Jobs and retail sales hold up in resilient Australian economy despite 2023 growth fears

Consumer prices rose 7.3% in the year to November, boosting the chances of another RBA interest rate rise in February

Australia’s economy was resilient towards the end of last year, with job vacancies and retail sales holding up, even as the World Bank joined other agencies to slash the outlook for growth in 2023.

Data for November, released by the Australian Bureau of Statistics (ABS) on Wednesday, showed consumer price inflation picked up in the month while the number of firms advertising for staff increased and consumers set fresh records for retail spending.

Consumer prices rose 7.3% in the year to November, up from a 6.9% rate in October, or slightly quicker than economists’ forecasts.

Fuel prices drove some of the increase, rising 16.6% from a year earlier as the effects of the end to the federal government’s fuel excise “holiday” flowed through to motorists. Food and housing costs rose while clothing and footwear were cheaper.

November CPI came in at 7.3%, or slightly above market consensus. (The trimmed mean measure was up 5.6% versus a year ago, also on the high side of expectations.) (Source: ABS)

— (@p_hannam) January 11, 2023

Higher inflation helped propel retail sales for November to record levels of almost $36bn, with the tally up 1.4% in the month alone, more than economists such as the ANZ and CBA had tipped.

Retail sales in November rose a quicker-than-expected 1.4% from October, adding to an upbeat mix of numbers for the month. Spending continued to set records, helped by rising prices. (Source: ABS)

— (@p_hannam) January 11, 2023

The ABS attributed some of the spending spurt to the rising popularity of so-called Black Friday sales, a marketing trend imported from the US to mark the first day after Thanksgiving.

Supporting signs of the resilience in the economy also include the job vacancy rate in November with 444,000 positions to be filled. While down about 23,000, or 5%, from August, the tally remains almost double pre-Covid levels.

Brendan Rynne, KPMG’s chief economist, said the labour market with a jobless rate at half-century lows of 3.4% remained “extremely tight”. Employers hired an extra 100,000 workers in the September-November period and there remain nine jobs for every 10 unemployed people, he said.

The Reserve Bank of Australia lifted its cash rate for each of the last eight months of 2022. Ahead of today’s figures, investors put the chance of of the RBA raising the cash rate to 3.35% when its board next meets on 7 February at about 60%.

Adelaide Timbrell, a senior ANZ economist, said the CPI and job vacancy numbers in particular “are strong enough to reduce any risk of a pause in February for the RBA and reinforce our view that the peak cash rate will be at least 3.85%”.

The treasurer, Jim Chalmers, warned the November CPI was yet to take into account the full effect of rising energy prices, which he blamed on “nine months of Russian aggression and nine years of Coalition incompetence”.

“There is also uncertainty around the impacts of ongoing flooding that continues to devastate communities across the country,” he said.

Chalmers also highlighted the release overnight of the latest World Bank outlook for the global economy that slashed forecast GDP growth in 2023 to 1.7% from 3% predicted just half a year earlier. Only the global financial crisis and the Covid pandemic had lower growth numbers.

“The United States, the euro area, and China are all undergoing a period of pronounced weakness, and the resulting spillovers are exacerbating other headwinds faced by emerging market and developing economies,” the World Bank said.

“Global prospects in 2023 will be shaped by the energy shock caused by the war in Ukraine, China’s Covid management, the fate of major economies, and the trajectory, severity and impact of interest rate rises around the world,” Chalmers said, adding Australians should be optimistic but also realistic about “what the deteriorating international outlook means for us in Australia”.

According to the World Bank, GDP growth in China – Australia’s largest export market by far – came in at 2.7% in 2022, or 1.6 percentage points slower than previous forecasts. Excluding 2020 with its Covid distortions, the growth pace was the weakest since the mid-1970s.

The World Bank predicts growth, though, will pick up in China to 4.3% this year and 5% in 2024.

Inflation, meanwhile, rose throughout 2022 in almost all economies, with prices rising faster than the targets in almost all nations that have such goals. In advanced economies, inflation last year was more than 9%, or the most since 1982.

Global inflation is expected to fall from 7.6% in 2022 to 5.2% in 2023 and 3.2% in 2024, the World Bank predicted.


Peter Hannam Economics correspondent

The GuardianTramp

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