Interest rates may rise as a result of migration surge

The arrival of half a million migrants over the past year is adding to inflation pressure and will influence the Reserve Bank of Australia’s interest rate decision next week, a former RBA economist says.

Per person consumer spending has been going backwards, as household incomes are squeezed by inflation, income tax bracket creep and interest rates rises.Retail sales grew a stronger than expected 0.9 per cent seasonally adjusted in September due to shoppers opening their wallets for hardware, gardening and clothing, the Australian Bureau of Statistics reported on Monday.“This is adding to inflation pressure in the near-term, especially via rents.

“Although per capita household consumption has been falling and is evidence that monetary tightening is working, overall household consumption growth is still positive, despite slowing. With many more people in the economy, there are also many more consumers.“Strong inward migration is also boosting labour supply. Partly as a result of this, the labour market is loosening, albeit very slowly.

“Along with strong services inflation more broadly, these outcomes suggest that domestic demand pressures are still driving domestic inflation, even though consumer spending growth more broadly is very weak,” Dr Ellis noted last week. “Strong population growth is a factor here, and recent arrivals data suggest it will remain so.”

“Most family migrants don’t require extra housing because they tend to live with their partners and children who are already here,” he said.“Skilled migration does have an impact on housing, but only where they are new migrants arriving from overseas, not the 70 per cent converting from a temporary visa to a permanent visa.”

Source: Loan Digest (loandigest.net)

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