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Australia's central bank Governor said unemployment is set to rise further as the scars from COVID-19 deepen.
Addressing the Anika Foundation on Tuesday, Reserve Bank (RBA) Governor Phillip Lowe said even despite signs of recovery, the path forward for the labour market was uncertain.
"This is because many of the people who lost their jobs over recent times have been classified as not in the labour force and so are not counted as unemployed," Dr Lowe said.
"As the labour market continues to improve, we expect many of these people will start looking for jobs, and thus be classified as rejoining the labour force.
"This will push up the measured unemployment rate at the same time that the share of the working-age population with a job is also rising."
Need somewhere to store cash and earn interest? The table below features introductory savings accounts with some of the highest interest rates on the market.
Rates based on a savings balance of $10,000. Sorted by total interest rate. Refer to providers' websites for bonus rate conditions. Note that the base rate will apply once the introductory term has passed. Rates correct as of July 3, 2022. View disclaimer.
Dr Lowe said until scientific breakthroughs were made or we become better at managing the virus, incomes would be temporarily lower.
He also said although the figures in April and May - which showed employment fall by around 870,000 people - were staggering, Australia had now turned the corner.
"In June, hours worked increased by 4% and the number of employed people rose by 210,000," he said.
"Notwithstanding this turnaround, the path ahead is expected to be bumpy and there are some major cross-currents in the labour market at the moment."
Prime Minister Scott Morrison today announced a tapered extension to JobKeeper and JobSeeker, and Dr Lowe said both schemes were vital for recovery.
"By helping the economy today, these measures also support the all-important confidence that I spoke about earlier," he said.
"So they assist with a return to more normal patterns of spending and consumption, without the need for ongoing fiscal stimulus."
Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner-occupiers.
Lender | |||||||||||||
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Variable | More details | ||||||||||||
FEATUREDUNLIMITED REDRAWSSPECIAL OFFER | Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)
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Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)
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Variable | More details | ||||||||||||
FEATURED100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES | Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)
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Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)
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Variable | More details | ||||||||||||
QLD/NSW/VIC/SA METRO & INNER REGIONAL AREAS | Variable Home Loan (Principal and Interest)
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Variable Home Loan (Principal and Interest)
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Variable | More details | ||||||||||||
REFINANCE ONLY | Variable Rate Home Loan – Refinance Only
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Variable Rate Home Loan – Refinance Only
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Variable | More details | ||||||||||||
NO ONGOING FEESFREE REDRAW FACILITY | Live-in Variable Loan (Principal and Interest) (LVR < 90%)
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Live-in Variable Loan (Principal and Interest) (LVR < 90%)
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- Fast turnaround times, can meet 30-day settlement
- For purchase and refinance, min 20% deposit
- No ongoing or monthly fees, add offset for 0.10%
Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of July 3, 2022. View disclaimer.
"There's no free lunch"
Dr Lowe also used his address to rule out the possibility of Modern Monetary Theory (MMT), whereby the RBA deposits money in every bank account in Australia, also known as helicopter money.
The RBA has the ability to create money and avoid financial constraints, offering a free lunch of sorts.
"So the argument goes, if the government needs money to stimulate the economy, the central bank should simply create it in the public interest," Dr Lowe said.
"The reality, though, is there is no free lunch. The tab always has to be paid and it is paid out of taxes and government revenues in one form or another."
Dr Lowe said helicopter money could push inflation up too drastically, so the central bank would have to hike the cash rate, meaning the general population would end up funding the system.
"So I want to make it very clear that monetary financing of fiscal policy is not an option under consideration in Australia, nor does it need to be," he said.
"The Australian Government is able to finance itself in the bond market, and it can do so on very favourable terms."
Dr Lowe reaffirmed the Board had no appetite for negative interest rates in Australia, as it would encourage people to save more, rather than spend more, which is not the direction we needed to head in.
Disclaimers
The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.
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