RBA warns of rise in unemployment rate

Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)

The Reserve Bank of Australia has warned the unemployment rate is expected to increase in the near term due to the lockdowns in parts of the country which will see the economy contract in the September quarter.

This is largely the result of the lengthy virus lockdown in Greater Sydney and regional NSW areas.

Last month's lockdowns in Victoria and South Australia will have also left a negative mark, as will the current restrictions in Queensland.

"The economic outlook for the coming months is uncertain and depends upon the evolution of the health situation and the containment measures," RBA governor Philip Lowe said in a statement.

"Beyond that, the bank's central scenario is for the economy to grow by a little over four per cent over 2022."

Dr Lowe also expects the jobless rate will resume its downward trend, reaching 4.25 per cent at the end of 2022 and four per cent a year later.

The unemployment rate fell to a decade low of 4.9 per cent in June.

The central bank left its key interest rate policies unchanged at Tuesday's monthly board meeting, including the cash rate at a record low 0.10 per cent.

Dr Lowe reiterated that in an environment of rising housing prices and low interest rates, the bank is monitoring trends in housing borrowing carefully and it is important that lending standards are maintained.

The central bank may draw some comfort that demand for home loans and applications to build homes are falling.

New Australian Bureau of Statistics data shows the value of new home loans fell 1.6 per cent in June to $32.1 billion. For owner-occupiers, loans fell by 2.5 per cent to $22.9 billion.

"While this was the largest fall since May 2020, owner-occupier commitments remained 76 per cent higher compared to a year ago and 64 per cent higher than pre-COVID levels in February 2020," ABS head of finance and wealth Katherine Keenan said.

The number of home building approvals also fell 6.7 per cent to 18,911 in June, including an 11.8 per cent tumble in private sector houses to 12,037.

This was the third consecutive monthly decline reflecting the unwinding of pandemic stimulus measures, such as HomeBuilder, the ABS said.

Unsurprisingly, confidence among Sydneysiders fell sharply in the past week following the extension of the NSW virus lockdown to the end of this month.

However, Australians have got a spring back in their step in other parts of the country after restrictions were eased in Victoria and South Australia.

Overall, the weekly ANZ-Roy Morgan consumer confidence index a pointer to future household spending rose 1.1 per cent after two weeks of hefty falls.

Confidence slumped by seven per cent in Sydney, but was partly offset by a two per cent rise in Victoria and a 2.9 per cent increase in South Australia.

Sentiment in Brisbane was also up 2.7 per cent, but the majority of the survey was completed before the three-day lockdown in southeast Queensland was announced, ANZ head of Australian Economics David Plank noted.