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The chance of further rate rises has increased as economic conditions continue to improve
This upswing in demand should see Australia’s total earnings from exports soar 15 per cent this year, according to the Australian Bureau of Agricultural & Resource Economics.
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The surge in Asia’s appetite for Australian minerals has helped strengthen Australian business confidence, with the latest figures from the NAB Confidence Index showing a 4 point gain to match the seven year high recorded in November last year.
Business conditions have also improved, climbing five points to eight, reflecting better trading conditions and employment opportunities.
In line with improving business conditions, employers added 194,600 jobs in the five months through January, the biggest increase in more than three years, driving unemployment to a low of 5.3 per cent in February 2010.
National vacancies advertised in newspapers and on online averaged 159,778 per week in February, according to the latest ANZ Job Advertisement Series – just 2.3 per cent lower than the same month a year earlier.
And forward indicators appear positive for more employment growth through the first half of 2010.
Gross Domestic Product (GDP) grew 0.9 per cent in the December quarter of last year – the fastest growth in almost two years.
The brisk growth took the annual pace to 2.7 per cent, close to the historical trend growth of 3 per cent, supporting the RBA’s decision to hike interest rates.
Moreover, a surging GDP increases the scope for RBA governor Glenn Stevens to raise the central bank’s benchmark rate next month for the fifth time in six meetings.
That said, markets remain cautious, with the prospect of an April rate hike priced in at just 22 per cent.
NAB’s chief economist Alan Oster expects the RBA to increase Australia’s overnight cash rate target by 25 basis points in the May, August and November meetings.
