Ms. Bullock believes a slowdown in the economy is necessary to contain price pressures, pointing to unexpected resilience in spending as a reason for elevated inflation rates in the labor-intensive services sector.
Speaking to reporters on Monday, Treasurer Jim Chalmers said he expected national accounts to reflect the growth-dampening impact of 13 interest rate hikes.
“People are under pressure, our economy is slowing, but inflation is moderating, wages are rising, [and] We had two quarters in a row of real wage growth,” said Dr. Chalmers.
In the clearest sign yet that the Albanian government is considering another round of cost of living relief, Dr. Chalmers said he was prepared to extend one-off measures, including subsidies, to reduce household energy costs.
“People shouldn’t expect any major new measures in next week’s half-year update. But as we get closer and closer to the budget in May and we can do more that is consistent with our budget constraints and appropriate to the economic conditions at that time, then we are ready to think about it. “said Dr. Chalmers.
An extension of cost of living relief in the May 2024 budget would be a key selling point for the Albanian government ahead of the next federal election, scheduled to take place in either late 2024 or early 2025.
The Paris-based OECD said last week that the RBA was done raising interest rates and predicted the central bank would start cutting rates in the third quarter of 2024.
The RBA's inflation-fighting efforts are being supported by a higher Australian dollar, which has strengthened by 2 percent on a trade-weighted basis since the start of November due to weakness in the US dollar.
Expectations that the US Federal Reserve will finish raising interest rates has pushed the Australian dollar up from $63.2 to $66.6 since the start of November, which will weigh on import costs as downward pressure continues.
Private activities slow down
Quarterly business indicators data released on Monday showed that receipts from the sale of private sector goods and services fell 0.1 percent in September, suggesting that investment and household spending were subdued in the past three months.
Along with a decline in hours worked in September, Commonwealth Bank economist Stephen Wu said private sector activity had slowed.
“This is consistent with the signals from the composite purchasing managers' index survey, where the country was in contractionary territory for two out of the three months of the quarter,” Mr Wu said.
While retail volumes increased 0.2 per cent in the September quarter, the rate of growth was slower than population growth, suggesting a decline in per capita spending.
Despite weakness in the private sector, corporate inventories will contribute a hefty 0.9 percentage points to GDP growth due to an 8.9 percent increase in mining industry inventories.
However, the strength of inventory investment was not broad-based as the non-mining sector did not record growth.
NAB senior economist Taylor Nugent said the RBA would tend to ignore the signal of an inventory-led GDP surprise.
Support for the RBA's wait-and-see approach are signs that the red-hot labor market is beginning to cool.
Job advertisements fell 4.6 percent in November, according to data released on Monday by ANZ and employment website Indeed.
The decline brings the total decline in job openings to 16.8 percent since the peak in November 2022.
In fact, senior economist Callam Pickering said the decline in job advertisements had been concentrated in NSW and Victoria, while Western Australia and Tasmania had seen increases.
“Job postings declined the most in the therapy, sales and software development categories, offsetting gains in food preparation, education and engineering,” he said.
When asked about the decline in job advertisements, Dr. Chalmers said he had been expecting a slowdown in the labor market for some time.
“The Treasury, the Reserve Bank and others have been expecting the unemployment rate to rise for some time. “Usually you see the peak of this in job advertisements, hours worked and other indicators, and that’s exactly what we’re seeing right now,” added Dr. Chalmers added.
Despite the decline in job advertisements, the labor market remains tight by historical standards: the unemployment rate is 3.7 percent and the number of job vacancies is 37 percent above the pre-pandemic level.
The combination of strong job growth and an increase in salaries led to a 9.7 percent increase in private sector labor costs last year.
While the economy is weakening, Ms Bullock said last week it was still strong enough for companies to pass on higher costs such as insurance, rent and energy bills to consumers.
Outside the mining sector, private sector profits rose 16 percent in the year to September.
But falling commodity prices have wiped out billions of dollars in mining sector profits, which fell 19 percent last year.
The RBA's commodity price has fallen 7 per cent in the last 12 months, driven by significantly lower prices for thermal coal and natural gas.
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