Tag: Monthly Hours Worked

Key Points

• The RBA maintained the cash rate at 3.6%.
• The strong housing market creates a wealth effect that encourages spending.
• However, unemployment is rising, and the RBA can’t do much because of the upturn in inflation.

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The RBA held rates steady at 3.6%, citing the recent upturn in inflation. Although some inflationary pressures are viewed as temporary, the policy statement says the housing market is strengthening and the labor market is “a little tight.”

We believe the labor market is deteriorating despite the “pick-up in private demand” mentioned in the RBA policy statement. ANZ-Indeed job ads declined by 2.2% in October, bringing the annual change to -7.4%.

The decline emphasizes the surprise increase in the unemployment rate to 4.5% in September. The graph below compares job ads on an inverted scale (blue – LHS) against the unemployment rate (red – RHS).

Growth in monthly hours worked is also slowing, and we expect the uptrend in unemployment to continue.

Housing

Building approvals for private dwellings indicate resilience in the housing market, with the 3-month moving average (15.5K) above its 20-year moving average.

Housing prices continue to reflect a market shortage due to high immigration.

Australia’s home value growth hits the fastest pace in over two years as national dwelling values surged 1.1% in October, marking the strongest monthly gain since June 2023 and pushing the annual growth rate to 6.1%. (Cotality)

Conclusion

Australia faces a similar K-shaped economy to the US.

Rising housing values and a buoyant stock market create a wealth effect, encouraging spending by wealthier consumers.

However, the increase in demand has not translated into strong job growth. Unemployment is rising, and growth in monthly hours worked has slowed, but the RBA can’t do much while inflation is increasing.

Acknowledgments

• • ABS: Building Approvals
  • RBA: Monetary Policy Decision
  • ANZ: ANZ-Indeed Job Ads
  • Cotality: Home Value Index