Markets Live, Tuesday, 5 October, 2021

The Reserve Bank has held official interest rates steady and remained committed to its gradual wind back of its quantitative easing program as it waits on large parts of the economy to re-open from COVID-19 lockdown.

At its regular monthly meeting today, the RBA board held the official cash rate at 0.1 per cent where it has been since November last year.

The decision was in line with market expectations and forecasts from economists. It also stuck with its decision to wind down purchases of government bonds to $4 billion a week, holding them at that rate until at least mid-February next year.

The decision came after the latest ANZ measure of job advertisements fell by 2.8 per cent in September, the third consecutive monthly drop.

Since lockdowns started in NSW, job ads have dropped by 6.8 per cent. Despite the fall, they are still up by almost 61 per cent on September last year.

Senior ANZ economist Catherine Birch said falls in employment so far have been concentrated in NSW but there was likely to be a drop in Victoria.

The youngest workers and those in the lowest-paying jobs were taking the biggest hit from the lockdown, but Ms Birch said once the economy re-opened there would be a strong recovery.

“As NSW and Victoria progressively reopen through the December quarter, we expect ANZ job ads, employment and hours worked to rebound and underemployment to drop, in line with the recovery in labour demand and broader economic activity,” she said.

“But we think measured unemployment is unlikely to peak until after restrictions have eased, as it did last year.”

Bank governor Philip Lowe in a statement said the RBA expected the jobs market and the broader economy to recover quickly once current lockdowns end.

“Looking forward, the bank’s business liaison and data on job vacancies suggest that many firms are seeking to hire workers ahead of the expected reopening in October and November,” he said.

Despite the jobs market improving once lockdowns are over, Dr Lowe cautioned the bank is not expecting a breakout in wages or inflation.

He said wage and price pressures across the country remained “subdued”, playing down concerns of an inflation breakout.

“While disruptions to global supply chains are affecting the prices of some goods, the impact of this on the overall rate of inflation remains limited,” he said.

Data last week showed house values climbing at their fastest rate in 32 years. Dr Lowe said while prices were continuing to rise, turnover in some markets had started to decline.

The Council of Financial Regulators, which includes the RBA and the Australian Prudential Regulation Authority, had been discussing the medium-term risks to macroeconomic stability.

Dr Lowe maintained the bank’s position that interest rates were unlikely to be pushed upward any time soon.

“The (bank) board is committed to maintaining highly…