Powered by MOMENTUM MEDIA
subscribe to our newsletter

October rate cut awaits as unemployment rises

The Reserve Bank is set to cut the cash rate for the third time in four months with the unemployment rate continuing to climb, according to ANZ Research.

The Australian Bureau of Statistics (ABS) has released its latest Labour Force data, reporting a rise in the unemployment rate, from 5.2 per cent in July to 5.3 per cent in August – above market expectations (5.2 per cent).

The underemployment rate also increased, rising from 8.4 per cent to 8.6 per cent.

According to senior economist at ANZ Research Felicity Emmett, the “tick-up” in unemployment would place further pressure on the Reserve Bank of Australia (RBA) to cut the cash rate further, with its back-to-back cuts in June and July primarily aimed at stimulating the labour market.

“Leading indicators point to a further deterioration in the labour market over coming months,” Ms Emmett said.

Advertisement
Advertisement

“Employment growth looks set to slow, and we expect that the unemployment rate will rise to a peak of 5.4 per cent in [fourth quarter] of this year.

“This will keep the RBA in easing mode, and we continue to expect the next rate cut at the October meeting.”

AMP Capital chief economist Shane Oliver agreed, adding that the latest data indicates that “significant spare capacity remains in the labour market”.

“Against this background, it’s hard to see wages growth improving any time soon,” he added.

“While the RBA rate and tax cuts to date should help limit the rise in unemployment to around 5.5 per cent, they are unlikely to be enough to get unemployment down to the 4.5 per cent or less needed to see stronger wages growth and higher inflation.

PROMOTED CONTENT


“[In] the meantime, the risks to global growth have increased.”

Mr Oliver concluded; “As a result, we remain of the view that the RBA will have to cut rates further and continue to see the next 0.25 per cent cut coming in October, followed by another cut in November, ultimately taking the cash rate down to 0.5 per cent.”

[Related: GDP outlook propelled by rate stimulus]

October rate cut awaits as unemployment rises
RBA
mortgagebusiness

Latest News

The average mortgage interest rate paid by households is expected to continue to decline “for a while yet”, according to the central ban...

Following the release of the Retirement Income Review, two reverse mortgage lenders have emphasised how these products could provide Austral...

The industry body has signed on customer-owned financial institution Newcastle Permanent as a partner. ...

FROM THE WEB

Join a group of highly informed brokers.

Broker Pulse, a community-driven knowledge base of lender performance Reveal exactly which lenders are making life easiest for brokers and their clients by taking this monthly survey and joining a group of highly informed brokers who leverage these insights every month.

JOIN NOW
podcast

LATEST PODCAST: Responsible Lending - what could lie ahead for lenders brokers and borrowers?

Do you expect to see strong uptake of the HomeBuilder scheme?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.