Thursday, August 06, 2009
"This is a truly magnificent result - tempered only by the fact that full-time employment fell.
Nevertheless a lift is a lift and it’s looking likely that the peak in the unemployment rate will be materially lower than the official 8.5% forecast - and even mine of 7.25%.
An added bonus is that the participation rate is still very high. The economy is handling that well given the absence of job shedding. Current indicators are that further lifts in the unemployment rate will be modest.
We’re coming into a recovery that on paper should be very strong indeed, particularly with a housing construction rebound that should commence in 2H09. I suspect that any lift in the unemployment rate we see throughout 2H09 will be whittled away quickly in 2010.
The policy implications are clear. The labour market was the weak link and now that link is looking less weak. It still has the potential to surprise to the downside – but when you look at the whole economic canvass there are few reasons to expect it to deteriorate significantly from here – exports are strong, housing is picking up, resource investment is holding up and public infrastructure investment has barely even started.
So far I'm not seeing any rational reason why the RBA would delay lifting rates to a still exceptionally stimulatory 3.25% in December - so that remains my expectation."