Strengthening employment bad news for home loan borrowers

Australia’s strong employment data has increased the risk of a home loan rate rise in March.

According to data from the Australian Bureau of Statistics (ABS), the number of people in employment jumped to 10.966 million in January – an increase of 52,700 people since December.

The increase in employment figures was partly attributed to the number of part-timers filtering back into the workforce in January, with part-time employment up 36,900 to 3.314 million.

Australia’s unemployment rate now sits at 5.3 per cent – the lowest rate in more than one year.

Westpac senior economist Anthony Thompson said the falling unemployment rate could hurt the inflation forecast.

“Australia’s unemployment rate is falling faster than expected,” Mr Thompson said.

“This data reinforces our view that the RBA’s inflation forecasts face upside risks, particularly for 2011.”

Mr Thompson said more rapid retightening of the labour market threatens an acceleration in wages in 2010, which with lags threatens the RBA’s 2 per cent underlying inflation forecast.

“We expect to see a 25 basis point rate hike to 4.0 per cent in March,” he said.

Source The Adviser

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