Job surge brings on rate rise

The chances of the first upward move in interest rates coming in May have grown with the release of March job figures showing healthy growth in employment. The declining employment market of last year now seems to have turned the corner with 105,000 new jobs created so far this year, reducing unemployment from 6.6 to 6.3 per cent last month. Concern over employment has been one of the few factors left standing in the way of a rate rise and a 0.25 percentage point increase in rates, perhaps 0.5, is on the cards early next month. A lot will depend on the March quarter inflation figure out on April 24. Working in the opposite direction however are signs the booming housing market is starting its anticipated cool off with housing finance falling 7.2 per cent in February, more than expected. This week’s figures also reveal that household debt has blown out by $50 billion since the start of last year and most of that debt is made up of personal credit and home mortgages. So, on one hand, interest rate levels seem far too low for the current upbeat level of economic activity, but high indebtedness means the RBA does not have raise rates greatly for them to bite among consumers and restrain spending.