On Friday, RBA Governor Michele Bullock and her new look team were questioned by the House Economics Committee in Canberra for most of the morning. And I watched it all, so you don’t have to! There was very little new at one level, because the bank had recently released its statement on monetary policy and rate `decision.
Recall that the Reserve Bank left the key rate at a 12-year high of 4.35% and maintained its hawkish rhetoric. Money markets and economists still reckon the RBA’s next move will be a cut, though they’re split on the timing. Traders are betting December will be the beginning of the easing cycle, while the consensus of economists is it will only start sometime in 2025.
It’s clear from Governor Bullocks opening statement, that Australia’s central bank remains some way off easing monetary policy because inflation is proving persistent and will only return back to the target range late next year. “The board remains vigilant to upside risks to inflation,” Bullock said in her opening statement to a parliamentary panel in Canberra on Friday. “It is premature to be thinking about rate cuts.”
Supporting the RBA’s caution, data this week showed Australia’s labor market continued to add jobs at a solid pace while wage growth remains elevated. See my earlier show “When things don’t add up at the RBA. Separate figures pointed to a small rebound in consumer sentiment and business confidence is holding up.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
You have to ask the question: are the ABS stats on employment, which were released today, meaningful? Because according to the data for July, a record share of Australians are either working or looking for a job and about 58,000 people found work last month. The increase in employment was not enough to stop the jobless rate from rising to 4.2 per cent last month from 4.1 per cent in June, (though less than 1% on a two decimal rounding) as the share of the working-age population with a job or looking for one climbed to a record high of 67.1 per cent.
This was better than market expectations for gains of 20,000 and accorded with the RBA’s view that the labour market is cooling, but only very gradually, so it appears to show its holding up in the face of a rapidly cooling economy. This will keep pressure on the Reserve Bank of Australia to maintain high interest rates.
The first question of course is where did all if the extra workers come from? Perhaps the mega high immigration where the influx of migrants, who are relatively likely to work, helps to explain the data, as well as financial pressure on local workers to grab more work, and multiple jobs to try and make ends meet. There is no good analysis to split these two factors apart, perhaps surprisingly, or perhaps not! But we know multiple job holders continues to rise.
Across the states, Victoria had the highest unemployment rate of 4.6% in seasonally adjusted terms. Western Australia had the lowest at 3.7%, reflecting the very different economic stories across the states. The participation rate was highest in the NT and ACT, at 73.6% and 72.9% respectively and lowest in Tasmania at 60.3%.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Today’s post is brought to you by Ribbon Property Consultants.
Digital Finance Analytics (DFA) Blog
Australian Employment Booms Even As Unemployment Rises!
You have to ask the question: are the ABS stats on employment, which were released today, meaningful? Because according to the data for July, a record share of Australians are either working or looking for a job and about 58,000 people found work last month. The increase in employment was not enough to stop the jobless rate from rising to 4.2 per cent last month from 4.1 per cent in June, (though less than 1% on a two decimal rounding) as the share of the working-age population with a job or looking for one climbed to a record high of 67.1 per cent.
This was better than market expectations for gains of 20,000 and accorded with the RBA’s view that the labour market is cooling, but only very gradually, so it appears to show its holding up in the face of a rapidly cooling economy. This will keep pressure on the Reserve Bank of Australia to maintain high interest rates.
The first question of course is where did all if the extra workers come from? Perhaps the mega high immigration where the influx of migrants, who are relatively likely to work, helps to explain the data, as well as financial pressure on local workers to grab more work, and multiple jobs to try and make ends meet. There is no good analysis to split these two factors apart, perhaps surprisingly, or perhaps not! But we know multiple job holders continues to rise.
Across the states, Victoria had the highest unemployment rate of 4.6% in seasonally adjusted terms. Western Australia had the lowest at 3.7%, reflecting the very different economic stories across the states. The participation rate was highest in the NT and ACT, at 73.6% and 72.9% respectively and lowest in Tasmania at 60.3%.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Today’s post is brought to you by Ribbon Property Consultants.
Interesting question, who you believe more the markets, or Central Bankers. Of course those in Central Bank land, will claim data dependence, and moving targets, and as RBA Deputy Governor Andrew Hauser warned recently it’s a risk to listen to “false prophets” on interest rates; and yet after several false dawns, New Zealand’s central bank cut interest rates, embarking on an easing cycle much sooner than previously indicated as The Reserve Bank’s Monetary Policy Committee lowered the Official Cash Rate by a quarter percentage point to 5.25% Wednesday in Wellington.
The RBNZ’s pivot to easing is a rapid change of tune after it said in May it considered raising rates and wouldn’t cut them until the second half of 2025. The bank’s concerns over sticky domestic inflation are being alleviated as the economy teeters on the brink of its third recession in less than two years and unemployment rises. The RBNZ’s new forecasts show the OCR falling further in the fourth quarter and by about 100 basis points by the middle of next year.
So will the RBNZ’s move influence Australian interest rates. Probably not because inflation in Australia is way worse, and Government spending and support significantly higher. RBA governor Michele Bullock last week ruled out the prospect of rate cuts this year. But the RBA’s significant lag in monetary policy will catch up to the Australian economy as it has done in New Zealand.
Generally, I think Australia will see rates higher for longer because of poor Government policy, as I discussed in yesterdays live show with Leith van Onselen. But the rate trend will be lower ahead, but not back to close to zero, which was in its own right a policy error and helped to fire up inflation in the first place. At least Kiwi’s can breath a little easier, though you can probably thank lower migration for that – Australia please note!
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Interesting question, who you believe more the markets, or Central Bankers. Of course those in Central Bank land, will claim data dependence, and moving targets, and as RBA Deputy Governor Andrew Hauser warned recently it’s a risk to listen to “false prophets” on interest rates; and yet after several false dawns, New Zealand’s central bank cut interest rates, embarking on an easing cycle much sooner than previously indicated as The Reserve Bank’s Monetary Policy Committee lowered the Official Cash Rate by a quarter percentage point to 5.25% Wednesday in Wellington.
The RBNZ’s pivot to easing is a rapid change of tune after it said in May it considered raising rates and wouldn’t cut them until the second half of 2025. The bank’s concerns over sticky domestic inflation are being alleviated as the economy teeters on the brink of its third recession in less than two years and unemployment rises. The RBNZ’s new forecasts show the OCR falling further in the fourth quarter and by about 100 basis points by the middle of next year.
So will the RBNZ’s move influence Australian interest rates. Probably not because inflation in Australia is way worse, and Government spending and support significantly higher. RBA governor Michele Bullock last week ruled out the prospect of rate cuts this year. But the RBA’s significant lag in monetary policy will catch up to the Australian economy as it has done in New Zealand.
Generally, I think Australia will see rates higher for longer because of poor Government policy, as I discussed in yesterdays live show with Leith van Onselen. But the rate trend will be lower ahead, but not back to close to zero, which was in its own right a policy error and helped to fire up inflation in the first place. At least Kiwi’s can breath a little easier, though you can probably thank lower migration for that – Australia please note!
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
In today’s deep dive, Elisa Barwick from the Australian Citizens Party shares her research on why housing has become so expensive, and what can be done about it. But this is not the normal discussion of high migration or currently government policy, rather it sheets the cause to a chapter of history dominated by neo-liberalists, austerity and the rise of technocrats who still now dominate our lives.
The Reserve Bank held its cash rate at 4.35% for a sixth straight meeting on Tuesday and lifted its forecasts for inflation and economic growth. In her press conference after the policy decision, Governor Michele Bullock said there’s still a risk that inflation will take too long to return to target and said it’s too early to be talking about imminent easing. Core prices at 3.9% remain well above the bank’s target and its largely driven by non-discretionary spending such as insurance, education and housing rent.
