Ahead of the global financial crisis in 2008,when unemployment was at 4.2 per cent,the RBA had the cash rate at 7.25 per cent. Inflation then was at 4.4 per cent compared totoday’s 3.5 per cent.
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The unemployment rate is now expected to fall to the low-3s by the end of the year on ANZ senior economist Catherine Birch’s forecasts. This would push up wages growth and keep inflation above the RBA’s 2 to 3 per cent target band,which she expects to result in significant interest rate rises.
“This is consistent with our expectation that the RBA will start hiking the cash rate in the third quarter of 2022,reaching 0.75 per cent by the end of 2022 and 2 per cent by the end of 2023,with more gradual rises to follow,” she said.
KPMG chief economist Brendan Rynne said four out of nine jurisdictions now had an unemployment rate in the 3 per cent range,including WA,Tasmania,the ACT and the Northern Territory.
“This data ... will provide the RBA with the evidence it needs to move more rapidly in tightening interest rates,” he said.
Bank of Queensland chief economist Peter Munckton said the jobs market was in a strong position with all regions benefiting.
Provided there was not another wave of coronavirus over the next eight to 10 weeks,he said economic growth would be very strong in the June quarter.
“The key question though is how many jobs can be created without leading to other economic problems (particularly inflation),” he said. “That is currently what we are finding out. The answer to that question is also the answer to when interest rates will begin to rise.”
CommSec senior economist Ryan Felsman said the unemployment result was a solid sign the “boom continues”,especially as the survey was conducted over the first two weeks of the year when the Omicron outbreak was accelerating.
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He expects wage growth to reach 3 per cent on a six-month annualised rate by the end of March,with the unemployment rate at 4 per cent or below and underlying inflation to hit 3.5 per cent.
“Our estimate is above the RBA’s inflation forecasts,so we expect the RBA to move to an explicit hiking policy bias at the May board meeting,with our expectation for the first hike in the cash rate to occur at the June 2022 meeting,” he said.
EY chief economist Jo Masters said a strong bounceback in February was likely due to job falls in NSW,Victoria and South Australia.
“[The data] should provide confidence that the economy will bounce back in coming months,with the labour market set to tighten further,” Ms Masters said.
The National Skills Commission’s internet vacancy index jumped to a 13-year high over January,with almost 260,000 positions available and recruitment activity up about 41 per cent over the last 12 months.
Australian Chamber of Commerce and Industry chief executive Andrew McKellar said the jobs figures were further evidence governments had to invest more heavily in upskilling the workforce.
“The ultra-low unemployment figures make clear that further emphasis is needed to boost workforce participation,invest in skills and VET and establish an ambitious skilled-migration program to plug widespread workforce shortages,” he said.
There was some positive news on migration. Overseas arrival and departure figures from the ABS showed a lift in the number of international students,tourists and migrants.