The Reserve Bank of Australia will have to \u201cpress the accelerator\u201d on interest rate cuts as an upcoming slump in public spending could cause the unemployment rate to rise, a leading economist has predicted.<\/p>\n
Some state and federal governments have signalled a slowdown in public spending which soared during and after the pandemic and kept many Australians in work.<\/p>\n
About four in five jobs created over the past two years have been in the non-market sector, which are industries influenced by government spending and regulation such as health, public services and education.<\/p>\n
Unemployment is forecast to pick up as government spending slows, putting pressure on the central bank\u2019s governor Michele Bullock to put more money back into Australians\u2019 pockets, GSFM\u2019s Stephen Miller said.<\/p>\n
\u201cBullock will have to contend with a weakening labour market,\u201d Mr Miller said on Business Now.<\/p>\n
\u201cPrivate sector spending here has been quite weak. What’s held up the labour market has been growth and employment in the non-market sector, public administration, health, government related services.<\/p>\n
\u201cThe market sector employment growth has been pretty tepid.\u201d<\/p>\n
He said that public spending was going on a \u201chiatus\u201d, putting pressure on the market sector to pick up the slack for Australia\u2019s jobs growth.<\/p>\n
This comes as inflation continued to fall in the June quarter, boosting hopes of a rate cut when the RBA meets in August.<\/p>\n
\u201cNow that inflation looks as though it’s headed toward the centre of the (RBA\u2019s 2-3 per cent target) band, I think Michelle Bullock now has to maybe sort of press the accelerator a little on rate cuts,\u201d Mr Miller said.<\/p>\n
\u201cShe might have to pay more attention to the employment side of her mandate now that the inflation side looks to be under some control and that’s not the circumstance.\u201d<\/p>\n