Full-time jobs are coming back in Australia but economists say time is not ripe for a rate hike

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jobs in Australia
A job advert for a local fast food outlet hangs on a wall in a shopping center located in central Sydney, Australia, in this March. Reuters/David Gray

Full-time jobs are coming back to Australia, resulting to an increased labour market. It is a relief to the Reserve Bank of Australia (RBA), which has left interest rates at a record-low 1.50 percent since last year.

Australia Bureau of Statistics’ data revealed that unemployment rate remained at 5.6 percent. Up to 14,000 new jobs were added. The employment gain was led by a rise in full-time employment, rising by 115,400 positions in the past two months, the strongest back-to-back increase in almost three decades. It was a turnaround after full-time jobs once dropped by 23,100.

AMP Capital Chief Economist Shane Oliver said it was a sign of strength in the labour market. "For those looking for an imminent rate hike by year end, it supports their case,” CNBC quotes him as saying.

The latest labour data coincided with a measure of business conditions that soared to its highest level since early 2008 in the June quarter. Firms also recorded a surge in hiring intentions and labour costs.

That means Australia’s economy is getting back in the grove. The Australian dollar climbed on the data, up by 1.4 percent for the week.

Rate increase

The outcome causes concerns that the central bank might start considering a rate hike. When asked about a possible rise, Prime Minister Malcolm Turnbull hinted a message was being sent. "They're not saying that they're going to do that tomorrow but I think they're sending a signal which is probably prudent, which is to say: 'Ladies and gentlemen just be aware rates are more likely to go up than go down.”

But Oliver and a few economists do not think a rate increase is apt as they see plenty of spare capacity in the labour market. The rate of underemployment remained near record highs. Participation rate edged up last month as more people are looking to be employed.

That is likely to keep a lid on wages growth and put downward pressure on inflation, which was still below the RBA's 2-3 percent target band. But the RBA was confident about the turnaround in Australia’s economy. Labour markets show signs of life together with a pickup in business investment, as shown by minutes of its July policy meeting earlier this week.

It was also revealed that board members discussed the estimated neutral policy interest rate. In general, some in the market interpreted it a hawkish message.

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