From The Shadow:
Australia’s inflation rate, at 1.3% (March quarter), highlights concerns about insufficient aggregate demand. For 10 of the past 12 quarters the headline inflation rate has been less than 2%, well below the Reserve Bank of Australia’s official target range of 2-3%. The unemployment rate ticked up to 5.2% in April and yields of benchmark 10-year government bonds have fallen to record lows. The RBA Shadow Board’s conviction that the cash rate should remain on hold next week weakened and the policy bias has further shifted in favour of a rate cut. More specifically, the Board attaches a 43% probability that holding interest rates steady at 1.5% is the appropriate setting, while the confidence in a required rate hike equals 8% and in a required rate cut equals 50%.
Based on latest ABS figures, the seasonally adjusted unemployment rate in Australia rose for the second month in a row, to 5.2% (April), coinciding with an increasing labour force participation rate (from 65.6% to 65.8%). Full time employment fell slightly, while part-time employment increased by nearly 35,000. There is growing concern among economists that the relatively high part-time employment rate in Australia reflects significant under-employment, which helps to explain why the comparatively low official unemployment rates in the past couple of years have not led to a surge in inflation. Again, there was no new data on overall wages growth. However, two days ago the Fair Work Commission announced that the national minimum wage will rise by 3% from 1 July, which should feed through to wages more generally and support consumption expenditure.
