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Some mixed news on the economy today – it suggest that the strong start to 2014 may have edged off a little, but that a resurgence in credit growth and on-going house price inflation are issues that will test the RBA in the months ahead. For now, with the economy rolling along with uneven pressures, the RBA is set to keep interest rates on hold next week and probably for some months beyond.
Credit growth was upbeat, with a monthly rise of 0.7 per cent in June, which was the largest monthly rise since March 2008. Borrowers are back in town! This means that annual credit growth leapt to a 5 year high of 5.1 per cent. This is probably the most important indicator for the RBA today – borrowers are ramping up their credit at the same time lenders are willing to extend that credit. Another few months of these sorts of increases and the RBA will not only be moving to a tightening bias but it will be delivering rate hikes to cool the credit lift off.
One consequence of the Abbott government's proposed work for the dole scheme might be to increase the number of people unemployed, as measured by the Australian Bureau of Statistics.
From July 2014, the ABS is changing the definition of "active" job search. This change is to bring the ABS into better alignment with international standards. The ABS includes an 'active' job search criteria to define the unemployed population. That seems sensible.
But what is 'active' job search?
According to international standards and those being adopted by the ABS, "active' job search steps are those which put a person in contact with prospective employers for work, either directly or through intermediaries (such as employment services, agencies or recruiting firms), or represent steps towards 'self-employment".