Rates set to stay on hold as job market brightens

Analysts predict interest rates will be frozen by the Reserve Bank today, following new figures showing the number of jobs advertised in March rose for the eleventh consecutive month.

The RBA is tipped to maintain the cash rate at 4.75% today, although industry commentators are predicting a hike in the third or fourth quarters of 2011.

The latest ANZ job advertisements series reveals total job advertisements online and in newspapers increased by 1.3% in March, making it 19.2% higher than in March 2010.

While newspaper jobs fell 0.4% in March, internet job ads rose 1.4%. Most notably, Queensland jobs are 15% higher than a year ago, falling only 2.9% since February.

Newspaper job ads rose 6.1% in Victoria, 2.1% in the ACT and 19.8% in the Northern Territory. However, they fell 4.9% in WA, 1% in South Australia, 11% in Tasmania, and 1.7% in NSW.

Ivan Colhoun, ANZ head of Australian economics and property research, says the increase in jobs ads comes despite diverse rates of economic growth between regions and industry sectors.

“In trend terms, the rate of increase in job advertising has moderated to around 1.4% per month in recent months, which is slower than in the early phase of the recovery from the global financial crisis,” Colhoun says.

“At face value, this might suggest a continuation of the more moderate rates of employment growth that have been witnessed in recent months.”

The Australian Bureau of Statistics is releasing March employment data on Thursday, with ANZ expecting a rise in employment of 24,000 and only a slight decline in the unemployment rate to 4.9%.

The market forecast is also for a 24,000 rise in employment, but for an unchanged unemployment rate of 5%.

Colhoun says the broadly stable unemployment rate of 5% since December is indicative of an economy growing around trend.

“This should not generate significant broad-based wages or inflationary pressures and would be consistent with the RBA retaining an unchanged interest rate setting for some time,” he says.

“Higher oil and food prices in recent months, however, are troubling central banks around the world and will also be weighing on the Reserve Bank’s mind.”

“ANZ continues to expect a further modest tightening of monetary policy in the second half of this year.”

The TD Securities – Melbourne Institute monthly inflation gauge jumped 0.6% in March, tripling the 0.2% rise in February and making it the biggest monthly increase since January 2010.

The jump was driven by the escalating cost of food and petrol, as a result of Queensland’s natural disasters, and political unrest in Libya.

The report says flood-driven rises in the prices of fruit and vegetables, fuel, and alcohol and tobacco were the biggest contributors to the price rises in March.

Due to an ongoing lack of supply from Queensland, the prices of fruit and vegetables rose by 11.3% in March, following a 5.1% rise in February, while the price of automotive fuel rose by 5.3% in March, building on the 1.6% February rise.

As war broke out in Libya, which produces 2% of the world’s oil, the price of crude oil was also pushed up.

Annette Beacher of TD Securities expects headline inflation to increase by 1% in the March quarter to an annual rate of 2.8%, predicting the RBA to keep the cash rate on hold at 4.75% after its meeting today.