Australia’s central bank downgraded estimates for unemployment in 2022, underscoring the resource-rich economy’s continued momentum despite a sharp rise in interest rates and a jump in costs for households and businesses.
With unemployment already at a 48-year low of 3.5%, Australia’s central bank expects the rate to fall to 3.25% by the end of the year.
In May, the central bank predicted that unemployment would fall to 3.75% this year.
The downward revision comes as economists raise their forecasts for second-quarter GDP, boosted by resilient consumer spending and record trade growth.
The labor shortage is partly due to a slow recovery in the supply of skilled workers internationally.
This is expected to remain a feature of the economy for many years, with the RBA predicting it will remain at a historically low 4% at the end of 2024.
Job vacancies and advertising are at extremely high levels, with many employers reporting they are unable to attract staff, Australia’s central bank said in its quarterly economic outlook update.
The labor force participation rate is estimated to be at its highest level in 112 years.
The central bank expects average inflation to peak near 6% by the end of 2022, while core inflation will move towards 8%, a level not seen since the early 1990s.
It also predicts that economic growth will come in at 3.25% compared to the previous forecast of 4.25% in May. Growth is expected to contract further to around 1.75% in 2023 and 2024.
Source: Capital
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