Australia’s economy and property markets are riding a wave of optimism as key indicators come into focus this week. With inflation continuing to ease and consumer confidence on the rise, attention is now turning to Thursday's unemployment report for further signs of economic stability. Meanwhile, property prices continue to climb around the nation, buoyed by expectations that the Reserve Bank of Australia (RBA) will slash rates at its meeting on monetary policy later this month.
"There's a lot going on in the Australian economy, a lot going on in the global economy," Nerida Conisbee (pictured), chief economist at Ray White, told Australian Broker.
Yet, despite all the noise, the economist said the nation's central bank is "almost certainly guaranteed" to cut rates at its meeting on monetary policy later this month. "At least .25%, potentially a .50% cut, which will be welcome by many mortgage holders," she said.
But, even with most of the market — including all of Australia’s Big Four banks — expecting a rate cut, conflicting forces in the economy are keeping the outlook uncertain.
Tailwinds include falling inflation, which dipped to a three-year low during April's consumer price index (CPI) reading and is now within the RBA's target range, optimism from Prime Minister Anthony Albanese's recent reelection victory, low unemployment numbers and rising consumer confidence.
Australia's unemployment rates — the latest which are set to be released Thursday midday — were 4.1% in March, up from 4.0% the month before. But unemployment has stayed within a 3.9% to 4.1% range for the last 16 months. Some market players are predicting a slight increase in coming months. National Australia Bank (NAB) has forecasted unemployment will reach as much as 4.4% this year. Meanwhile, Westpac anticipates unemployment rates will hold steady.
That's good news for job seekers. But the nation's low unemployment figures could delay the central bank's decision to reduce rates.
Conisbee said Australia's low unemployment is "one of the factors that has kept the rate cuts from being a lot more than they otherwise could have been.
"If unemployment goes down rapidly that will obviously mean a much different decision to what [the RBA] makes. But if it remains steady, and specifically, if it starts to tick up, it will give them further reason to cut rates next week," she said.
And while both consumer and business confidence are still below optimal levels, they are on the rise. The latest Westpac–Melbourne Institute Consumer Sentiment Index rose 2.2% to 92.1 in May, while the ANZ-Roy Morgan Consumer Confidence Index was up 0.8 points to 88.3 the same month. The NAB Business Confidence Index moved to -1 in April, up from -3 in March.
Conisbee attributed the rising confidence to both the potential for added financial relief, as well as Albanese's recent win, which promised a number of housing reforms.
"It was a landslide win," she said. "So more people than not are happy about the results."
Brokers have also reported increased activity in the market, likely stemming from February's rate cut, as well as the expectations of more to come.
But headwinds persist, including looming tariff tensions and rising property prices.
"We do have rising global uncertainty; we've got a trade war, which may or may not still be in place in three months' time," Conisbee said. "Things are changing so rapidly. At the moment, we could be looking at a vastly different economic situation in a month's time.
"There are so many moving parts; there's changes every day," she added. "We're not quite sure exactly how the economy will play out this year, but there are more ominous signs in terms of slowing economic growth."
The RBA's next meeting is scheduled for May 19-20.
