November rate rise firms in the betting

Another interest rate rise in November now seems more likely than not given the latest jobs market growth and the revelations in what the Reserve Bank is actually thinking currently from new governor Glenn Stevens this week. The message from Stevens' speech to economists was that the chances of another rate rise in November hang on a knife edge and it won't take much to push them over the line. That push may well come from the June quarter inflation figures to be released on October 25 and what will finalise the RBA's position, as Stevens said this week: "Over the next little while, the main job is to ensure that the inflationary pressure we have been experiencing of late is successfully resisted." The inexorable rise of employment only adds to the pressure for high rates. The bumper conditions in the job market continued in September with another 36,000 full time jobs created and the unemployment rate falling to 4.8 per cent. This gives weight to Stevens' view that he thinks the last GDP figure showing sluggish economic growth understated the true picture. There are other signs to suggest growth is a bit flat (home loans for owner-occupiers, excluding renovations, fell 1.3 per cent in August) and that inflation might have passed its peak with the oil price now coming down. But this week has shown that the RBA under Stevens is leaning in the other direction. There is speculation, and some suggestion from government circles, that the RBA should hold off raising rates because of the worsening drought in south eastern Australia. Don't hold your breath. If the RBA decides that another rate rise is needed to stave off higher inflation across the economy as a whole, conditions in the beleaguered rural sector, as bad as they are, won't stop it.