Buoyant Australian Job Market could see higher Interest Rates

7 September 2010

The strengthening Australian economy should reduce the unemployment rate to 5per cent or below by the end of the year, but this will put pressure on the Reserve Bank to begin raising interest rates again, new figures show.

Dun and Bradstreet chief executive Christine Christian said her company's latest national business expectations survey, to be published today, showed five key indicators of business strength had improved significantly, some to their highest levels in seven years.

''The sales index is particularly strong and it is driving the increased level of expectations in profits, inventories and capital investment.''

The latest ANZ job advertisements survey is pointing to a more buoyant labour market.

There was a 2.6per cent increase in job ads in August, to a seasonally adjusted average 176,239 a week. Internet ads rose 2.6 per cent to 166,743, and newspaper ads were up 1.5per cent to 9496. However, there was a 7.3 per cent fall in newspaper advertisements in the ACT.

ANZ chief economist Warren Hogan said it was the fourth consecutive increase in total ads.

''The pick-up in job advertisements in recent months suggests Australian businesses are confident about the local outlook despite the uncertain global economic environment. This suggests the Australian economy is maintaining good momentum into the second half of 2010,'' he said.

It also pointed to the unemployment rate falling below 5 per cent by year end, although ''it also has potential consequences for Australia's already relatively high rate of inflation'' with anecdotal evidence of skills shortages and pressure on wages. This would prompt the Reserve to lift interest rates. However, economists are confident the Reserve board will leave rates on hold when it meets today.

Source: David McLennan, Canberra Times