Australia's jobs slump, housing boom raise concern

A man walks into a Centrelink, part of the Australian government's department of human services where job seekers search for employment, in a Sydney suburb, on Aug 7, 2014.
A man walks into a Centrelink, part of the Australian government's department of human services where job seekers search for employment, in a Sydney suburb, on Aug 7, 2014.PHOTO: REUTERS

SYDNEY • Australia's central bank will focus on the performance of the nation's labour and housing markets in coming months in an economy it said grew moderately early this year.

In minutes of this month's policy meeting released yesterday, the Reserve Bank of Australia (RBA) noted labour market conditions were "somewhat weaker than had been expected" and measures of underemployment "remained high".

It met two weeks ago, missing a surge in full-time employment reported last Thursday. That data also showed that unemployment remained at a high 5.9 per cent.

"The board judged that developments in the labour and housing markets warranted careful monitoring over coming months," the RBA said, in a new addition to its outlook.

The central bank has kept interest rates at a record-low 1.5 per cent since August as it encourages industries outside of mining to boost investment and hiring.

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The board judged that developments in the labour and housing markets warranted careful monitoring over coming months.

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But, that has set off a speculative spree by property investors in Sydney and Melbourne, sending home prices and household debt soaring.

Echoing its assessment in last week's semi-annual Financial Stability Review, the RBA board said: "Growth in housing credit continued to outpace growth in household incomes, suggesting the risks associated with the housing market and household balance sheets have been rising."

More positively, the central bank said an improvement in global economic conditions had supported higher commodity prices, which are "expected to have provided a significant boost to Australia's national income in the March quarter".

The outlook is less positive, however, as the price of the nation's key commodity export, iron ore, has been plunging. Its downturn has intensified since the central bank's board met.

The RBA said early indications were that supply disruptions from Cyclone Debbie in the state of Queensland and floods in northern New South Wales were likely to be concentrated in coal production and some specific crops. The impact on inflation and domestic demand growth, including from repairs and rebuilding, "was not expected to be large", it said.

The RBA reiterated that holding policy unchanged was consistent with sustainable growth in the economy and achieving the inflation target over time.

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A version of this article appeared in the print edition of The Straits Times on April 19, 2017, with the headline 'Australia's jobs slump, housing boom raise concern'. Print Edition | Subscribe