regarded as Australia’s leading property economist.
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