Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)
The Reserve Bank says there are good prospects for economic growth in Australia that will eventually see an increase in wages and inflation, as new data showed improving employment conditions.
Even so, RBA assistant governor Christopher Dr Kent remains of the view inflation is unlikely to be sustainably within the two to three per cent target band until at least 2024, keeping interest rates at record lows.
“Households and business borrowers continue to benefit from record low interest rates on most loans, their balance sheets are in good shape and the economy is benefiting from supportive fiscal policy,” Dr Kent told an online conference on Wednesday.
Economists have been upgrading their growth forecasts following last week’s national accounts which the economy has now fully recovered from last year’s recession.
Australian Bureau of Statistics data showed payroll jobs increased by 0.3 per cent in the fortnight to May 22, following a 0.1 per cent decline in the previous two weeks.
Payroll jobs are now 2.6 per cent higher than a year earlier.
The report precedes the full labour report for May due on June 17.
At the same time, preliminary figures from the National Skills Commission showed internet job advertisements rose by a further 1.9 per cent in May, to stand 46 per cent higher than pre-pandemic levels.
Job ads have now risen for 13 months in a row, a positive sign for future employment opportunities.
“The labour market has recovered five times faster than what Australia experienced after the 1990s recession,” Treasurer Josh Frydenberg said in an opinion piece published prior to Wednesday’s figures.
“There are more people in work in Australia than before COVID began … a feat not achieved by any other major advanced economy.”
However, confidence among Australians has taken a hit from the COVID-19 lockdown in Melbourne, a worry for retailers.
The Westpac-Melbourne Institute consumer sentiment index fell a further 5.2 per cent in June, and has slumped 9.7 per cent in the space of two months.
Westpac chief economist Bill Evans said the initial 4.8 per cent drop followed a strong surge to an 11-year high in April and some disappointment around the federal budget, given the high expectations leading into the announcement.
“The latest fall in June is almost certainly due to concerns around the two-week lockdown in Melbourne,” Mr Evans said, noting the survey was conducted during the first week of the lockdown.
However, AMP Capital chief economist Shane Oliver expects to see a bounce in confidence on the back of news that Melbourne’s lockdown will end on Thursday night, albeit with some restrictions remaining.
The RBA has held its key cash interest rate at a record low 0.1 per cent since November last year.
It has repeatedly said it wants to see a sustainable rise in prices and wages before lifting interest rates, with the latter achieved by a much lower unemployment rate.
However, such interest rate support has not been enough for some businesses, which are feeling the pinch in the absence of support from the JobKeeper wage subsidy that ended in March.
Analysis by CreditorWatch has found business external administrations rose by 24 per cent over the past three months and defaults increased by nine per cent.
“We’ve been saying for some time we won’t be able to get a true picture of the economic health of the nation until federal government stimulus measures, such as JobKeeper, have ended,” CreditorWatch chief executive Patrick Coghlan said.