Rba States A Jobs Slowdown, Wage Growth And High Household Debts Keep Interest Rates On Hold
June 12th, 2018
OFFICIAL interest rates have been held for another month as the Reserve Bank continues to wait for a pick-up in wages even as it admits jobs growth is slowing.
Following its monthly meeting this morning, the RBA held the cash rate at 1.5 per cent. It was last changed in August 2016 with markets not tipping an increase until next year.
Bank governor Philip Lowe said while the overall economy was tipped to grow by more than 3per cent, there were some signs of a slowdown in the jobs sector.
One issue still on the bank’s mind is the level of debt held by Australian consumers and what that might mean to the wider economy.
“One continuing source of uncertainty is the outlook for household consumption. Household income has been growing slowly and debt levels are high,” he said.
Wages growth has continued to be a missing development for both the RBA and the Federal Treasury.
Dr Lowe said people hoping for a fatter pay packet may have some time to wait.
“Wages growth remains low. This is likely to continue for a while yet, although the stronger economy should see some lift in wages growth over time,” he said.
“Consistent with this, the rate of wages growth appears to have troughed and there are reports that some employers are finding it more difficult to hire workers with the necessary skills.”
CoreLogic head of research Tim Lawless said if the Reserve kept official rate steady for an extended period this would benefit the housing sector.
“Financial markets are not fully pricing in a rate hike until October 2019. That is despite the latest RBA forecasts suggesting headline inflation will reach 2.25 per cent by the end of this year and unemployment will fall to 5.25 per cent,” he said.
“From a housing market perspective, a stable rate environment is positive. However, there is risk that mortgage rates could rise, regardless of the steady cash rate, due to higher funding costs being faced by lenders overseas.”
While recruitment firm Sure People Solutions have seen a significant increase in labour requirements within WA. 3.2% increase compared with this time last year 2017. Primarily, mining services, scheduled shut-downs & industrial requirements for SME's.