Australia's Jobless Numbers Point to RBA Rate Cuts
Australia's central bank is again under pressure as to how it will play the key benchmark key rates in the near term as unemployment and inflation rates rose in recent weeks.
Analysts are torn as to the Reserve Bank of Australia's next fiscal policy decision, but industries are unanimous for a cutback on interest rates to encourage more spending among consumers amidst the rijobless.
According to Goldman Sachs Group Inc's economist David Colosimo, the RBA would likely ease monetary policy by as much as 50 basis points before the end of the year.
This change in economic outlook among economists like Goldman Sachs reflects the anxiety that there are important elements in the Australian economy that are vulnerable and are not directly benefiting the mining boom in some states.
According to MarketWatch.com, markets are already pricing up to 150 basis points of rate cuts in the next year.
The weak job figures, according to Goldman's Mr Colosimo, is the final trigger that has altered their earlier forecast of a rate tightening measure in the first quarter of 2012.
CMC Markets sales trader Ben Taylor said in a commentary that investors in the Australian stock market saw the volatility as a sign to take long positions on the increased chance of an interest rate cut in the coming months."
"Our relative outperformance of US and Europe has shown Australia is in a much different situation from other developed nations. Whilst I don't believe we will decouple from the US, I believe the correlation with the US will deteriorate as we have both fiscal and monetary leverage to our advantage," Mr Taylor said.
"The weaker jobs data follows tepid consumer confidence and turbulent global markets which have sparked fears of another major downturn of a scale last seen in 2008. Commodity prices are weakening too, hinting at possible weakness in the Australian economy's biggest defence, resource exports to China," said MarketWatch.com.
Goldman's view follows through Westpac Banking Corp.'s chief economist Bill Evans's statement last month that the RBA will cut by 25 basis points later this year with further easing in 2012.
Others are closing in on this bet. Citi, UBS and more are now openly raising the spectre the RBA may ease for the first time since April 2009, an easing cycle that saw it cut a large 425 basis points during the 2007-2008 financial crises.
The RBA has held off any rate adjustments for seven consecutive meetings. Rates in Australia have remained at 4.75 percent.