Case Builds For Rates To Rise Again

The Age

Thursday January 10, 2008

Tim Colebatch, Economics Editor

IN 1992, Australia had 25 unemployed for every job vacancy. Today this ratio is edging down towards 2.5 unemployed for every job offering - increasing pressure on wages and interest rates.

The Bureau of Statistics and a new employer survey yesterday continued to pile up evidence that the economy has been heating up as retail sales surge, job vacancies soar to record levels and employers predict a quickening in the growth rate of wages and prices.

The figures and the survey add fuel to the case for the Reserve Bank to impose another interest rate rise.

But whether it does so will depend mainly on what level of inflation was recorded in the December quarter, which the bureau will publish in just under two weeks.

Retail sales rose 0.8% in November, even after seasonal adjustment, and in trend terms were running 8.1% higher than a year earlier.

A new survey by SAI Global and the Australian Chamber of Commerce and Industry found that 72% of employers expected higher prices ahead, the biggest percentage in eight years, and 55% expected to have to pay higher wages, the biggest percentage in the 10 years of the survey.

Not surprisingly, 91% said they expected higher interest rates ahead.

Financial markets are expecting at least one rate rise, and possibly two, in coming months.

The bureau reported that in November 183,400 jobs were vacant in Australian workplaces. Despite immigration expanding to record levels to try to fill these jobs, the number of unfilled vacancies expanded another 13% in the past year, and by 37% in the past two years, as employers could not find the kind of workers they were looking for.

Bureau figures show there are now five times as many jobs vacant as there were 15 years ago, when Australia was emerging from the recession and only 36,900 jobs were unfilled. But the number of people unemployed has almost halved since.

Increasingly, the unfilled jobs are not restricted to skilled areas, but are growing across the board.

In November, there were 41,100 jobs vacant in real estate and business services, 35,500 in retailing and 12,700 in cafes and restaurants. By contrast, there were 5200 jobs vacant in mining, 6900 in construction, 15,200 in health and welfare and 16,900 in manufacturing.

One reason why employers have problems in filling vacant jobs is that Australia invests very little in retraining its unemployed with new skills. Organisation for Economic Co-operation and Development figures show Australia is near the bottom of the rich world in spending on training for the unemployed.

Victoria was an exception to the rapid growth in retail sales.

The bureau estimates that while the trend level of retail sales has shot up by 12% in Queensland and 8% nationally in the past year, in Victoria it rose just 5.4%, as Victorians saved their tax cuts instead of spending them.

The World Bank forecast overnight that global growth will be slightly slower this year, as Asia increases its output by almost 10%.