It now sees underlying inflation easing to 3.5% by the end of this year, and then hitting 3.1% in mid-2025. The gauge is seen falling just shy of the 2.5% target mid-point at the end of the forecast horizon.
The governor did tell reporters that the board discussed a hike before deciding to pause again and said a tightening couldn’t be ruled out due to upside risk to inflation.
But as governor Bullock delivered her comments and answers at Tuesdays press conference, it became clear there are disconnects between inflation in Australia and other countries, a divergence between the bank and markets about the future trajectory of interest rates, a revision to how restrictive current interest rate settings are in Australia, and a problem with the impact of Government “support” in its broadest sense estimated to be circa $40 billion across federal and states, plus the tax cuts.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
The Reserve Bank held its cash rate at 4.35% for a sixth straight meeting on Tuesday and lifted its forecasts for inflation and economic growth. In her press conference after the policy decision, Governor Michele Bullock said there’s still a risk that inflation will take too long to return to target and said it’s too early to be talking about imminent easing. Core prices at 3.9% remain well above the bank’s target and its largely driven by non-discretionary spending such as insurance, education and housing rent.
It now sees underlying inflation easing to 3.5% by the end of this year, and then hitting 3.1% in mid-2025. The gauge is seen falling just shy of the 2.5% target mid-point at the end of the forecast horizon.
The governor did tell reporters that the board discussed a hike before deciding to pause again and said a tightening couldn’t be ruled out due to upside risk to inflation.
But as governor Bullock delivered her comments and answers at Tuesdays press conference, it became clear there are disconnects between inflation in Australia and other countries, a divergence between the bank and markets about the future trajectory of interest rates, a revision to how restrictive current interest rate settings are in Australia, and a problem with the impact of Government “support” in its broadest sense estimated to be circa $40 billion across federal and states, plus the tax cuts.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
The ABS released their latest on CPI, with the quarterly results to June, and the monthly. The data of course feeds into the RBA rate decision next Tuesday. The Consumer Price Index (CPI) rose 1.0 per cent in the June 2024 quarter and 3.8 per cent annually. So real prices are still rising. Underlying inflation which measures reduce the impact of irregular or temporary price changes in the CPI – the annual trimmed mean inflation was 3.9 per cent, down from 4.0 per cent in the March quarter. This is the sixth quarter in a row of lower annual trimmed mean inflation, down from the peak of 6.8 per cent in the December 2022 quarter.
At first blush, the data could be bent in support of an argument that inflation continues to fall, especially if you focus on the core measure, which is precisely where Treasure Chalmers went in his statement, and in which he also argued that inflation was about 0.5% lower thanks to Government support for electricity and rents, etc. ““While headline inflation is proving sticky and stubborn, and is more persistent than we would like, it is less than half its peak,” he said. “Inflation is lingering for longer than we had hoped across the globe, and Australia’s experience is no different.”
But then, remembering RBA Governor Bullock said she would look through these temporary adjustments, the story swings more to the rise in headline inflation, which came in as expected. Actually the RBA was forecasting CPI inflation to reach 3.8%yr in the June quarter, in line with today’s result. However, for core inflation, the RBA was also forecasting 3.8%yr for June, so the 3.9%yr pace was a touch stronger than they were expecting.
All this means if the RBA felt the need to lift rates they could justify it, but also if not, they could find reason to hold, so if comes down to judgement and weighting the political and economic consequences. Nothing here though to justify a rate cut.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Digital Finance Analytics (DFA) Blog
Is The Door Closed On A Further Rate Rise In Australia?
In our latest show we pull apart some of the recent property spruiking, look at the latest numbers and deep dive into the gap between the “speak” from policy makers and the “reality” of what they do. As a result we underscore the need to go local, and not be misled by high-level waffle!
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Today’s post is brought to you by Ribbon Property Consultants.
If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.
Buying property, is both challenging and adversarial. The vendor has a professional on their side.
Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.
Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest.
Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.
