For those that were hoping that the RBA may further ease off on interest rates rises may be disappointed according to comments from some analysts and economists based on the latest jobs figures. Based on remarks delivered by the RBA Governor Philip Lowe following the November RBA Board meeting, the Board is conscious of the impact of rising rates on households at the same time as rising prices are putting pressure on budgets. There was also a mention of easing back on the size of rate rises. Hence the 0.25% cash rate increase in November rather than 0.5%
These comments may have been reason for some to expect, or at least hope, that the RBA would ease off further when it meets in December. But the latest jobs figures as released by the Australian Bureau of Statistics show yet another drop in unemployment by 0.1% from 3.5% to 3.4%. The latest unemployment figures strengthen the prospects of more RBA interest rates rises as soon as December with significance for lending including truck finance. Many analysts are expecting the RBA Board’s 6 December decision to be a further 0.25% rate rise.
The jobs figures and the September quarter wages growth data may also have significance for business operators in regard to filling positions and costs.
ABS Jobs Figures Statement
The ABS released the latest jobs figures on 17 November which cover the October reporting period. The figures show a decrease in unemployment from 3.5% to 3.4% while the participation rate was steady at 66.6%. The underemployment rate also remained steady at 6%.
The ABS’s Head of Labour Statistics, Mr Bjorn Jarvis, said the unemployment rate for men dropped by 0.3% to be at the lowest rate, 3.2%, since November 1974 while the rate for women remained steady. In regard to hours worked, Mr Jarvis noted that the number of people that worked less hours as a result of sickness was in the vicinity of one third more than was usually recorded for October. But not the 2-3 times more than was recorded in the earlier periods in 2022.
The floods and bad weather that impacted NSW, VIC and TAS during the reporting period are also seen as contributing to the reduction in hours worked. The underutilisation rate also fell to its lowest since March 1982. Mr Jarvis said this reflected the fewer underemployed and unemployed people since March 2020. These rates being about two-thirds of previous figures.
In regard to trends, Mr Jarvis said that employment continues to show growth, the actual rate of that growth has actually slowed to a level under the long-term average.
The ABS also released the Wage Price Index (wages growth figures) for the September quarter in the past week. Data which may have significance to business operators in regard to wages bills and operational costs.
The ABS data reveals a 1% increase in wage growth for the quarter and 3.1% annually. Ms Michelle Marquardt, the ABS Prices Program Manager said that the data was the highest growth on a quarterly basis for hourly wages since the 2012 March quarter. She said the growth was mainly drive by private sector wages.
Ms Marquardt said that pressure in private sector labour market as well as the Fair Work Commission decision to increase awards combined to give this wage growth increase. She said that the 3.1% annual growth rate was the highest since 2013 March quarter.
Significance for Lending
This release of the latest data – unemployment figures and wages growth, are seen as indicating strength in the economy despite facing a high rate of inflation and global issues which may indicate that a downturn could be imminent. That strength and the continuing fall in unemployment are seen as strong indications that the RBA will move on rates, as it has already indicated, at the Board’s December meeting.
When considering the lending landscape, it's important to note that lenders are known to react to RBA rate increases, and in some cases, adjustments can even precede the publication of such data. Delving into the realm of truck finance, our accreditation spans across multiple lenders, encompassing both traditional institutions and non-bank lenders. The manner in which each lender reacts to market shifts varies significantly, underscoring the importance of our broker-style services for operators in search of new truck finance. Through our extensive network and adeptness at swiftly pinpointing the lender offering the most competitive rate at the juncture of the finance application, we play a pivotal role in shaping the overall loan scenario. This proactive approach can significantly influence cash flow dynamics throughout the entirety of the finance term. Compare Truck Loans & Finance Options From Major Lenders to make well-informed decisions about your financial choices..
The consideration of rising costs, driven by labour market competition and the potential effects of elevated rates, underscores the significance of securing the most competitive interest rates when the need for new truck loans arises. It's important to recognize that even a slight variance in an interest rate can translate into a considerable sum over the entirety of, let's say, a 7-year loan term. Interest Rate Determining Factors play a pivotal role in this equation, emphasizing the need to meticulously assess and select the optimal financing options to effectively manage costs over the long haul.
For those hoping for some respite in rate rises, the December meeting will be the last RBA Board meeting regarding rates until February 2023 as the Board does not meet in January.
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