Jobs growth puts pressure on interest rates

By Mozo ·

The Reserve Bank (RBA) may be tempted to lift interest rates again early next year following the release of better-than-expected employment figures, a leading analyst has said.

Official data shows that the jobless rate fell to 5.2 per cent in November as almost 55,000 jobs were created – a trend that could boost the overall outlook for the economy.

JPMorgan economist Helen Kevans suggested that the RBA may soon be encouraged to lift the official cash rate on the back of rising wage pressures.

"If employment continues this strongly and we approach full employment in the first quarter of next year as we expect, then wages are going to go up significantly and we know the RBA gets a bit uncomfortable when wage growth hits four per cent," she told the AAP.

Ms Kevans also noted that annual employment growth is now at its highest level since 2005.

She said that such "tightness" in the labour market could force the RBA to "tighten early next year".

Earlier this week, the RBA opted to keep the official cash rate at 4.75 per cent after a hike of 25 basis points in November.

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