Economic Insights by Clifford Bennett

Spirits lift as unemployment falls

Property Club Property Market Insights

Australia’s unemployment figures for October are out – and it’s really great news. Unemployment is down to 5.9%

There is a glimmer of hope for all the struggling families of the far-too-many unemployed. While the RBA has certainly been no help in this, the continued strong demand from China, as well as increasing tourism and education pressures are bound to be helping the lift in employment.

Australia's Unemployment Rate - October 2015

Australia’s Unemployment Rate – October 2015

 

Please, let’s not make the mistake of patting ourselves on the back here.

The PM’s honeymoon period in leadership will certainly be maintained by this number, even though it is not his work! But that’s OK, because it is all about getting the nation moving again.

British unemployment-rate

Great Britain’s Unemployment Rate

This is just the start. Notice that the UK remains well ahead of Australia with its employment trend (see chart below). We should be doing better than the UK, surely. So let’s be encouraged and work even harder.

In truth Australia continues to be rescued by China/Asia.

 

australia-unemployment-rate (1) - line graph

Unemployment Trend

This improvement in the unemployment rate, with a corresponding employment increase of 58,600, came on top of an increase in the participation rate to 65% – this is doubly positive!

It’s a positive outlook for stocks, the currency, and property. Auctions should begin to heat up again very soon throughout Australia. This probably  reinforces my long held forecast that the RBA will hold at 2.00%, the next move being up in about 12 month’s time. This isdespite the fact that rates should already have been at 1.5% for some time. The RBA getting it wrong is nothing new, nor is their foolish stubbornness.

This is the first real sign of life in the economy for some time, and deserves celebration as a call to greater effort!

 

How will this impact property prices?

For property prices though, the implications could not be clearer. This most probably means we have passed the peak in the unemployment rate in the current cycle. Fresh employment growth is quite strong. There is no doubt, that not just for those who have regained their jobs, but for every Australian family, this will be encouraging news. Confidence to make new home or investment purchases will flow through from job stability. The idea that rates may not go much lower, if at all, will also creep into potential buyer’s minds over coming weeks and months. Buying now, whatever it is you have your eye on, is probably a very good decision.

 

Clifford Bennett,

International Economist