So rates up in a fortnight.
A further hike in mortgage rates next month is now inevitable following a slide in unemployment to its lowest level since the mid-1970s.
Australia's unemployment rate fell to 4.1 per cent in January – a result not bettered since November 1974, when economic turmoil flowing from the world's first oil crisis pushed the rate above 4 per cent for the first time since the great depression.
In 33 years the rate has never again approached 4 per cent until now. The figure released yesterday by the Bureau of Statistics holds open the prospect of Australia obtaining a national unemployment rate with a '3' in front of it within months - a goal set by the outgoing Prime Minister John Howard during the November election.
The unemployment rate of Australians looking for full-time work has already fallen below 4 per cent. It hit 3.8 per cent in January.
In Parliament the Treasurer Wayne Swan welcomed the news declaring that “on this side of the House the creation of jobs goes to the very core of our being.”
But it has also made inevitable a further hike in the Reserve Bank's cash rate target to a 13-year high of 7.25 per cent, and an accompanying hike in standard variable mortgage rates to a 11-year high of around 9.25 per cent.
Late yesterday financial markets were assigning an 85 per cent probability to the hike.
The Reserve Bank will meet to formally approve the hike in a fortnight on Tuesday March 4. It will be the fifth in eight months.
Concern about inflation forced the Reserve Bank to pushed up rates in August and November, a worldwide shortage of capital forced the the private banks to push up rates independently of the Reserve in January, and the Reserve Bank itself pushed up rates again in February.
Economist John Edwards of HSBC Capital Markets said said he expected the Reserve Bank to follow its March interest rate hike with another in April or May, taking the increase in mortgage rates since August to 1.4 percentage points.
A mortgage that cost 8.1 per cent in August and took $3,100 a month to pay off would then cost 9.5 per cent and take $3,500 a month to pay off.
Dr Edwards said the Reserve Bank wasn't planning the interest rate hikes because yesterday's employment figure was by itself spectacular, but because it showed “absolutely no sign of the slowdown in jobs growth” that the Bank expected following the recent hikes.
The resilient jobs market gave the bank confidence that it could afford to tighten rates a few more times without too much risk of going too far.
An extra 26,000 Australians found jobs in January in Australia's 15th consecutive month of jobs growth, the longest on record.
The number of unemployed Australians fell to 458,500 - a 26 year low and less than half the peak of nearly one million reached in 1993.
Commonwealth Securities reported yesterday that the dole queue – the number of Australians on either NewStart or Youth Allowances was much lower. In December it fell to 302,000 people, creating what ComSec calls a “core” unemployment rate of 2.8 per cent.
The ACT's unemployment rate remains the lowest in Australia at 2.3 per cent on a trend basis, with only 4,442 people out of work. Only 2,262 of them are receiving NewStart or Youth Allowances.