The Australian economy is likely already out of recession and there should be growth ahead according to the RBA.
Those are the thoughts of RBA Deputy Governor Guy Debelle who also believes the impact of the extended lockdown in Victoria won’t have a prolonged impact.
That’s good news for the jobs market in Australia which is already showing signs of recovery over the last few months.
The most widely watched and reported measure of jobs in Australia is the unemployment rate. With the onset of COVID, the jobless rate jumped to 7.5% before settling back to where it currently sits at 6.9%.
Unemployment Rate - Source: ABS
The unemployment rate was trending lower, prior to Victoria’s second wave and if not for the prolonged shutdown, we would have likely seen the jobless rate continuing to fall.
Victoria lost 36,000 jobs in September however, the unemployment rate in the state fell 0.5 per cent to 6.7 per cent.
Around the country thought the situation is different. In the mining-focused Western Australia, conditions are good and businesses in the sector are also going well. South Australia's unemployment rate showed the biggest improvement, dropping 1 per cent to 7.1 per cent. While the states that have a large reliance on the public sector, including the ACT and Darwin are the ones that are doing the best.
Areas that are heavily reliant on tourism are the ones that are still doing it tough, which includes areas in far north Queensland.
Unemployment Rate by State - Source: ABS
On the flip side, there is also the belief that the current relatively low jobless rate is not telling the whole story.
During COVID there has been a lack of participation, particularly in Victoria where many people have been unable to look for work and are not required to in order to receive JobSeeker benefits. These figures have been keeping the jobless rate low, however as Victoria slowly reopens, jobs will return.
And it’s for that reason that the RBA is looking to continue with their policy of low interest rates.
The expectation is now that the RBA will cut rates to 0.1 per cent from 0.25 per cent at the next meeting which falls on Melbourne Cup day.
While that will take interest rates to another record low level, that might not be the end of the easing, with many economists also starting to think that rates could very well go negative.
The clear winner at the moment appears to be the property market and the RBA have made it very clear that they are not concerned at the moment about house prices increasing.
In fact, the RBA is stating that not only are interest rate going lower, but they are also likely to remain at those lowe levels for the net 2-3 years. While the Federal Government is also making it easier to access finance by winding back responsible lending laws.
The goal of the RBA has now changed from boosting inflation to now trying their best to support jobs and they recently suggested that a jobless rate under 6 per cent would be a good result in the current climate.
Interestingly, the fallout from Victoria falling into a second-lockdown might just have been the catalyst for strong growth in property prices over the next few years thanks to a period of extended low interest rates.
Last month, six of the eight states recorded price growth, with only Sydney and Melbourne, the two largest cities and the ones most impacted by COVID, lagging behind. While all the regional areas across the country continued to perform strongly.
As jobs keep coming back and now with the RBA looking to keep rates low, it looks like the next few years could be very strong for Australian residential property markets.
Rowan Crosby is a Research Contributor at Wealthi. He is a published Australian journalist with opinions on Australian real estate, worldwide stock markets and commodities. Rowan has a particular interest in small-scale property development and investing.