Each way bet for rate cut
The case for a rate cut today may have eased, with the latest data showing steady growth in the number of job advertisements.
According to the ANZ Job Advertisement Series, the number of ads on the internet and in newspapers rose six per cent month-on-month – the largest increase since February 2010.
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The rise in job advertising was driven by a 6.4 per cent rise in internet job advertisements to a level 1.4 per cent higher than a year ago.
Speaking about the results, ANZ head of Australian economics and property research Ivan Colhoun said the tentative improvement in job ads was very encouraging and being driven by acceleration in the mining regions of Australia.
"This month's job ads data if sustained in coming months suggests any rise in unemployment should remain very modest," Mr Colhoun said.
"Against this local backdrop and that of a persistently weak (but not worsening) global economy, we have forecast that the RBA will need to cut interest rates by 25 basis points in Q1, most probably in March. Inflation is well contained and the economy can afford to grow a little faster.
"Beyond March, if we see further confirmation that job ads have stabilised, this will likely be important for monetary policy expectations. In particular, we will be less likely to see further interest rate cuts and the market will need to remove some of the aggressive easing profile built into rate curves."
Yet declining building approvals - which fell for the third time in four months at the end of 2011 - should be reason enough for the RBA to cut rates, the Housing Industry Association (HIA) said last week.
“The new home building sector is a key indicator of the health of the domestic economy and has a significant multiplier effect in terms of output and employment,” HIA chief economist Harley Dale said.
“New housing activity doesn’t need to fall further, that situation can be averted. Such aversion requires further interest rate cuts starting next week, full pass through of those rate cuts by the banks, and government measures to both stimulate new home building activity and reignite action to address the high and inefficient tax base which applies to new housing.”