Australia | Jul 13 2006
By Rudi Filapek-Vandyck
Commonwealth Bank chief economist Michael Blythe has so far remained on the "no more rate hike" side of the ongoing interest rate debate between analysts and economists in Australia. Today’s strong employment figures seem to have tilted the balance in favour of another rate hike decision at the next Reserve Bank of Australia meeting in August.
"By the time of the August RBA Board meeting (1 August) there should be enough ammunition to justify an August rate rise", Blythe comments following the latest employment data.
According to the latest figures by the Australian Bureau of Statistics, employment throughout Australia increased by 52,000 jobs in June, pushing the participation rate up by 0.3ppts to a record 64.8%.
The unemployment rate remained at a 30-year low of 4.9%. The increase in employment largely occurred in Victoria and Queensland.
Blythe’s view is partly based upon the observation that the June quarter CPI is shaping up as a "shocker". He notes large increases in petrol prices, fruit and veg prices plus annual increases in health insurance charges could push the headline CPI figure for last month to as high as 1.2%. This would take the annual inflation rate to 3.6%.
Read between the lines and you can hear Blythe think: I know already what the newspaper headlines will look like.
However, the CommBank economist remains of the view the potential rise should be seen as "insurance" rather than an indication of some fundamental deterioration in the inflation outlook in Australia.
Others, such as ANZ Bank Senior Economist (Australia) Mark Rodrigues, have simply reiterated their prior view the RBA is likely to raise the official cash rate by 25 basis points to 6% at the next meeting, or later this year.