(14 January 2010 – Australia) Australia’s unemployment rate has dropped to 4.98 percent, the lowest level in two years.Data from the Australian Bureau of Statistics shows that the official rate dropped to the new low in December, suggesting that the labour market is tight and likely in become even tighter.
The low unemployment rate will also put upward pressure on wages and inflation, possibly spurring on further interest rate rises.
But despite the latest data, HSBC chief economist Paul Bloxham remains bullish that the Reserve Bank will keep rates on hold until at least the second quarter on 2011.
“We are not reading much into the employment growth in December,” Mr Bloxham said.
“We do expect further tightening of the labour market, putting upward pressure on inflation. But we continue to expect that the next increase in interest rates will be in Q2 2011.”