{"id":187157,"date":"2024-12-22T16:30:09","date_gmt":"2024-12-22T05:30:09","guid":{"rendered":"https:\/\/propertyupdate.com.au\/?p=187157"},"modified":"2024-12-16T16:19:27","modified_gmt":"2024-12-16T05:19:27","slug":"new-jobs-are-the-key-to-where-interest-rates-are-headed","status":"publish","type":"post","link":"https:\/\/propertyupdate.com.au\/new-jobs-are-the-key-to-where-interest-rates-are-headed\/","title":{"rendered":"New jobs are the key to where interest rates are headed"},"content":{"rendered":"

Where interest rates head in Australia next year and beyond depends not on inflation per se but on what happens with new job creation.<\/p>\n

This impacts the unemployment rate and, in most situations, the level and direction of inflation.<\/p>\n

So looking forward it is all about jobs.<\/p>\n

Our first chart<\/strong> shows that the annual rate of job creation is currently above the long-term average.<\/p>\n

\"Australia<\/p>\n

Good if you are looking for work but not so much if you have a big mortgage or outstanding loan.<\/p>\n

Yet the \u2018good\u2019 has a big caveat too, in that many of the new jobs created over the past couple of years have been in the public sector or in government-aligned work.<\/p>\n

Nevertheless, the RBA and many economists see these as \u201creal\u201d jobs.<\/p>\n

Well, I do remain sceptical.<\/p>\n

But maybe that is just me.<\/p>\n

The\u00a0second chart<\/strong>\u00a0shows that there is a strong relationship between the job growth trend and when the RBA lifts and cuts official interest rates.<\/p>\n

\"Australia<\/p>\n

If we see job growth start to trend downwards \u2013 and especially below the long-term trend - then interest rates here will start to fall.<\/p>\n

Chart 3\u00a0<\/strong>shows that the financial markets expect rates to fall, but they aren\u2019t as keen as they were a few months back.<\/p>\n

\"Yield<\/p>\n

For that blame the little recent tick upward in the annual job growth trend as shown in chart 1<\/strong>.<\/p>\n

Looking forward<\/h2>\n

The next RBA meeting is on the 18th of February where they might drop the cash rate by 0.25%.<\/p>\n

Might.<\/p>\n

This meeting will be after the December Quarter ABS CPI results out in late January.<\/p>\n

I expected the cash rate to fall last month.<\/p>\n

Many of you will recall that I said that.<\/p>\n

I anticipated that new job growth would have slowed more, as the new labour laws kicked in.<\/p>\n

Maybe I just got ahead of myself.<\/p>\n

But maybe not given that two-thirds of the recent new work has been government-related, and the current federal government has no shame when it comes to spending our kids and grandkids' future, so maybe new job creation will remain artificially elevated.<\/p>\n

2025 is an election year after all.<\/p>\n

<\/div>\r\n
<\/div>\n","protected":false},"excerpt":{"rendered":"

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