The Reserve Bank’s Dilemma: Balancing Inflation Control and Employment Security – Sydney Auction Clearance Rate at 64%

Week’s Key Focus

The Reserve Bank of Australia has performed well in its mission to control inflation and stabilize the economy. But the question remains: Can they help us keep our jobs in the process?

As the Reserve Bank implements a series of interest rate hikes to combat inflation, many Australians are growing concerned about the long-term effects of these economic policies. While raising interest rates can help curb inflation, it may also slow down the economy, impacting business profitability and the job market.

Currently, many households are feeling the pressure of higher mortgage rates, while businesses face increased borrowing costs, potentially leading to reduced hiring or even layoffs. In this context, people are starting to ask: Can the Reserve Bank manage to stabilize the economy while also protecting our jobs?

So far, each time inflation or employment data has been released, the nation has held its breath, only to breathe a sigh of relief afterward. For many, things have gotten a bit tougher, and for some, even harder. But inflation—our public enemy number one—is gradually retreating, and most of us still have jobs.

While the Reserve Bank may not be patting itself on the back just yet, it is cautiously optimistic about the progress so far. However, as the bank nears the finish line, maintaining the balance will become more challenging. The Reserve Bank has been laser-focused on reducing inflation and has seen some success. But the labor market is weakening, and if high interest rates persist, they could have a significant impact on jobs before we even realize it.

Professor Jeff Borland, a labor economist at the University of Melbourne, points out that while recent data indicates the Reserve Bank has made progress, there may need to be a shift in thinking soon to avoid a wave of layoffs. Borland also notes that although Australia’s inflation rate hasn’t risen dramatically compared to other countries, we need to consider whether the Reserve Bank’s policies are too focused on controlling inflation at the expense of the job market.

Compared to the U.S., UK, and Canada, Australia is in a relatively better position. One reason is Australia’s rapid response to interest rate changes, particularly as many homeowners here have variable-rate mortgages, meaning rate changes affect them almost immediately.

Although inflation is gradually coming down, Australia’s economy is still “running hot,” which suggests that the Reserve Bank has reason to stick to its current policy direction. The Reserve Bank is unlikely to rush into cutting rates unless the labor market worsens significantly or inflation consistently returns to the target range. However, job losses have life-altering, long-term consequences for those affected. To keep Australia on the “narrow path” and continue excelling at its job—without harming the economy—the Reserve Bank may need to shift its focus more toward preserving employment.

Rosella Place

Auction Results Last Week

Sydney: 1167 homes went to auction, 688 results reported, 440 sold, with a clearance rate of 64%. The total auction value was AUD 554,971,499, and the median house price was AUD 1,600,000.
Melbourne: 129 homes went to auction, 65 results reported, 42 sold, with a clearance rate of 65%. The total auction value was AUD 28,343,150, and the median house price was AUD 700,500.