Jobseekers can be confident that the rising unemployment rate does not have far to go before it starts to fall, the boss of the Reserve Bank of Australia has told a parliamentary committee.
RBA governor Glenn Stevens said that while the jobless rate had been edging higher for some time, he expected unemployment to peak later this year not too far above the current level. The unemployment rate in January hit a 10-year high of six per cent, and most forecasters, including the RBA say it will go higher.
“Unemployment will rise further; I would hope not too much further,” he said in Sydney. “I’d say the unemployment rate will edge up a little bit further yet before we see it peak some time this year.”
In recent months, new data has shown that economic growth has been strengthening but employment growth has still been quite weak.
Earlier this week, new data showed that Australia’s economy grew by 0.8 per cent in the December quarter, well ahead of expectations.
Gross domestic product, which measures the output of the economy, rose 2.8 per cent through 2013, and grew 0.8 per cent in the December quarter.
Mr Steven was asked how long its takes the labour market to respond to changes in economic activity.
“Output leads employment. I’d say that would be true in the future and I’d say, probably, one to two quarters,” he said.
Mr Stevens re-affirmed the RBA’s forecasts that economic growth will soon pick up and get above three per cent.
He also played down the December quarter spike in inflation.
The consumer price index (CPI), a key measure of inflation, rose 2.7 per cent in the year to December.
“We’ve had a little bit faster flow-through of the affects of the exchange rate,” the RBA governor said.
Economy remains in good shape
“For some time, our view has been that growth has been running below its trend pace,” he said in his opening statement.
“The national accounts released a couple of days ago don’t significantly change that assessment.”
He said the drivers of growth were shifting and the decline in investment spending by mining companies would accelerate over the coming year.
“Business investment spending outside mining, which has been very low indeed, is bound to pick up at some stage,” he said.
He said dwelling investment activity would, clearly, rise strongly over the period ahead.
The public hearing was the first of two he makes each year.