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The Reserve Bank’s battle to balance inflation and unemployment looks increasingly fraught, with more signs the national jobs market is deteriorating and cash-strapped consumers are winding back spending on life’s little luxuries.
Ahead of the conclusion of the bank’s two-day monetary policy committee meeting, which is expected to leave official interest rates on hold at 3.6 per cent, new figures show employers are hitting the brakes on hiring new staff.
Job ads are disappearing much quicker than expected in a sign the economy may be slowing.Credit: Louise Kennerley
The Reserve has championed the way inflation has fallen over the past three years while employment growth has remained strong, as the bank aims to fulfil its dual mandate of keeping inflation between 2 and 3 per cent and keeping as many people in work as possible.
But the closely watched ANZ-Indeed measure of job ads, released on Monday, revealed a fall of 2.2 per cent in work advertisements in October.
It was the fourth consecutive monthly drop, with the measure down six out of the past seven months. The overall measure is down 7.4 per cent over the past 12 months to be at its lowest level since February 2021, when the jobless rate was 5.8 per cent.
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Indeed senior economist Callam Pickering said while there had been a lift in ads for retail and food preparation jobs in the run-up to Christmas, there had been falls in education, management and administrative assistance.
Finance markets put the chance of an interest rate cut at the Reserve Bank’s Melbourne Cup Day meeting at better than 60 per cent when jobs figures showed a lift in the jobless rate in September. But those chances evaporated after the most recent inflation report showed prices climbing at 3.2 per cent over the past year.
Figures from the Bureau of Statistics, also released Monday, showed household spending increased by a lower-than-expected 0.2 per cent through September. While spending rose after the Reserve Bank’s February rate cut, it has moderated to be just above population growth.
Consumers are changing their spending patterns. Expenditure on discretionary goods was flat in September after a 0.1 per cent drop in August, as people cut back on dining out and recreation.
By contrast, spending on essentials continues to grow at a fair clip, lifting by 0.6 per cent in the month. Much of that has been driven by health and food expenditure.
Since the RBA started cutting rates, spending on essentials has grown twice as quickly as that on discretionary goods and services.
ANZ economists Madeline Dunk and Adelaide Timbrell said the volume of household spending had fallen to its slowest rate in a year.
They said the Reserve Bank’s future interest rate setting would hinge on the coming Christmas period and the increasingly important Black Friday and Cyber Monday sales.
“Consumer confidence has softened a little in recent months, and it is possible that the likely RBA hold decision this week may dent spending growth in the near term. A softer holiday spending period may support the case for a rate cut in February,” they said.
Black Friday and Cyber Monday sales this month are expected to attract cost-conscious consumers.Credit: Eddie Jim
There are signs that the Reserve Bank’s past rate cuts are feeding into the house construction sector.
Home approvals jumped by 12 per cent in October, the ABS reported, with a 26 per cent surge in the number of apartments.
Total approvals in NSW lifted 30 per cent, while they jumped by 41 per cent in Victoria.
Over the year to September, more than 192,000 homes were approved for construction across the country, a near-14 per cent lift on the 12 months to September last year. It was the highest annual result since December 2022.
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The federal government has set a target of 1.2 million homes between mid-2024 and mid-2029 – or 240,000 new homes a year.
AMP economist My Bui said townhouses and apartments each accounted for 40 per cent of building approvals.
“Building approvals are still running 25 per cent below the peaks in 2017 and 2021, and the key to get the approvals figures higher is to have more units in the mix,” she said. “Back in 2015-2017, apartments and townhouses accounted for close to 60 per cent of total approvals.”
Apart from revealing its interest rate decision, the Reserve Bank will release its latest medium-term economic forecasts on Tuesday. They are expected to show inflation remaining higher for longer and a possible deterioration in unemployment.
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