The economy has taken another leap towards a full recovery after almost 90,000 people returned to work in February.
Australia’s unemployment rate fell from 6.3% to 5.8% in February – smashing economist forecasts and pushing the number of Australians with a job above 13 million for the first time since March 2020, when national restrictions threw the economy into crisis.
The Prime Minister said there are now more jobs than when the recession began.
“In less than 12 months from when the recession began, caused by the COVID-19 pandemic, there are now more jobs in the Australian economy than there were before the pandemic,” said Prime Minister Scott Morrison.
Even with the government’s JobKeeper program scheduled to end this month, economists say the impact on the labour market will be temporary.
“The next major test for the labour market will be the expiry of the JobKeeper payment at the end of March when businesses who have been receiving this payment will be required to foot the full bill for wages and salaries,” said Commonwealth Bank economist, Kristina Clifton.
“Ultimately we think that any negative impacts on the labour market will be fairly short lived. The leading indicators are pointing to continued solid jobs growth and we think that many people will be able to find a new job relatively quickly should they lose their position at the end of JobKeeper.”
The jobs figures are the latest in a slew of positive economic data releases and puts Australia’s economy on track to be above its pre-COVID level by mid-year. Speculation has been building that the RBA may be forced to raise interest rates earlier than expected to prevent the economy – and housing market – from overheating.
But in a recent speech, RBA Governor Philip Lowe said that’s “not an expectation” he shares, reiterating interest rates will stay on hold until 2024 “at the earliest”.
Low interest rates boosting housing market
The impact of low interest rates on housing has been a hot topic this year as the property market continues to heat up.
A new report from REA Insights found sales volumes have dramatically increased so far this year as low interest rates and an improved economic outlook give buyers the confidence to return to the market.
According to the new REA Insights Housing Market Indicators Report, sales volumes are up by a third over the first 11 weeks of 2021, compared to the same period a year ago.
“With borrowing costs at historic lows, we would expect that transaction activity will remain strong over the coming weeks,” said REA Group Director of Economic Research, and author of the report Cameron Kusher.
“The biggest challenge for the market remains the low volume of stock available for sale. However, new supply does appear to be increasing.”
The report – which analyses several key metrics including search and sales activity, views per listing, and email enquiries as recorded by realestate.com.au – also found investors are returning to the market, with enquiry from investors on realestate.com.au at its highest share since March 2020.
Investor confidence returning
Recent lending data by the Australian Bureau of Statistics revealed home loan commitments for investors rose by 9.4% in January – the largest rise in more than four years.
Investor lending has rebounded 62.4% since reaching a 20 year low in activity in May 2020, and with economists forecasting double-digit price growth nationally over the next two years, activity is set to boom.
That’s caught the attention of Australia’s financial regulators, who say they’re closely watching for any deterioration in lending standards.
Regulators clamped down on the banks during the last housing boom by introducing caps to interest-only and investor loans after buyers began taking on too much debt to secure a property.
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