Softer jobs information tipped to appease key inflation | Australian Markets
Unhealthy news is sweet news for Australians holding out for more Reserve Financial institution charge cuts.
Wages growth is slowing and unemployment is predicted to edge larger, that means much less risk that labour prices will rise.
For RBA governor Michele Bullock, indicators of tightness unwinding within the labour market will ease a central inflationary concern weighing in opposition to additional rate of interest cuts.
Regardless of slashing the money charge for the primary time in more than 4 years, Ms Bullock made clear the board was removed from snug with the direction the financial system was heading.
“We cannot declare victory on inflation just yet,” she advised reporters on Tuesday.
“Many indicators suggest that the labour market is tight, and on some measures tightening further.
“Whereas that is good news for jobseekers, the board stays alert to the likelihood that it’s signalling a bit more energy within the financial system, which might delay or stall the disinflation course of.”
On Wednesday, workers received some bad news that would’ve been music to the central bank board’s ears: annual wages growth slowed from 3.6 per cent to 3.2 per cent in the December quarter.
“The slowing charge of wages growth, notably within the non-public sector, will present some consolation to the RBA that providers inflation ought to proceed to improve over the approaching yr and paves the way in which for additional discount in rates of interest during 2025,” said KPMG economist Terry Rawnsley.
On Thursday, more bad news for workers could further reassure the RBA in the form of rising unemployment.
CommSec chief economist Ryan Felsman expects the January jobless rate to lift from four per cent to 4.1 per cent, a modest increase that builds on the 0.1 per cent rise in seasonally adjusted terms experienced in December.
Still, the jobs market remains unusually tight in historical terms and there’s one piece of news that is unequivocally bad for everyone in the economy: productivity growth is in the doldrums and moving nowhere fast.
A key risk to the economy’s outlook, identified by the RBA in its Statement on Monetary Policy, is that productivity growth remains persistently weaker than predicted.
That could cause inflation to rise again if wages continue to grow faster than the output workers produce.
Three years of near-consistent productivity declines has become a key concern for the Australian economy, said Deloitte Access Economics partner David Rumbens.
“Labour productiveness is a key determinant of financial growth and total dwelling requirements,” he said as he unveiled Deloitte’s latest Employment Forecasts report.
“Australia wants a productiveness enhance – from the market sector by way of investment, notably in technology, and from the non-market sector by way of financial reforms.”
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