Analysts are predicting official interest rates may hit six percent by the end of 2010 as the economy continues to grow.
TD Securities senior strategist Annette Beacher said the latest unemployment figures show the economy is speeding up, putting upwards pressure on inflation and therefore on interest rates.
“As data like (the jobs report) starts flowing through, there is a higher probability of them lifting to six percent cash rate than there is of four percent,” she said.
Beacher added that there is a risk the Reserve Bank of Australia (RBA) will push the cash rate from its current setting of 3.75 percent, through the “neutral” range of 4.5 to 5.0 percent, and into restrictive territory by the end of the year.
According to economist at financial markets research group 4Cast, Michael Turner, low unemployment, or low capacity, at the start of an economic growth cycle could push inflation higher.