Jobs and mortgage figures point to further rate rise

The stellar performance of the jobs market and the resilience of home lending means that a further interest rate rise in April will be under serious consideration by the Reserve Bank. But it may be that the RBA holds off to await evidence of just what impact the March rise has had.

Home lending figures for January suggest that activity in the housing market continues to bubble along in the midst of cooling house prices. The number of owner-occupier loan commitments increased a small 0.5 per cent, continuing a recovery underway since mid last year. If you take out the numbers of those merely refinancing an existing loan arrangement, the increase was 1.1 per cent.

So people are still out there borrowing, in part attracted by falling prices no doubt. But these figures of course pre-date the interest rate rise and the impact on borrowers is one thing the RBA is keen to gauge. The record plunge in consumer sentiment for March is clearly heavily reflecting this news around at the time of the survey. Coming on the back of the interest rate rise and low economic growth figures the 16 per cent fall in the index is not surprising.

These confidence readings can be volatile and overstate the impact of bad economic news but it should be recognised that vulnerability to rate rises is high and one or two rate rises should be enough to bite well and truly and give the RBA its desired effect.

Meanwhile, the employment market continues its stellar run with another 38,000 new full time jobs created in February. But the forward indicators on the jobs market suggest the long predicted peak in job creation may be near. The ANZ job ads survey fell again in February while the federal Department of Employment's numbers have had jobs turning down for some time.