Black Friday is Now! Don’t miss out on up to 60% OFF InvestingProCLAIM SALE

Australia's central bank in sweet spot as jobs, home prices please

Published 03/07/2017, 01:03 pm
Updated 03/07/2017, 01:10 pm
© Reuters.  Australia's central bank in sweet spot as jobs, home prices please
AUD/USD
-

* Job ads jump 2.7 pct, affirm improvement in official data

* Home price growth slows in June qtr amid lending crackdown

* Factory, service surveys point to stronger activity

* RBA seen content with steady rates at July 4 policy meeting

By Wayne Cole

SYDNEY, July 3 (Reuters) - Australia's jobs market looks healthier than it has in months while house prices are cooling in the face of tighter lending rules, all arguments for steering a steady course on interest rates this week.

The Reserve Bank of Australia (RBA) holds its July policy meeting on Tuesday and is almost certain to keep rates at 1.5 percent, where they have been since August last year.

All eyes will be on the post-meeting statement for any hint of hawkishness given central banks in Europe and Canada had surprised recently by talking of the need for tighter policies.

That change in tune led the futures market 0#YIB: to abandon any thought of another easing in Australia and instead imply a one-in-ten chance of a hike in rates by Christmas.

Economists, though, remain much more circumspect and dovish. A Reuters poll of 50 analysts found all but one expected rates to stay steady this week and most saw no move until late 2018. AU/INT

"In our view the RBA is unlikely to be hawkish given still elevated labour market slack and subdued inflation," said Tapas Strickland, an economist at NAB.

"Nevertheless, the Statement could well read more positively given May's stellar labour figures and the market might well infer a hawkish tilt even if it isn't," he added.

Employment blew past forecasts to jump 42,000 in May, a third straight month of upbeat outcomes that drove the jobless rate to a four-year trough of 5.5 percent.

Leading indicators of labour demand are also healthy with ANZ's measure of job advertisements climbing 2.7 percent in June to its highest since 2011. think the strength of employment will be a key factor in stabilising, and possibly lifting, consumer sentiment," said David Plank, ANZ's head of Australian economics. "This will be important in ensuring downside risks to the economy don't materialise."

The upbeat tone was echoed by an inaugural series of surveys from CBA and Markit which showed robust activity in both manufacturing and services during June. run of improving numbers could lead the RBA to upgrade its view of the labour market, which it has been characterising as no better than "mixed".

Yet too cheerful a message could lift the local dollar, which is already at heights considered unhelpful for exports.

"It's a conundrum for the RBA which wants to avoid a stronger currency," said NAB's Strickland. The Aussie stood at $0.7678 AUD=D4 on Monday, just off a three-month peak.

There have been some calls for the RBA to tighten policy to head off a debt-driven bubble in the housing market. Instead, regulators chose to crack down on bank lending to investors, pushing up mortgage rates for a range of products.

The tactic seems to be working. Figures from property consultant CoreLogic on Monday showed home prices rose only 0.8 percent in the June quarter, the smallest increase since late 2015, with Sydney recording a notable slowdown.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.