Policy must drive jobless rate down: RBA

Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)


A Reserve Bank of Australia official has again stressed the central bank won’t be jacking up interest rates to cool a heated housing market.

RBA assistant governor Michele Bullock says if financial stability concerns emerge from strong demand for mortgages, that will be dealt through so-called macro-prudential tools to curb housing activity.

“Monetary policy really needs to get unemployment down and inflation up,” she told an online Bloomberg seminar on Wednesday.

“I don’t think we can afford to be distracted from that.”

She said lending standards were being maintained by banks at present, and expects credit demand for housing to peak at 11 per cent early next year, compared with its current seven per cent pace.

There are clear signs that the broader economy needs support at a time when around half the population is in lockdown battling coronavirus.

A pointer to the future performance of the Australian economy suggests annual growth continues to slow.

The Westpac-Melbourne Institute leading index, which indicates the likely pace of economic activity three to nine months into the future, fell again in August.

But is does suggest annual growth will hold just above its long-term rate of around 2.8 per cent for now.

“The leading index has held up surprisingly well during this downturn but it seems likely that there is more weakness on the way,” Westpac chief economist Bill Evans said on Wednesday.

The index fell from 1.4 per cent in July to 0.5 per cent in August. It was 3.4 per cent in March.

Mr Evans expects weakness in components of the index, such as falling commodity and stock prices, will weigh on the index in September.

Westpac expects the economy to contract by four per cent in the September quarter as a result of lockdowns in NSW and Victoria, before making a modest 1.6 per cent recovery in the December quarter as restrictions are eased.

“By December we would be expecting to see signs of this recovery in the leading index as it paves the way for a very strong rebound in 2022,” Mr Evans said.

Westpac expects growth to surge by 7.4 per cent next year.

For now, the impact of restrictions is clearly being felt in the labour market, which saw 146,300 jobs lost in August.

The National Skills Commission confirmed job advertising on the internet fell by 5.6 per cent in August, the third consecutive monthly decline after a 12-year high in May.

The data – a pointer to future employment growth – recorded the biggest fall in locked-down NSW, declining by 9.2 per cent, followed by a nine per cent drop in jobs ads in the ACT.

Victoria and Queensland both fell by 5.9 per cent.

All eight occupational groups monitored by the commission fell in August.


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