When the lift in non-mining investment is also taken into account, there appear to be very few downside risks to Australian growth in the year ahead, even allowing for a possible tight budget in May.
Another quarter or two where GDP growth runs at a 3 per cent plus growth pace, which is likely given the hard data of recent times, would signal not only stronger demand for labour, but would suggest that some of the building inflation pressures over the past half year would also be magnified.
This is where the RBA is playing a dangerous game in refusing to move monetary policy towards neutral – ie, starting the process of hiking the cash rate to ensure its inflation target is not blown out of the water. A 25 basis point rate hike now, followed by another in a few months, for example, would hardly derail the growth momentum in the economy.
But a rate hike would certainly signal the RBA's seriousness in meeting its inflation target and would give it a bit of wriggle room in either a scenario of very strong growth (thankfully we acted early) or an economic decline (let's take back those hikes and no damage done).
Add to that rampaging house prices – prices are up 1.5 per cent in the first two weeks of March and are now 2.7 per cent up for 2014, year to date – and the impediments to the RBA hiking interest rates are scarce.
On the contrary, a clear turn in the labour market, as evident in today's data, suggest the RBA will get smart and will start a rate hiking cycle in the next few months.