Drum roll please. The economy is back! Australia’s economic performance in the March quarter was among the best in the world and the Government has timed the withdrawal of support well.
There’s great news all-round – housing prices are rising, private demand accounted for all of the growth in the March quarter, with public final demand flat. Business investment is recovering; household disposable income increased in the March quarter supported by compensation of employees (wages and salaries); and ABS analysis of the payrolls data shows that termination payments as a per cent of total wages paid look to have peaked in all sectors in the December quarter.
Of course, Victoria’s lockdown is a timely reminder not to become complacent. The roll-out of the vaccine remains critical for further easing of social distancing and opening borders, as well as remaining competitive in the global landscape.
Most experts agree the central bank won’t move rates higher until at least the fourth quarter of 2022. While the economic recovery is faster than expected, the RBA’s conditions for a rate hike are still far from being met. Australian unemployment is at 5.5 per cent, but Reserve Bank Governor Philip Lowe has said the bank wants to achieve “full employment”, or an unemployment rate below five per cent.
“The economic recovery in Australia is stronger than earlier expected and is forecast to continue,” Dr Lowe wrote in his monthly statement. “The bank’s central scenario is for GDP to grow by 4.75 per cent over this year and 3.5 per cent over 2022.”
He also referred to Melbourne’s latest COVID outbreak, and warned that: “An important ongoing source of uncertainty is the possibility of significant outbreaks of the virus, although this should diminish as more of the population is vaccinated.”
Inflation is currently also at 1.1 per cent, well below the 2-3 per cent target. So the jobs market is still a long way from full employment, wages growth at 1.5 per cent is way below the three per cent plus pace necessary to sustain 2-3 per cent inflation and in any case inflation is still well below its target zone. So a rate hike remains some time off.
As always we remind you the future remains uncertain for many reasons:
What we do know is that market fundamentals right now are helping our clients who are looking to sell. Our data tells us that our sellers who choose to sell via the auction method are rewarded with around 12 per cent higher price under the hammer than if they’d accepted a prior offer. We cleared 80 per cent of all auction stock last month, with record numbers of registered bidders. There’s a deep buyer pool for sellers to take advantage of right now. Our question remains, “What are you waiting for?”