Will a December RBA rate hike ruin Santa’s Christmas party?
Sean Langcake from Oxford Economics Australia offers highlights in last week’s Statement of Monetary Policy, with the RBA discussing more resilient growth, which to a large degree is being driven by immigration. While the rate of growth is expected to slow, the immigration has driven higher inflation, which the RBA now expects to linger for longer-than-expected.
Sean envisages a debate around immigration and he highlights the fact that the labour market participation from migrants is not that high. Much of the impacts are being felt in fixed asset prices, such as housing stock.
Looking ahead, the Fair Work Commission’s increase in minimum wages will feed through in the Q3 wage price index, and the RBA expects the WPI to hit 4% year-on-year. Sean also says that the concerns around sticky services inflation is not going away any time soon.
Australia’s unemployment rate is expected to come in around 3.7% in October and is due to be announced on Thursday. Sean explains that companies are working around more flexible hours for workers, which is reducing average hours worked and this also means the unemployment rate is a less efficient measure.
Turning to the next quarterly CPI, this is due out towards the end of January 2024, but there will be monthly data, which is noisy and volatile.
Sean thinks there is enough inflation evidence to raise rates again in December and if not next February.
Watch Sean’s full interview with Ausbiz below:
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