High unemployment to continue

RBA assistant governor Christopher Kent told the Australian Business Economists in Sydney last week that unemployment has risen gradually over the past couple of years to a level that is high relative to its recent history.

“That is consistent with below-trend growth of economic activity over that period,” Mr Kent said.

“Growth over this financial year is likely to remain below trend, but our forecast is for growth to pick-up gradually to an above-trend pace by 2016,” he said.

“There are already signs of better growth in some parts of the non-mining economy, supported by the very low level of interest rates.”

The RBA expects growth will continue to be “a bit below trend for a time”, picking up gradually to be “a bit above trend pace” by 2016.

The unemployment rate is likely to remain elevated for some time, Mr Kent said.

Meanwhile low interest rates and higher housing prices have lent support to the growth of consumption, which has picked up over the past year or so, notwithstanding the weak growth of incomes, he said.

“The strength of this effect is most apparent in those states for which housing market conditions have been strongest, namely New South Wales and, to a lesser extent, Victoria.

“These states are also less exposed to the effect of declining mining investment and commodity prices, which are weighing more heavily on Queensland and Western Australia.”

The unemployment rate remained at 6.2 per cent from a revised September 2014 estimate, according to the Australian Bureau of Statistics.