The release of today’s wages data and tomorrow’s unemployment figures will either alleviate concerns about a potential interest rate hike by the Reserve Bank in June or intensify speculation about such a move. For individuals hoping to avoid further increases in their home loan repayments, low wage rises and higher unemployment rates will be welcome news.
According to the AFR, the likelihood of a rate hike by August has increased from 34% to 58%, although bond market experts predict only a 12% chance of a June rise. While economists and market analysts do not currently see sufficient evidence of the impact of previous rate increases, the government’s recent pro-inflationary budget and the likelihood of wage increases in various sectors could put further pressure on the Reserve Bank’s decision-making.
The Wage Price Index for the March quarter and the latest job and unemployment figures will be crucial in determining whether a rate hike is more or less likely in June. However, interest rate increases always have a lag effect, and it may take up to two years for monetary policy to have its maximum impact. If rates continue to rise, there is a risk that Australia could fall into recession. Despite the challenges, the Reserve Bank governor’s position comes with a million-dollar salary.
The information provided is general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances. Your full financial situation will need to be reviewed prior to acceptance of any offer or product. This article does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. Subject to lenders terms and conditions, fees and charges and eligibility criteria apply.