Rates to lift for third month in a row as jobs market tightens further
The Reserve Bank will impose the third interest rate rise on home buyers in as many months on Tuesday as signs grow the nation’s jobs market is increasingly tight with foreigners looking to get employment in Australia.
The bank will use its monthly board meeting to debate whether to lift rates by a quarter or a half percentage point, taking the official cash rate to either 1.1 per cent or 1.35 per cent.
Home buyers will get stung by another interest rate rise after Tuesday’s Reserve Bank board meeting.Credit:Rhett Wyman
A quarter percentage point would add about $110 to the monthly repayments on an $800,000 mortgage while a half percentage point would increase repayments by more than $230.
Financial markets and most market sector economists expect a half percentage point lift, which on top of the 0.75 percentage points of increases in May and June would add $550 to the monthly repayments on an $800,000 mortgage from April levels.
Home buyers are being hit by higher mortgage repayments while the entire economy struggles to deal with the surge in petrol prices.
The Australian Institute of Petroleum on Monday reported the national average price for unleaded was 211.2 cents a litre. At the start of the year, and before the federal government’s 22.1 cents a litre cut in fuel excise, unleaded petrol averaged 159 cents a litre.
Offsetting the impact of high prices is the strong jobs market with unemployment at 3.9 per cent and job vacancies at all-time highs.
Research by online hiring platform Indeed has found a surge in the number of people based overseas looking for a job in Australia.
In further confirmation of the strength of the local jobs market, Indeed found overseas jobseekers accounted for 8.3 per cent of clicks on Australian-based jobs between January and May. It’s up from 5.6 per cent for the same period last year and now exceeds pre-pandemic levels.
May was particularly strong with the overseas interest level reaching 9.2 per cent.
Between January and May, there has been a 17.7 per cent jump in the number of overseas people clicking on ads for Australian employment in the agriculture and forestry sector, a 7.5 per cent lift in electrical engineering and a 6.8 per cent increase in ads for “beauty and wellness”.
There has been a surge in the number of foreigners showing interest in vacant Australian jobs with agricultural positions in high demand.Credit:Louie Douvis
Indeed’s Asia-Pacific economist Callam Pickering said the lift in overseas interest in the local jobs market could not come a moment too soon for the local economy.
“Australia’s unemployment rate is at a near half-century low, job vacancies have never been higher and recruitment has become increasingly difficult,” he said.
“The key challenge for Australia will be attracting highly skilled workers in a tight and globally
competitive labour market.
“Most of Australia’s staffing challenges are far from unique in today’s world. A range of countries are competing for the same pool of workers. Australia will need a steady source of foreigners to fill the talent shortages that have ballooned during the pandemic recovery.”
Separate research by ANZ showed another step up in the number of job advertisements across the country through June.
Ads rose by 1.4 per cent last month to be 58.9 per cent up on their pre-pandemic level.
ANZ senior economist Catherine Birch said demand for workers was still out-pacing supply which suggested the economy could absorb a further lift in interest rates.
“The key takeaway for us is that the sheer volume of unmet labour demand suggests under-utilisation will keep falling and stay low even as demand growth is curtailed by higher inflation and rising interest rates,” she said.
“The very tight labour market is a key reason why we expect the Australian economy will be resilient in the face of these.”
AMP senior economist Diana Mousina said while there was a risk the Reserve Bank could lift rates by three-quarters of a percentage point on Tuesday, home buyers should prepare for a half percentage point increase.
“We expect another 50 basis point hike by the RBA, taking the cash rate to 1.35 per cent and reflecting the RBA’s concern that inflation is too high and could result in inflation expectations or ‘inflation psychology’ getting entrenched at a permanently higher level which would result in inflation not meeting the RBA’s 2-3 per cent inflation target over the business cycle,” she said.
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