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Australia’s Job Boom: Did it Dash Hopes for a Rate Cut? | Property Insiders [Video] - featured image
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Australia’s Job Boom: Did it Dash Hopes for a Rate Cut? | Property Insiders [Video]

key takeaways

Key takeaways

The latest ABS data shows that the unemployment rate fell from 4.1% to 3.7%.

116,500 jobs were created in February and the participation rate increased to 66.7% and is now at a near-monthly record high.

With the jobless rate still at record lows despite high-interest rates and booming migration, it's unlikely that the Reserve Bank will lower interest rates any time soon.

There was great news on the jobs front recently- Australia's unemployment rate plunged to a new low of 3.7% in February, but this has raised the question of how well those 13 interest rate rises have worked to slow down the economy and kill inflation.

This unexpectedly strong jobs market data has cast doubt on the possibility of an imminent rate cut, which many borrowers had been hoping for.

Prior to the February figures, talks of a rate cut by the RBA in mid-2024 were gaining traction.

Many economists predicted a cooling labour market in response to the RBA's recent series of interest rate hikes.

Remember, if unemployment rises, then the Reserve Bank may worry about a slowing economy or even a possible recession and could start to cut rates.

However, the February figures painted a different picture.

Not only did unemployment fall, but a significant number of new jobs were created.

This robust jobs market data has economists scrambling to revise their interest rate predictions.

Now, analysts believe the bank is more likely to hold or even increase rates in the coming months.

The reason?

Low unemployment can contribute to inflationary pressures as businesses compete for a tighter pool of labour, potentially leading to higher wages.

This is exactly the scenario the RBA is trying to avoid.

So what does this mean for our economy and for the future of interest rates?

That’s one of the questions I’m going to ask Dr. Andrew Wilson, chief economist of My Housing Market, in this week’s Property Insiders chat.

Unemployment rate back to its lowest since September 2023

In case you missed the latest jobs report, here it is in a nutshell:

  1. The unemployment rate fell from 4.1% to 3.7%, which is a big fall
  2. 116,500 jobs were created in February, when 45,000 new jobs were expected by economists.
  3. The participation rate increased to 66.7% and is now at a near-monthly record high.

Abs National Unemployment 25 March

Watch this week's Property Insider chat as Dr Andrew Wilson explains that the jobless rate is still at record lows despite high-interest rates and booming migration.

Of course, this means it's unlikely that the Reserve Bank will lower interest rates any time soon.

Abs Unemployment By State

Rates on hold – next move?

Obviously, the RBA left rates on hold in March, the third consecutive steady decision.

Watch this week’s Property Insider chat as Dr Andrew Wilson views on what’s for interest rates.

 He explains how our economy is still stronger than the Reserve Bank would like despite 13 interest rate rises since May 2022.

At the same time, the jobless rate remains at record lows, job growth is surging, unemployment is falling, and the participation rate is also near record highs.

Doctor Wilson explains that interest rates remain significantly above pre-Covid levels notwithstanding the migration surge and inflation.

And of course, while inflation is falling, is it still too high with housing, food and fuel the main drivers of our inflation?

Dr. Wilson feels that rates will remain on hold for the foreseeable future, but the Reserve Bank has not cut out the thought of raising rates in the future if need be.

Rba Monthly Cash Rate

Here are the RBA’s recent comments:

“While recent data indicate that inflation is easing, it remains high.

The Board expects that it will be some time yet before inflation is sustainably in the target range. The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain and the Board is not ruling anything in or out.

The Board will rely upon the data and the evolving assessment of risks.

The Board will continue to pay close attention to developments in the global economy, trends in domestic demand, and the outlook for inflation and the labour market.

The Board remains resolute in its determination to return inflation to target”

What factors does the RBA take into account when making interest rate decisions?

The Reserve Bank's duty is to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.

This week Dr. Andrew Wilson discusses the various factors that the RBA takes into account when making its interest rate decisions and gives his thoughts on each one:

Rate Decision Variables

Australia's population grows by 2.5%

Watch this week’s Property Insider chat as Dr Andrew Wilson discusses the recent results released by the ABS, explaining Australia's population grew by 2.5 per cent to 26.8 million people in the year to 30 September 2023, an annual increase of 659,800 people.

Abs Annual Net Migration 25 March

You’ll hear how net overseas migration drove 83 per cent of the annual population growth, while natural increase accounted for the remaining 17 per cent.

The ABS reported that net overseas migration grew by 60 per cent compared with the previous year, driven by an increase in overseas migration arrivals (up 34 per cent), predominantly on a temporary visa for work or study.

With 765,900 overseas migration arrivals and 217,100 departures, net overseas migration was 548,800 people during the year ending 30 September 2023.

Over this 12-month period, there were 295,000 births and 183,900 deaths registered in Australia.

This makes the natural increase 111,000 people, 3.9 per cent less than the previous year.

Western Australia had the fastest-growing population, up 3.3 per cent compared with the previous year.

This was followed by Victoria, which grew by 2.9 per cent, and Queensland which grew by 2.7 per cent,”

Tasmania saw the least growth, at 0.3 per cent over the same period.

Abs Qld Annual Net Migration

Massive super Saturday of auctions fails to drag markets down

Weekend auction markets have hosted a remarkable Super Saturday of pre-Easter holiday auctions, with clearance rates remaining relatively steady despite the flood of listings.

Sydney had the strongest auction clearance rate of 75.3%.

Auction clearance results for the other capitals were:- Melbourne - 64.1%; Brisbane -55.1%; Adelaide - 70.6% and Canberra - 66.7%.

The national auction market reported a clearance rate of 66.4% at the weekend, which was higher than the 65.0% reported over the previous weekend, but it was marginally lower than the 68.5% recorded over the same weekend last year.

Pre-Easter holiday national auction numbers were predictably higher, with an extraordinary 3000 listings versus the previous weekend’s 2448, and significantly above 1901 listed over the same weekend last year.

Weekend auction markets have concluded the first part of the autumn selling season with remarkable results that have featured record numbers of home listings and sales for this time of the year.

Auction Results Mar 23

About Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.
120 comments

Wages growth figures don’t include superannuation or the recent payroll tax changes in Victoria either. This means that the actual cost to business has had at least another 2% added to the payroll over the past few years with some more yet to com ...Read full version

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That is the nature of the game. Stagnant, stagnant, stagnant, stagnant (half the investment punters give up and sell), stagnant, stagnant (most of the rest do the same), stagnant, stagnant, explodes recouping all the losses and more so those who hung ...Read full version

1 reply

I just pulled out an old residential lease dated 2013 and found the rent on that was the same as it was in 2022/23. So in reality rents didnt go anywhere for 10 whole years. A little up, then and a lot of down during COVID19, and then up again. Its ...Read full version

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