The Commonwealth Bank warns that the Reserve Bank of Australia may raise interest rates again in May! Cash rate could rise to 4.1%

This article is reproduced from the WeChat public account: Sydney Today

As wages in Australia remain high and the job market continues to be hot, the Reserve Bank of Australia (RBA) may press the button to raise interest rates again.

Economists from the Commonwealth Bank (CBA) recently issued an early warning to the public, reminding everyone to prepare for a possible interest rate hike at the May interest rate meeting.

This is undoubtedly a heavy blow to struggling homeowners across Australia.By then, the cash rate may be pushed up to 4.1%, returning to the level before the Reserve Bank of Australia started a short-term easing cycle in February last year.

The Commonwealth Bank’s (CBA) salary insights lead the Bureau of Statistics (ABS). Source: Commonwealth Bank (CBA)

The Commonwealth Bank’s Wage and Labor Insights report released on Tuesday showed that 21,000 new jobs were created across Australia in January. The survey found that Australian worker wages jumped 0.8% in just three months, bringing the annual growth rate to 3.1%.

This growth momentum, which shows no signs of abating, has kept the inflation rate outside the RBA’s comfort zone.

The Commonwealth Bank pointed out in a briefing that the report tracks the real salary flows of about 400,000 bank accounts and can observe economic turning points earlier than the Australian Bureau of Statistics (ABS).

These are also two important reference indicators for policymakers and analysts to judge the current situation of the workplace and determine the direction of interest rates.

Wage growth across Australia. Source: Commonwealth Bank (CBA)

Regionally, Western Australia leads the country in wage growth, while the eastern states also continue to see solid growth.

In addition, the latest data to December shows that the unemployment rate is falling sharply, which runs counter to the RBA’s goal of curbing inflation by easing pressure on production capacity.

Belinda Allen, Commonwealth Bank’s head of Australian economics, warned that the current economy is showing signs of overheating, with limited spare capacity in the labor market and inflationary pressures remaining high.

Economist Harry Ottley added that although January data showed that the job market remained solid, weak productivity growth meant that companies faced higher labor cost pressures, which further fueled inflation.

However, there is still a glimmer of hope for the market. The Commonwealth Bank predicts that after the Reserve Bank of Australia raises interest rates in May, it is unlikely to start a new round of brutal continuous interest rate hikes.

Harry Ottley said official Australian Bureau of Statistics data and internal indicators would be closely watched over the coming months to determine whether the labor market was truly starting to cool down or was merely experiencing a brief lull brought on by fluctuations in data.

At present, its internal indicators do not indicate a substantial tightening of the labor market again.

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