Speaking at the CBA 2024 Global Markets Conference in Sydney, Hauser highlighted that the “strikingly high participation” in Australia’s labour market – both compared to the country’s own historical levels and to most other nations – has been a surprising development.
In September, over 64,000 new jobs were created – roughly 50 per cent more than even the most optimistic forecasts. Commenting on this unexpected surge, Hauser admitted the RBA was “a bit surprised”.
While unemployment is aligning with the bank’s central scenario, he emphasised that the broader economic landscape remains complex.
“We’re data dependent, but we’re not data obsessed,” Hauser emphasised, underscoring the need to assess incoming data, including inflation figures, within the broader economic context.
As the RBA continues to assess key indicators, Hauser suggested that September’s robust employment numbers could signal that companies are hiring in anticipation of stronger future economic conditions, despite the present uncertainties.
Unwilling to speculate on the RBA’s next policy move, Hauser said that any prediction now would likely be premature, with the upcoming quarterly inflation data still pending.
Interviewing Hauser was CBA’s Gareth Aird, one of the few economists still predicting rate cuts this year. However, earlier this month, Aird conceded that September’s unexpected job surge has cast doubt on his forecast for the RBA to begin easing monetary policy in December.
“Overall, the recent labour market data does not strengthen the case for the RBA to commence normalising the cash rate this calendar year. Indeed, at the margin it weakens it,” Aird said. “That means the conviction we have in our call for a 25 bp December cut to the cash rate has dipped today.”
China a key focus for the RBA
Houser noted that the RBA is closely monitoring developments in China, particularly with speculation growing around the size of the recently announced stimulus. He emphasised that Australia’s long-term economic trends are often shaped by external events, highlighting the importance of tracking global factors to predict domestic outcomes.
“It’s important, I think, in Australia to maintain a focus on the fact that we are an important trading economy as well as a home-owning economy. I know that consumption is 50 per cent of the GDP or thereabouts, but if you look at the long sweep of history of Australia, the periods of success and the periods of relative failure have tended to coincide with global trade cycles,” the deputy governor said.
“And it’s not obvious that that is going to change in the future.”
Australia ‘freakishly similar’ to Norway
In a broader comparison, Hauser drew parallels between Australia’s monetary policy and that of Norway, describing the two countries as “freakishly similar”.
Norway’s central bank, Norges Bank, raised its key interest rate from 0 per cent to 4.5 per cent in just over two years – a trajectory not unlike Australia’s, where the cash rate is currently at 4.35 per cent after 13 rate hikes since late 2021.
Much like the RBA, the committee of the Norges Bank still believes that a restrictive monetary policy is still needed to bring inflation down to target within a reasonable time horizon.
