RBA: Rates Remain Unchanged

The RBA has decided to maintain the cash rate at its record low level of 0.1% in line with its previous expectations despite the market speculating on the effect of the war in Ukraine.

Russia’s invasion of the Ukraine and the impact of natural disasters on home soil are expected to delay any monetary policy tightening, as a major new source of uncertainty.

Further, inflation in parts of the world has increased sharply due to energy prices and disruptions to supply chains at a time of strong demand.

The Australian Economy remains resilient — spending is up following the Omicron outbreak and the unemployment rate is at a 14-year low of 4.2% while underemployment is at its lowest level since 2008.

According to the RBA, unemployment still has room to fall lower again.

“The RBA’s central forecast is for the unemployment rate to fall to below 4 per cent later in the year and to remain below 4 per cent next year,” said Dr Philip Lowe in his address.

Inflation has picked up more quickly than the RBA had expected but the RBA governor Dr Philip Lowe is still positive on the Australian economy’s financial conditions stating.

“Financial conditions in Australia continue to be highly accommodative. Interest rates remain at a very low level, although some fixed rates have risen recently. The Australian dollar exchange rate is around its lows of the past year or so. “

Further, a levelling of the housing market has been noted following a period of strong growth with Dr Lowe stating, “Housing prices have risen strongly, although the rate of increase has eased in some cities. With interest rates at historically low levels, it is important that lending standards are maintained and that borrowers have adequate buffers.”

Could a recession be the best time to launch a tech startup?

A recent study suggests that is the case. The authors found that tech startups that began operations during the 2007-09 recession—and received their first patent in that time—tended to last longer than tech startups founded a few years before or after. And those recession-era companies also tended to be more innovative than the rest.

“The effect of macroeconomic trends is not always intuitive,” says Daniel Bias , an assistant professor of finance at Vanderbilt University’s Owen Graduate School of Management, who co-wrote the paper with Alexander Ljungqvist, Stefan Persson Family Chair in Entrepreneurial Finance at the Stockholm School of Economics.

Drawing on data from the U.S. Patent and Trademark Office, the authors examined a sample of 6,946 tech startups that launched and received their first patent approval between 2002 and 2012.

One group—about 5,734 companies—launched and got their patent outside of the 2007-09 recession. Of those, about 70% made it to their seventh year. But the startups that launched and got their first patent during the recession—about 1,212 companies—were 12% more likely to be in business in their seventh year.

These recession-era firms were also more likely to file a novel and influential patent after their first one. (That is, a patent the researchers determined was dissimilar to patents in the same niche that came before it, but similar to ones that came after it.)

So, why did these recession-era firms outperform their peers? Labor markets played a big role.

A widespread lack of available jobs meant that the startups were able to land more productive and innovative employees, especially in their research and development groups, and then hold on to them. More important, the tight labor markets also meant that the founding inventors—the people named on the very first patent—were more likely to stick around rather than try for opportunities elsewhere.

For startups started during the 2007-09 recession, founding inventors were 25 percentage points less likely to leave their company within the first three years. On average, about 43% of founding inventors in the entire sample left their startup within the first three years.

“Our study really highlights the importance of labor retention for young innovative startups. Retaining founding inventors cannot only help them survive, but also thrive,” Bias says.

RBA: Rates Remain Unchanged

War in Ukraine and local flooding may delay any future rate hike.

A study suggests that when jobs are hard to come by, the best workers are more available—and stay longer