I honestly don’t know what happens to these RBA guys when they walk through the door at Martin Place:
The nation’s labour market is close to the point when workers who are keen for jobs or more work are absorbed into a strengthening economy, stoking the wage inflation that is a key precondition for future interest rate hikes, said Reserve Bank of Australia board member Ian Harper.
While there is still no need to “rush” the normalisation of monetary policy towards higher official interest rates, Professor Ian Harper expressed growing confidence the economy is “on a steady track towards a recovery” forecast by the central bank and Treasury.
Professor Harper described this week’s jobs numbers – which showed the jobless rate has fallen to a four-year-low of 5.5 per cent – as a sign that the labour market’s “excess capacity is beginning to wear off”.
“We’re targeted on getting inflation back into the RBA’s target range – that will occur as wages growth begins to pick-up.
“Are we headed in that direction? Yes we are. Are we going at an appropriate pace? The bank, the board, are convinced the setting is right.
“Bluntly, at this juncture, there would be no reason to try and rush this. It’s recovering nicely and there are other reasons to do with financial stability why you wouldn’t rush.”
Rush it? Rush what? You’ll be cutting before long. What will $35 iron ore do to that happy assessment? What will a sovereign downgrade do? What about:
- the car industry shuttering;
- continuing capex falls;
- a worsening gas shock;
- the dwelling construction bust;
- the house prices stall, and
- immigration flooding the labour market?