Australia | Jun 08 2006
By Rudi Filapek-Vandyck
The amount of newly created jobs in Australia does not only support a potential RBA rate hike as early as August, HSBC Chief Economist Australia and New Zealand John Edwards believes, it also challenges the “appropriateness of big tax cuts delivered from July 1”.
Edwards agrees with his fellow economists elsewhere there is no compelling reason why Australia’s output growth and demand will slow down.
On the contrary, Edwards says, tax cuts, higher exports and firm business spending are poised to push up trend growth above the 3.1% recorded in the year to the March quarter.
The employment gain for May is so strong it is “freakish”, says Edwards and the data will give the Reserve Bank of Australia (RBA) “considerable concern”.
The HSBC economist agrees with ANZ and TD Securities’ Stephen Koukoulas the strong employment figure, combined with the strong trend in household consumption shown in the March quarter, makes another tightening “very much more probable than not”.
The big question that now lays on the table, he says, is whether the RBA will wait until the second quarter CPI July 27 CPI before tightening at the August meeting.
Edwards suggests there may be more rate hikes in the offing depending on data developments over the next month or so.