Aiming for low unemployment rates remains a shared objective for governments across the globe. However, appearances can be deceiving, and the current statistics must be evaluated within the framework of the ongoing COVID situation and the global repercussions on business activities. Delving deeper, the June employment statistics and the data recently unveiled by the ABS don’t bode well for the trajectory of truck finance interest rates, given that this information further exacerbates the pressures on the Reserve Bank of Australia (RBA).
The release of the data sees a significant 0.4% drop in the unemployment rate from the May 3.9% to 3.5%. This is the lowest since 1974 and economists are already commentating on how this will impact the RBA’s August rate decision.
Surging inflation is the motivator for the RBA’s recent rate hikes, but the rate of unemployment is also a major determinant of the Board’s decisions. With interest rate rises top of mind for business operators, especially those considering new truck purchases, these latest stats are worth considering. Considering in regard to getting those purchases finalised ahead of further rate rises and in regard to the impacts low unemployment has on business in general.
June Employment Statistics – Statement by ABS
The employment figures in Australia are compiled by the Australian Bureau of Statistics and the details released via a statement. The seasonally adjusted rate of unemployment for the period is 3.5%, the lowest since a 2.7% rate was recorded for the period to August in 1974. At that time stats were compiled quarterly whereas now they are monthly.
Bjorn Jarvis, the Head of Labour Statistic at the ABS reported that the rate for women sits at 3.4% and 3.6% for men. Both the lowest since 1974 and 1976 respectively. Mr Jarvis notes the June fall as the eighth consecutive drop in the unemployment rate. He said this employment growth follows the lifting of restrictions as a result of the late 2021 COVID outbreak.
Employment growth is notably better even compared with rates prior to the pandemic. On a state comparison, WA was the only one to record a rise, 0.3%, while QLD was 0.1% down, VIC 0.5% down and NSW posted a 0.7% drop in unemployment for the reporting period.
A key point for businesses to note in the ABS statement is in regard to the hours lost due to workers off with illness. This is reported as very high and comes at a time of high flu and COVID cases.
Businesses seeking to safeguard continuity in operations will no doubt be paying heed of this point and taking steps to ensure COVID safety procedures are followed. The HVIA recently released a statement in this regard after attending a high level taskforce meeting which included Paul Kelly, CMO.
Interest Rates and Low Unemployment in Context
Employment figures are taken into account by the RBA Board when making its decisions around cash rates. In recent statements, RBA Governor Lowe mentioned that upcoming data releases would be considered when the August decision was made. Compare Truck Loans & Finance Options From Major Lenders to find the best financial solutions for your needs.
As mentioned above, the figures are being seen by economists and experts in the field as an indication that the RBA could call a much larger rate rise in August. The figures reflect the tightness in the labour market, a factor which is constraining supply for many businesses and as such adding to inflation.
The cash rate has already increased by 1.25% in just 3 months, and the ANZ, for one, has forecasted that we could see a further 2% in rises before the end of 2022. As we've seen with the May, June, and July RBA rate rises, our truck loan lenders react with their own rate rises. Some have actually been raising rates prior to RBA announcements. Thus is the take on the current rate scenario.
Key Take outs for Truck Operators
As a business operator what are the key messages from these latest employment figures?
For starters, it’s going to continue to be tough to fill job vacancies. Low unemployment means there are less workers available to fill jobs. For many operators, having to continue to operate with a reduced workforce has meant issues in taking on more work and possibly achieving desired outcomes.
The high levels of illness leave is a reminder that COVID-safe precautions need to be followed along with booster and vaccinations to ensure key people, possibly owner-operators, are not forced off the road due to illness.
For those considering new truck purchases with finance, the message is loud and clear. Interest rates are set to increase further. So the focus should be on achieving cheaper interest rates through a broker-style lender such as Truck Finance Broker Australia - Jade Truck Loans, expediting purchases to beat the rises and ensuring you are optimising the available tax measures to achieve the most cost-effective solution.
Contact Jade Truck Loans on 1300 000 003 to discuss cheaper interest rate truck loans.
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