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RBA content but watchful on jobs, housing

AAP logoAAP 4/11/2016 Peter Trute

Jobs growth remains a concern for the Reserve Bank, which has noted a rise in part-time work could see people working more hours without improving the unemployment rate.

The RBA gave a relatively upbeat assessment of the economy in its latest Statement on Monetary Policy, maintaining its forecasts for economic growth and inflation, and indicating it is content with the current cash rate of 1.5 per cent.

Unemployment and jobs growth were a focus of the quarterly statement, as was the state of the property market.

The central bank said indicators for the labour market have been mixed, with a better-than-expected drop in unemployment in the past year a positive, but a fall in the participation rate and an increase in underemployment complicating the picture.

"The ABS measure of underemployment has remained relatively high, consistent with employment growth having been driven by part-time work," the RBA said.

Growing demand for labour could be met by giving more hours to part-time workers, it said.

"This could see total hours of employment increase without a reduction in the unemployment rate," the bank said.

Underemployment also posed a potential impact on continuing low wage growth, the RBA said, by implying more spare capacity in the labour market "than indicated by the unemployment rate alone".

The RBA also targeted the housing market - in particular a possible oversupply of apartments in inner-city areas - as a dampener on consumer spending.

A strong pipeline of upcoming dwelling investment should support growth in the sector for the next year or so, the bank said, but the outlook beyond that period was uncertain.

"There is concern about the risk of an oversupply of apartments in specific geographical areas, such as inner-city areas of Melbourne and Brisbane," the RBA said.

While housing supply has been absorbed largely by population growth, a failure of demand to keep pace with supply would put downward pressure on housing prices and rents and increase the risk of off-the-plan buyers failing to settle their purchases, the bank said.

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