BIS still bullish on employment, rates

by Adam Smith31 Jan 2012

Australia's ageing population won't hit the labour market as hard as anticipated according to one forecaster.

BIS Shrapnel has put forth a bullish outlook for employment over the coming decade, and said baby boomers are set to remain in the labour force for longer. With participation rates up, the forecaster has again predicted that unemployment will fall to around 4% within the next decade.

"Over the next few years, increased participation rates for most age brackets is expected to be the dominant factor, countering the effect of baby boomer retirement and pushing up the aggregate participation rate," BIS senior economist Tim Hampton said.

The company has again predicted that a tightening labour market will see the Reserve Bank begin to move upward on rates. In November, managing director Robert Mellor told Australian BrokerNews a pickup in the labour market would stave off any further rate cuts and move the RBA toward a tightening bias. BIS Shrapnel has now conceded the likelihood of a February cut, but said rate hikes will return at the end of the year.

Related stories:

Flat period for employment: BIS Shrapnel