Good news on wages and jobs equals bad news for interest rate worriers

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.

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