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Reserve gets chance to show its hand on rates as pressure grows


The Reserve Bank will get the chance to respond to last week’s extremely strong labour force figures, which has triggered speculation among economists that an interest rate rise could be sooner than expected.

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RBA assistant governor for economics Luci Ellis will address a business lunch in Adelaide on Wednesday.

The massive 115,200 rise in employment and a fall in the unemployment rate to 5.1 per cent was described as a ‘game changer’ by one economist in regard to the interest rate outlook.

Not only has unemployment fallen for seven straight months in a row, the rate is now back to pre-pandemic levels and far quicker than either the RBA or Treasury had been expecting.

Some economists believe that conditions may be in place for a hike in the RBA’s cash rate in 2023, or perhaps even earlier.

As such, economists will be closely monitoring Dr Ellis’ comments when she addresses the Australian Industry Group’s event.

Since cutting the cash rate to a record low 0.1 per cent last November, the RBA has been adamant that a lift in the rate won’t happen until inflation is sustainably within the two to three per cent inflation target, an event it hasn’t seen occurring until 2024 at the earliest..

However, despite the stunning jobs figures for May, the Australian Bureau of Statistics’ weekly payroll jobs report released on Tuesday did show the recent Victorian COVID-19 lockdown had a negative impact on employment.

Payroll jobs in Victoria tumbled 2.1 per cent in the fortnight to June 5, dragging the national result down to a fall of 0.9 per cent.

Still, demand for workers has generally been strong.

The National Skills Commission will release its final vacancy report for May on Wednesday.

Its preliminary figures showed job advertisements on the internet rose by a further 1.9 per cent in May, the 13th consecutive monthly rise to stand at the highest level in 12 years.

Jobs ads are now 46 per cent higher than their pre-pandemic level.

The ABS will also release its preliminary international trading figures for May.

Goods exports have been supported in recent months by strong demand for iron ore, particularly from China, which reached a record high of $10.6 billion in April.

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