Thursday, August 09, 2007

November 3 - a good date for the election

Here's why: The Bank might push up rates again on November 7.

An extra 21,777 Australians found work in the month of July, more than 700 a day, taking employment to a new all-time high and fueling speculation about another interest rate rise.

The figures released by the Bureau of Statistics yesterday also show that employment rebounded in the ACT, which gained an extra 1,229 jobs in July - around 40 jobs per day. In addition about 3,000 ACT jobs that had been part-time were converted to full-time in further evidence of a tight labour market...

Victoria and Western Australia recorded the largest gains in employment, with NSW and South Australia continuing to lose jobs.

Nearly all of extra jobs created were full-time.

Australia’s unemployment rate remains at 4.3 per cent, a 33-year low and well below the Treasury’s forecasts. The May budget assumed an unemployment rate of around 5 per cent by June.

The Treasurer expressed surprise at the figures saying that his department had expected an increase in unemployment as a result of welfare to work requirements that came into force in July.

“It is very early days, but wouldn’t it be wonderful if, having encouraged more people to move off pensions, they were all able to find work? Our assessment always was that it would take some time for all of them to get into the labour force but July was a great success,” Mr Costello said.

He said it was important to note that the continuing employment boom was widespread. It wasn’t limited to the states experiencing a mining boom. It was too early to tell whether the budget’s revenue forecasts would have to be upgraded to take account of the extra tax revenue that would be collected from the extra full-time employees.

Economists from Citigroup, JP Morgan, HSBC and the AMP said the good employment news would help bring forward the timing of the next interest rate rise.

At the AMP Shane Oliver said until yesterday he hadn’t believed that there would be another interest rate hike in the near term. He now thought there would be one early next year. At HSBC John Edwards said he expected a post-election interest rate hike in December.

Wednesday November 7 would be the earliest likely date, the day after the Reserve Bank’s Melbourne Cup day board meeting set to consider the next round of inflation figures.

If the Prime Minister wanted to hold an election ahead of that move the most likely date would be Saturday November 3.

In Parliament Mr Howard declared his Welfare to Work program a success. He said that since its partial introduction a year ago the number of all welfare recipients has fallen by 100,000, a reduction of 3.9 per cent.

“It is a reform that was bitterly opposed by the Labor Party when we introduced it. We were told that we were heartless, we were told that we were indifferent and we were told that we were contemptuous towards people who, after their children had reached a certain age, were being asked to return to the workforce. Now, of course, we hear not a word of criticism from the man who sits opposite me. The Leader of the Opposition now course faithfully says that he agrees with me on Welfare to Work,” he said.

Earlier Mr Howard said that he regretted the latest interest rate rise. But he said “nobody had ever argued that interest rates should never move up or down”.

The Labor Party last night began running television advertisements in which the Prime Minister is seen in 2004 saying, “This election ladies and gentlemen, is about trust. Who do you trust to keep interest rates low?”