Though the loss of more than 31,000 full-time jobs in December 2013 has, not surprisingly, grabbed most attention, the Reserve Bank of Australia is possibly more interested in another set of numbers that came out today.
In a sign that low interest rates are having the desired effect, building activity is strengthening, improving 1.6 per cent in the September 2013 quarter to be up 5.4 per cent from a year earlier, according to the Australian Bureau of Statistics.
In the residential sector, new houses accounted for the majority of improvement – activity there was up more than 5 per cent from the September quarter 2012. This is on top of a significant 3 per cent upward revision in ABS estimates of dwelling commencements in the June 2013 quarter.
The improvement has also been reflected in measures of the value of all building work done, which rose above $21 billion in the September quarter for the first time in about two years.
The activity figures match RBA lending data, which show housing credit grew by 5 per cent in the year to last October.
Taken together, the results are adding to the pretty strong signal to the central bank that, notwithstanding December’s weak jobs numbers, it does not need to cut interest rates any further.
Before the release of the labour force data, markets had priced in a minor 7 per cent chance that the official cash rate would be lowered to 2.25 per cent at the RBA Board’s 4 February meeting.
Knee-jerk reaction might have pushed those odds a little higher since but it seems unlikely the unemployment reading will have unsettled the RBA, which anticipated the jobs market would soften through much of the coming year.
Instead, the on-going recovery in building work will have it pondering how much longer it should hold interest rates down at current levels.
Though inflation remains subdued, and talk of housing bubbles is (once again) exceedingly premature, household spending is clearly gathering some momentum. Retail sales are up, as are building approvals and home construction. Sure, job insecurity will be a not-insignificant handbrake on consumption.
But in the push and pull of economic forces, growth seems to be gaining ground, and the RBA is likely to view the 2.5 per cent cash rate as increasingly inappropriate.