The Reserve Bank governor has dismissed warnings of rising unemployment and hinted at an interest rate hold, saying the labour market will not \u201cfall off a cliff\u201d.<\/p>\n
Michele Bullock said the RBA had been surprised by September\u2019s jump in joblessness<\/a> and an uptick in inflation<\/a> but emphasised job creation was slowing broadly as the RBA expected.<\/p>\n \u201cThere are still jobs being created, just not as many,\u201d Bullock said on Monday night.<\/p>\n \u201cWe\u2019d always thought [unemployment] would drift up a bit. Maybe it\u2019s drifted up a bit further than we thought, but it\u2019s not a huge amount yet.\u201d<\/p>\n In recent weeks the RBA has received two unwelcome and contradictory signals about the September quarter: inflation has come in substantially hotter than expected, while the jobs market has run colder.<\/p>\n The rise in unemployment to 4.5% blew past the RBA\u2019s own forecasts and prompted calls for further interest rate relief as early as next week.<\/p>\n Speaking at an Australian Business Economists dinner in Sydney, Bullock said the job market\u2019s strength had been a highlight of her two-year tenure as governor but downplayed its weakening as a byproduct of slow economic growth.<\/p>\n \u201cThis is bringing the labour market back more to balance \u2026 We think we\u2019re close-ish,\u201d Bullock said.<\/p>\n \u201cThere\u2019s still signs out there that the labour market\u2019s a little bit tight and that it\u2019s not actually going to, all of a sudden, fall off a cliff.\u201d<\/p>\n Bullock said the RBA board would have updated predictions at its meeting next week when it would decide whether to focus on inflation or support the slowing jobs market, which would mean more interest rate cuts.<\/p>\n Luci Ellis, Westpac\u2019s chief economist and a former top RBA official, said Bullock\u2019s speech showed forthcoming inflation data would determine the outcome of that meeting.<\/p>\n The consensus among economists is for inflation to leap from 2.1% in the year to June, to 3% in September in Wednesday\u2019s quarterly report from the Australian Bureau of Statistics.<\/p>\n A sharp rise would be a well-anticipated result of the end of government power bill subsidies, which will continue to roll off into 2026. Electricity prices could climb by more than 9% in the three months to September, and leave them 24% higher than a year earlier, according to Barrenjoey, an investment bank.<\/p>\n Inflation set to accelerate<\/p>\n While Australians will be squeezed by the end of power bill relief, more alarming for the RBA is an acceleration in underlying inflationary pressures.<\/p>\n These are best represented by the bank\u2019s preferred \u201ctrimmed mean\u201d measure, which removes large, one-off moves (such as electricity) and provides the best steer for interest rate decisions.<\/p>\n Here the consensus is for underlying inflation of 1% in the quarter, a marked rise from the previous three-month period.<\/p>\n That would leave the annual rate unchanged at 2.7% and represent a concerning stalling in a downward trajectory stretching back to the end of 2022.<\/p>\n Bullock acknowledged on Monday night that such an outcome would represent a significant break from the RBA\u2019s forecasts.<\/p>\n Johnathan McMenamin, the head of economic forecasting at Barrenjoey, said: \u201cIt\u2019s a complex set of numbers for the RBA to navigate.\u201d<\/p>\n If the RBA holds off on rate cuts for too long than they risk the economy\u2019s \u201csoft landing\u201d that has seen inflation drop sharply over recent years without a major rise in the jobless rate, which remains well below the 5%-plus rates that prevailed before the pandemic.<\/p>\n \u201cThey are very proud of the gains they have made on the labour market and the unemployment rate and they would still want to preserve that. But I don\u2019t think they will jump at one monthly jobs figure,\u201d McMenamin said.<\/p>\n McMenamin is predicting inflation will come in substantially stronger and far above what the RBA\u2019s economists had predicted.<\/p>\n This could send the RBA\u2019s underlying measure up to 2.8% \u2013 the first increase in nearly three years. That would delay a rate cut well into next year.<\/p>\n Belinda Allen, CBA\u2019s head of Australian economics, said after coming off a period of historically high inflation, fear of having to restart the battle in 2026 would keep the RBA focused on price pressures.<\/p>\n Allen has the next rate cut penciled in for February, at least for now.<\/p>\n","protected":false},"excerpt":{"rendered":"The Reserve Bank governor has dismissed warnings of rising unemployment and hinted at an interest rate hold, saying…\n","protected":false},"author":2,"featured_media":228315,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[84,1294,56,54,55],"class_list":{"0":"post-228314","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-economy","10":"tag-uk","11":"tag-united-kingdom","12":"tag-unitedkingdom"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/228314","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=228314"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/228314\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/228315"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=228314"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=228314"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=228314"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}