Jobs report a mixed blessing for brokers

Australia's job market is outperforming just about every major economy in the world with one in five employers looking to hire more workers and the number of job ads being placed increasing at a never before seen rate.

The strength of the Australian jobs market will have two major effects - both of which will impact mortgage brokers.

Firstly, strong job growth and a falling unemployment rate will pressure employers to increase wages to attract the best workers. This will lead to wage growth, a key component to strong inflation, and a major concern of the Reserve Bank. The RBA will counter this by increasing rates from their historic lows to what it calls a "neutral setting" of around 4-5%.

Having interest rates at a neutral setting should not be a major concern to mortgage brokers. While it is possible that some buyers will be priced out of the market, by definition the neutral setting is aimed at neither encouraging borrowing or discouraging it.

A more important result of the strengthening employment market in Australia will be its effect on the job security of potential home buyers. Educated consumers know that interest rates fluctuate and good brokers do not encourage borrowers to bite off more than they can chew but the biggest factor in whether someone decides to make a long-term financial commitment like taking out a home loan or not is their long-term outlook on their ability to pay it off.

An improving job market will undoubtedly put upwards pressure on interest rates but it will also ensure buyers are confident of being able to pay off their home loans. Overall, the strengthening of the employment market and the Australian economy overall should work out to the benefit of brokers.