Thursday, May 19, 2016

Jobless rate steady, adds to case for August rate cut

Unemployment has remained unchanged at 5.7 percent, with the estimated addition of 10,800 jobs last month.

Listen to my analysis from The World Today

The Bureau of Statistics figures for April show that a small decline in the proportion of people in work or looking for it helped hold the jobless rate steady, despite relatively weak employment growth.

The Australian dollar fell, signalling bets are rising for a Reserve Bank rate cut as early as August.

US Federal Reserve surprises with signal for a June rate rise

The US Federal Reserve has signalled that a June rate rise is firmly on the agenda if economic conditions continue to improve.

In the minutes from the Fed's April meeting where rates were left steady at between 0.25 and 0.5 percent, officials say a hike would be “appropriate” if key indicators on inflation and employment stay on a positive track.

"Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen and inflation making progress toward the committee's 2 percent objective, then it likely would be appropriate for the committee to increase the target range for the federal funds rate in June," the minutes say.

But the minutes also show that Fed members remain divided on whether those critical conditions will be met.

"Participants expressed a range of views about the likelihood that incoming information would make it appropriate to adjust the stance of policy at the time of the next meeting."

The hawkish tone of the minutes surprised many Fed watchers who had pushed expectations for a US rate rise to later in the year.

Listen to this morning's report from the ABC's Rebecca Hyam

While the Fed awaits better news on the US economy, officials are cautious about global developments that have the potential to trigger volatility.

The minutes warn that global markets could be "sensitive" to the referendum on Britain's membership of the European which occurs a week before the Fed's June meeting.

The Fed also remains concerned about China and "unanticipated developments" associated the China's management of its exchange rate.

US dollar surges after Federal Reserve Minutes      Source: Bloomberg

National Australia Bank senior economist David de Garis agrees the likelihood of a June rate rise comes despite earlier comments from Federal Reserve chair Janet Yellen that the federal funds rate would only be increased gradually.

In a note to clients, Mr de Garis says despite the Brexit caution "the Fed is still seriously considering enacting some further gradual removal of monetary accommodation."

The US dollar rose sharply after the release of the Fed minutes, pushing the Australian currency as low as 72.15 US cents.

The Federal Reserve hiked interest rates in December ending a extensive period of emergency support in the wake of the Lehman Brothers collapse in 2008.

Wednesday, May 18, 2016

Feeling poorer? Wage growth hits fresh lows, ABS index shows

Wage growth has hit a fresh record low, with workers' pay rising just 0.4 per cent last quarter and 2.1 per cent over the past year.

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The latest seasonally adjusted Bureau of Statistics Wage Price Index is growing at the lowest level since the data began in the September quarter of 1998.

The weakness in pay rises is particularly evident in the private sector, where wages edged just 1.9 per cent higher over the year to the end of March.

Tuesday, May 17, 2016

RBA says inflation a threat to wages growth; signals more rate cuts

Australia's recent dip into deflationary territory is unlikely to have been a one off and could prompt further interest rate cuts this year, the Reserve Bank has signalled.

Listen to my analysis from The World Today

According to the minutes from its May meeting where the cash rate was cut to 1.75 percent on Budget day, the RBA board was briefed about "ongoing inflation trends" and that the outlook could be lower for longer.

Referring to the March CPI result where inflation went backwards by 0.2 percent, the Board was told that the data "were less subject to measurement error than many other key data series".

"Moreover, the lower-than-expected CPI outcome could not be explained entirely by temporary factors" such as lower fuel prices and that the weakness in cost pressures "had been broadly based".

The RBA has also signalled that the outlook for lower inflation had the potential to dampen wages growth even though employers in general appear unwilling to make offers of wage growth below two percent.

"But if inflation was to be persistently lower than previously forecast, it was possible that in time this could be reflected in lower wage growth."

The minutes also highlight a stabilising but soft outlook for the labour market with employment growth slowing in the first quarter of 2016.

"Employment would continue to grow but at a somewhat slower pace than had been evident over the previous year," the minutes warn.

Australia's current jobless rate of 5.7 percent in March will be updated on on Thursday when the Bureau of Statistics releases official data for April.

The RBA has also singled out low wage growth as contributing to "heightened job insecurity" which is says "may be relevant to the current Australian experience."

"The broad-based softness in prices and labour costs signalled less momentum in domestic inflationary pressures than had previously been expected."

Economists are now betting the RBA will continue to cut the cash rate after being surprising by the depth of the latest inflation reading.

The Commonwealth Bank is predicting another two cuts in 2016 taking the cash rate to 1.25 percent.

The Reserve Bank's continued "accommodative" stance for monetary policy reflects today's low inflation world but also cautious comfort that Australia's real estate market is less hot than a year ago.

Monday, May 16, 2016

Women still hitting glass ceiling, warns US entrepreneur Kay Koplovitz

One of America's leading entrepreneurs says Australia still has a long way to go in getting greater diversity in business, particularly in corporate boardrooms.

But Kay Koplovitz, who founded the USA cable television network and the Sci Fi channel in 1977, says the balance is slowly tipping in favour of women.

Ms Koplovitz - who chaired Bill Clinton's National Council of Business for Women -  is in Australia this week as chair of Springboard Enterprises, which works with women entrepreneurs to raise venture capital.

Listen to my interview with Kay Koplovitz