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Jobless fall puts pressure on cash rate

Staff Reporter 4 minute read

A shock drop in the number of unemployed Australians may put pressure on the Reserve Bank of Australia (RBA) to raise the official cash rate again at its November board meeting.

Figures from the Australian Bureau of Statistics revealed that Australia’s unemployment rate decreased 0.1 points to 5.7 per cent.

Total employment increased by 40,600 jobs to 10,805,600. Full-time employment increased by 35,400 to 7,589,800 whereas part time employment increased by 5,200 to 3,215,800.

Economists and industry commentators now believe that another rate rise might be imminent. RP Data’s head of property research Tim Lawless told Mortgage Business that it makes sense for the RBA to move interest rates from their historic lows.

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“There needs to be a fine balance, however. The economic conditions domestically and globally are still very fragile and any overly aggressive moves from a monetary policy perspective may cause consumers to tighten the purse strings once again,” he said.

According to Mr Lawless, the overall affect of two 25 basis point rate rises would not be dramatic.

“Rate rises should have been planned for and most property owners should have been factoring a more normal mortgage rate into their budgets,” he said.

“The number of new borrowers who have stretched themselves too thinly are not likely to represent a large proportion of the market due to the fact that banks have been exceptionally risk averse in their lending standards.”

Mr Lawless said the tightening of interest rates was only likely to affect demand in the first home buyer segment, as this is by far the most price sensitive segment of the market.

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“On balance we are seeing more non first time buyers and more investors enter the market.

“Housing finance commitments for investors were up 7.6 per cent in August, highlighting the surge in investor numbers in the market as first home buyers wind back.

“In all likelihood we will see investor numbers continue to improve over the rest of the year and into 2010,” he said.

Jobless fall puts pressure on cash rate
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