Buoyant jobs keep RBA on rates watch
James Glynn | June 26, 2008
AUSTRALIA'S labour market remained buoyant in the three months to May as job vacancies rose sharply even as interest rates hurtled to 12-year highs and a credit-crunch gutted business confidence.
Economists said today the rise in the number of unfilled job positions is a sign that any slowdown in the labour market in 2008 has only been modest, at best.And while there are increasing indications of an economic slowdown, they say the Reserve Bank of Australia can't afford to be relaxed about the dangers of accelerated wages growth.
Australian job vacancies rose 3.4 per cent in seasonally adjusted terms during the three-month period ended May 2008 from the previous three-month period, the Australian Bureau of Statistics reported today. The rise more than offset a 2.7 per cent drop in the previous quarter.
Sally Auld, co-head of Australian economics at ANZ, said the rise in job vacancies shows that an expected cooling off of the labour market in the second half of 2008 will be "modest at best."
Too much is also being read into weak May labour force data released by the ABS earlier this month that showed 20,000 fewer jobs, the first contraction in a year and half, Ms Auld said.
The data are consistent with the next move in interest rates being up, and soon, she added.
Financial markets are currently pricing in one further interest rate hike over the next year, likely taking the official cash rate target to 7.50 per cent from 7.25 per cent.
Second quarter inflation data on July 23 will do much to determine the next move in interest rates.
Craig James, chief equities economist at CommSec, said the job vacancies data confirms the strength of demand for workers remains high.
"There are less that three unemployed people vying for every vacant job, the lowest reading since records were maintained over 30 years ago," he said.
Australia's economy is in the midst of a sustained commodity price boom which has seen unemployment fall to its lowest level since the mid-1970s. The strains on the labour market and a persistent inflation problem are keeping the RBA on alert.
Kieran Davies, chief economist at ABN AMRO, said the broad sweep of labour market indicators are now pointing to a moderation in the labour market.
Importantly, it is a controlled moderation that the RBA will be content with. There is no indication that the job market is crumbling, Mr Davies said.
"The RBA can be confident that unemployment is about to rise," he said.
Unemployment now stands at 4.3 per cent.
The Australian dollar and bond markets were largely unchanged in the wake of the data.
The ABS has also attracted some criticism today from economists for its decision to scrap the job vacancies data series due to budget cuts announced in May by Treasurer Wayne Swan.
"It is ironic that cutbacks at the ABS are causing a serious erosion of our statistical knowledge of the Australian economy just when the uncertainty about our short-term economic future has increased," said Chris Caton, chief economist at BT Financial Group.
Matthew Johnson, senior economist at ICAP Australia, said cancellation of the data series would mean economists would be reliant on the less accurate private sector business surveys.
Dow Jones Newswires
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