The jobless rate is tipped to tumble below 4 per cent – its lowest for 33 years – but economists warn it is a two-edged sword: it threatens to bring higher wages, inflation and an interest rate rise before the election.
Amid a furious national debate over housing affordability, another rate rise could anger voters with mortgages, despite the accolades that will flow to the Government for the historically low jobless rate.
The hunt for staff has led to a 36 per cent increase in the number of job ads appearing in newspapers and online over the past year, according to the respected ANZ survey of job ads, prompting this prediction from the bank's head of economics, Tony Pearson: "We believe we may well see an unemployment rate with a '3' in front of it before the end of the year."
But he added: "Policymakers will need to remain vigilant for any signs that the tightening labour market is placing upward pressure on wages growth."
A Macquarie Bank economist, Brian Redican, said a jobless rate below 4 per cent could be the point at which inflation began to accelerate. "If it did fall below 4 per cent … that could prompt the Reserve Bank to bring forward an interest rate rise to before the election," he said.
Industry groups say demand for workers is even higher than shown by the figures, because employers are abandoning advertising for staff because they know it will not work.
A survey of 1200 business executives released today by Dun and Bradstreet shows a third think wages growth will be the most important influence on their business in the new financial year, compared to just 15 per cent who say interest rates.
Businesses fear they will be forced to offer higher pay to tempt a dwindling pool of workers.
The Reserve Bank is worried workers will spend their higher wages, stimulating the economy and pushing up prices.
Financial market observers believe there is a good chance the bank will make a pre-emptive strike against inflation next month by raising the cost of borrowing to a decade high of 8.3 per cent.
The Labor leader, Kevin Rudd, promised yesterday to look at tax credits for developers offering low rent accommodation to ease the housing shortage.
The head of Restaurant & Catering Australia, John Hart, said Sydney restaurants in particular were feeling the staff squeeze. "Every restaurant, on average, could employ another person if they fronted up to the door," he said.
A survey of building and construction jobs by recruitment firm Olivier Group found demand for these workers had doubled over the year.
The jobless rate fell to 4.2 per cent in May. Federal Treasury predicted at the time of the budget in May that the jobless rate would rise to 5.25 per cent as welfare-to-work changes, which come into effect this month, force more women to seek work.
Source: SMH, 10/07/07
