Australian job advertisements fell for a second consecutive month in May, with a 1.2% drop from April, which had already seen a downwardly revised 0.3% decline. This marks the lowest level of job ads since March 2021.
Yearly Comparison
- Compared to last year, job ads in May were down 5.7%.
- However, they remain 13.6% higher than pre-pandemic levels.
Economic Insights
ANZ economist Aaron Luk noted that despite the drop in job ads, "the labour market still remains tight with robust employment growth and a low unemployment rate."
Interest Rates and Economic Conditions
- The Reserve Bank of Australia recently cut interest rates to a two-year low as inflation cooled and global trade risks increased.
- The ANZ-Indeed Australian Job Ads series has remained relatively stable over the past year, fluctuating between 114-117.
Luk commented on the current state of job ads:
- "Although the ANZ-Indeed Australian Job Ads series has remained in a tight range of 114-117 over the last year, the May result is in the bottom of that range."
- He anticipates job ads to rise by about 1% next month due to strong employment growth and an improving economy.
Future Projections
- Labour market conditions are expected to remain strong throughout the year, with unemployment projected to decline towards 4% by mid-year.
- The Reserve Bank will meet again for its June monetary policy meeting, where it is expected to maintain current interest rates after two cuts earlier this year.
Global Trade and Economic Growth
The central bank’s decision comes amid:
- Cooling inflation.
- Increased global trade risks, particularly due to rising tensions between Russia and Ukraine.
- Sanctions imposed by countries, including Australia’s major trading partner, China, against Russia.
Economic Growth and Consumer Spending
- Australia’s economy grew faster than forecasted last quarter, with GDP increasing by 3%, compared to expectations of 2%.
- However, economists warn of a potential slowdown later this year due to:
- Higher mortgage repayments following recent interest rate hikes.
- Rising costs for businesses, including higher wages after workers secured pay rises above inflation.
Consumer Behavior
- Consumer spending accounts for about 50% of Australia’s economic output, while business investment accounts for around 33%.
- Households may cut back on discretionary spending, such as dining out or holidays, due to increased financial pressures.
Conclusion
The Reserve Bank has been raising borrowing costs since November to cool consumer demand without triggering a recession. The most recent cash rate increase brought rates from 0.75% to 1.25%.
Recent job reports indicated:
- Unemployment held steady at 5%.
- The wage price index rose by 0.6%, exceeding forecasts and taking annual wage gains up nearly 0.7%.
While inflation eased slightly, it remains high enough to keep policymakers cautious. Paul Bloxham from HSBC remarked, “Inflation came down less quickly than we thought,” indicating that while further tightening may be considered, it is not imminent.
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