Low inflation could be a boon, says HSBC

Low inflation could be a boon, says HSBC

Australia’s low inflation figures are helping to “absorb the shock of lower commodity prices”, says HSBC.


The “unusual combination” of strong growth and weak inflation has been key to rebalancing the Australian economy according to HSBC Australia’s chief economist Paul Bloxham.

The lower-than-expected rate of inflation has enabled the Reserve Bank to cut interest rates and consequentially support “a pick-up in consumer spending”, Mr Bloxham said.

Much of the boost has come as a result of the end of the mining boom and decreasing commodity prices, and the effect this has had on job and wage growth, he said.

“High-paying jobs in the mining and related industries [are] being replaced by lower paid jobs in the service industries. Lower wages growth has also helped to boost jobs growth as firms have been more willing to take on employees they can pay less,” he said.

Mr Bloxham did however note that the rebalancing process has “not been perfectly smooth”, due in part to commodity prices falling more than anticipated and growth being below trend.

“There is spare capacity in the labour market as not quite enough jobs have been created fast enough to manage full-time employment in the face of the end of the mining boom,” he said.

Mr Bloxham said the lower rate of inflation has “somewhat protected” the economy from the lower wage growth, and that “it is surely better to share the lower national income amongst more households than amongst fewer.”

Read more:

Housing downturn would hit banks: Moody’s

‘Bionic advice’ headed to platforms: CFS

MLC hires GM for insurance sales

Don’t ‘give up’ on blue-chip stocks: SSGA

Global markets facing three key challenges

Related Articles

 

Low inflation could be a boon, says HSBC
ID logo
promoted stories

Appointments

Stephen Glenfield

FASEA appoints new chief executive

Reporter

David Murray

David Murray commences new role as AMP chairman

Reporter

Adrian Went

ANZ names new group treasurer

Reporter

Analysis

investordaily image

Super shouldn’t be a lottery

Tim Stewart

investordaily image

Can infrastructure equities cope with rising rates?

James Lydotes

James Swanson

Is this as good as it gets?

James Swanson