“This, in turn, is keeping the combination of unemployment and underemployment very high at over 14 per cent and driving wages growth bonuses to a record low of just 2 per cent year-on-year in the June quarter,” AMP Capital’s chief economist Shane Oliver said.

“Given this and the ongoing downside risks it implies for inflation, we remain of the view that the RBA will cut the cash rate again in November to 1.25 per cent,” Mr Oliver said.

“The reason for rate cuts has been around the downside risks to inflation and on this front, while jobs growth has been solid, there is still significant slack in the labour market with labour underutilisation (i.e. unemployment plus underemployment) remaining very high at 14.2 per cent and this is putting downwards pressure on wages growth.”

With interest rates already at historic lows, the Sydney and Melbourne property markets could be in for a further challenge.

“The perk up in finance commitments to investors, HIA new homes sales and weekly auction clearance rates in Sydney and Melbourne despite mixed readings on what home prices are doing suggest that the Sydney and Melbourne property markets may be getting a bit too hot again,” Mr Oliver said.

This, coupled with an oversupply of apartments, would test the two property markets.

“Returning to rapid house price gains at a time when the supply of apartments is starting to surge would not be a good thing,” Mr Oliver said.

“However, pressure is likely shifting back to APRA to further tighten lending standards.”

Looking forward, slow national growth in dwelling prices is anticipated to continue, while the commercial property market will likely grow.

“Dwelling price gains are expected to slow to around 3 per cent over the year ahead, as the heat comes out of Sydney and Melbourne thanks to poor affordability, tougher lending standards and as apartment prices get hit by oversupply,” Mr Oliver said.

“Commercial property and infrastructure are likely to continue benefiting from the ongoing search for yield by investors.”