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In its February Statement on Monetary Policy the RBA said that “On the current outlook, then, and allowing for the inevitable uncertainties in forecasting, the risk of inflation remaining uncomfortably high for some time is considerable.”
Australia's core inflation rate accelerated to its fastest pace in 16 years last quarter at 3.6 per cent, and in November the RBA sharply revised its inflation forecast for mid 2008; raising its prediction from 3.25 per cent to 3.75 per cent.
Today’s statement implies that home owners could be facing multiple rate hikes this year if the Reserve Bank is to keep a lid on inflation, and bring it back in line with its two to three per cent target band.
Commonwealth Bank of Australia chief economist Michael Blythe said a strong economy and tight labour market were putting pressure on inflation, adding: "That's as clear cut as the central bank gets on the rate front. It looks like a seven per cent cash rate won't be enough."
UBS chief economist Scott Haslem was equally blunt, saying the RBA statement exceeded the expected extent of “hawkishness”, and that the likelihood for further rises in cash rates in March “has risen materially”.
Meanwhile ANZ today released its January job advertisement figures, showing a continued strengthening trend in employment opportunities.
Total job adverts, online and print, rose by 1.8 per cent in January – averaging more than 270,000 a week. The increase follows December’s jump of 4.9 per cent, and was almost 32 per cent up on totals from 12 months ago.
ANZ’s Head of Australian Economics, Tony Pearson, said: “The continued trend increase in the total number of job advertisements in January suggests the demand for labour remains very healthy.”
Pearson added that “the figures suggest employment growth will remain solid over coming months. As a result, the current tight labour market conditions are expected to continue well into 2008.”
Australia's core inflation rate accelerated to its fastest pace in 16 years last quarter at 3.6 per cent, and in November the RBA sharply revised its inflation forecast for mid 2008; raising its prediction from 3.25 per cent to 3.75 per cent.
Today’s statement implies that home owners could be facing multiple rate hikes this year if the Reserve Bank is to keep a lid on inflation, and bring it back in line with its two to three per cent target band.
Commonwealth Bank of Australia chief economist Michael Blythe said a strong economy and tight labour market were putting pressure on inflation, adding: "That's as clear cut as the central bank gets on the rate front. It looks like a seven per cent cash rate won't be enough."
UBS chief economist Scott Haslem was equally blunt, saying the RBA statement exceeded the expected extent of “hawkishness”, and that the likelihood for further rises in cash rates in March “has risen materially”.
Meanwhile ANZ today released its January job advertisement figures, showing a continued strengthening trend in employment opportunities.
Total job adverts, online and print, rose by 1.8 per cent in January – averaging more than 270,000 a week. The increase follows December’s jump of 4.9 per cent, and was almost 32 per cent up on totals from 12 months ago.
ANZ’s Head of Australian Economics, Tony Pearson, said: “The continued trend increase in the total number of job advertisements in January suggests the demand for labour remains very healthy.”
Pearson added that “the figures suggest employment growth will remain solid over coming months. As a result, the current tight labour market conditions are expected to continue well into 2008.”
