- The number of job advertisements grew 7.9% over May, ANZ Research states, signalling that unemployment could drop faster than expected — and potentially spark an interest rate hike.
- ANZ predicts unemployment of 4.8% by the end of this year, with further falls potentially serving as a catalyst for wage growth and inflation.
- Those figures ought to interest the Reserve Bank of Australia, which states wage growth and inflation will remain too low to lift interest rates until 2024, at the earliest.
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A sky-high number of job advertisements is more evidence that Australia’s unemployment rate could plummet to 4.8% by the end of the year, ANZ Research states.
Beyond the good news for skilled jobhunters, the new figures raise the spectre of an interest rake hike well before the Reserve Bank of Australia’s 2024 target.
ANZ’s job ads tracker rose 7.9% over the month of May, with the number of new job ads now sitting nearly 39% over prepandemic levels.
The findings mirror data from jobs portals Seek, which has boasted of record-high job listings through early 2021.
All told, the statistics speak to a faster-than-expected recovery from the economic punishment wrought by COVID-19 lockdowns and ongoing border closures.
That labour market optimism has caused ANZ Research to tweak its unemployment rate expectations.
“In May, we upgraded our labour market forecasts, and now expect an unemployment rate of 4.8% by the end of this year and 4.4% by end-2022,” said ANZ senior economist Catherine Birch.
“We think solid employment growth will drive this rapid improvement, notwithstanding near-term volatility post-JobKeeper.”
The Australian Bureau of Statistics has pegged the unemployment rate at 5.5%, far below the highs of 7.5% in June 2020.
The sudden tightening of the labour market seemed all but impossible at the start of COVID-19 lockdowns, and ANZ Research states new restrictions afflicting Victoria will do little to dissuade that overall sense of optimism.
“The Victorian lockdown is unlikely to derail the state’s labour market recovery,” Birch said.
“Even if we see some employment losses in June, as long as restrictions start easing from 11 June as currently planned, workers should be reinstated or find new jobs quite quickly, given the underlying strength in the labour market.”
Over and above the implications for Australians chasing a new role, the findings could adjust how Reserve Bank of Australia (RBA) approaches the interest rate.
The RBA upheld its decision to keep the interest rate at just 0.1% in June, with governor Phillip Lowe saying inflation and wage growth are not sturdy enough to warrant an interest rate tweak any time soon.
“Despite the strong recovery in the economy and jobs, inflation and wage pressures are subdued,” Lowe said. “While a pick-up in inflation and wages growth is expected, it is likely to be only gradual and modest.”
The Reserve Bank of Australia has projected interest rates will remain at ocean-floor levels until 2024 at the earliest, when it expects low unemployment will finally kickstart significant wage growth.
ANZ’s latest predictions could tweak that timeline. In addition to cataloguing a massive number of job ads, ANZ states its wage price index sat at 2.4% for the first quarter of 2021, and is coming within striking distance of the 3%-4% window targeted by the RBA.
“While still below the RBA’s 3% yardstick, the gap is narrowing, which has implications for the timing and speed of RBA policy changes,” Birch said.
While conceding that border closures and skill shortages in some sectors could keep unemployment from falling to the floor, ANZ’s latest report will only put pressure on the RBA to slowly shut the ‘cheap money’ tap.