The “dangerous cocktail” that will lead to an early rate rise

“We’ve seen a huge buildup of cash in households,” said Hogan. “That money is there to be put into the economy, whether it all happens in a matter of a few months or a year, or whether it’s a few years that it takes, we don’t know, but there is this substantial amount of money sitting there.”

He said he thought the economy would do “very well” as high demand from households led to more demand for labour.

“Things like job ads and vacancies are telling us that the demand for labour is as strong as it has ever been in Australia,” he said. “Not just better than normal, but as strong as it has ever been. The other feature of the pandemic is our closed borders. In Australia, about 60% of our new workers each year come from overseas in the form of immigration. We’ve got a potential severe labour shortage that is emerging. It’s clearly happening in certain skill sets and certain geographic regions, certain industries already.”

He said labour shortages could soon become acute as Australia reached its vaccination targets for reopening – something that could bring about a wage response.

“We’re seeing high rates of industrial action in the last few months and we’re hearing lots of anecdotes of certain skills, like in IT or engineering jobs, leading to pay rises of 20%,” he said. “These are the factors that make me think we’re going to get a quicker wage and inflation response than you would normally expect from an upturn in the economy, rather than the RBA’s assessment that it will be slower.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *