Rate rise may now be nearer

The first rise in interest rates in eighteen months appears nearer as more evidence of economic resilience surfaced this week. The Reserve Bank’s quarterly monetary policy statement revealed few surprises, reiterating the Bank’s recent view that it expects inflation to unwind by mid year taking off some of the pressure for a rate rise. However, the latest figures on jobs and consumer sentiment are positive for growth. The creation of 70,000 full time jobs in January is a healthy offset to successive falls last year and eases concerns that large numbers of jobless might drag the economy down this year. Another 30,000 part-time jobs on top makes for a very positive result (even though a surge in new job seekers entering the workforce bumped the unemployment rate up to 7 per cent). Meanwhile, the Westpac-Melbourne Institute measure of consumer sentiment rose by 0.6 per cent this month, the fourth consecutive monthly increase, taking it to its highest level since 1999. It would be premature to draw too many conclusions from just one month’s job figures, but if the next few months confirm a return to jobs growth as the ANZ job ads series suggests, a rate rise in mid year may be possible.