A strong rebound in retail spending during the September quarter, and signs that the construction industry has turned a corner, back the Reserve Bank’s belief that the recovery from recession is under way.
However, employment growth is weakening – a key factor behind the central bank’s decision to cut the cash rate and other key rates to a record low 0.1 per cent, while taking on a massive $100 billion bond buying program.
Payroll jobs fell 0.8 per cent in the fortnight ending October 17, following a 0.9 per cent drop in the previous two weeks.
Compared to the beginning of the coronavirus pandemic in March, payroll jobs have fallen 4.4 per cent, the Australian Bureau of Statistics found.
Westpac senior economist Justin Smirk calculates official labour force figures for October, due later this month, will show a 30,000 fall in jobs.
Other data showed while retail trade fell 1.1 per cent in September, turnover for the September quarter jumped 6.5 per cent, a solid result for the economic growth calculation due in December.
“This confirms that outside of Victoria, where volumes fell 4.2 per cent as a result of the lockdown, the recovery in household spending is well under way,” BIS Oxford Economics chief economist Sarah Hunter said.
Cutting the cash rate on Tuesday, RBA governor Philip Lowe said the economic recovery is up and running and the September quarter national accounts will show positive growth.
The construction industry is another sector on the mend, buoyed by house building and less pronounced declines in apartment and engineering works.
The Australian Industry Group/Housing Industry Association performance of construction index rose 7.5 points in October to 52.7, indicating a mild expansion in the sector.
The index has breached the 50-point mark for the first time since 2018.
HIA executive director Geordan Murray said low interest rates, government grants and other fiscal stimulus measures were lifting demand for detached housing.
“These are positive signs that policy settings are working to generate employment throughout the initial phase of the economic recovery,” Mr Murray said.
Dr Lowe said with Australia facing a period of high unemployment, the central bank was committed to doing all that it could to support the creation of jobs.
The cut in the RBA’s cash rate would save more than $30 a month on a $400,000 variable rate mortgage if passed on in full by retail banks.
But the nation’s two biggest banks, Commonwealth Bank and Westpac, have instead cut their fixed-rate home loans and some business loan rates and left their variable rates unchanged.
The other two major banks have so far remained silent.
However, a handful of smaller banks have cut their variable rates from between 0.1 per cent and 0.2 per cent with immediate effect.