RBA’s Mixed Bag September Labour Data: Cooling Job Market Points to Unchanged Rates
The Reserve Bank of Australia (RBA) recently released the September labour force data, revealing a mixed bag of results. While the job market is showing signs of cooling down from its previous tightness, there is nothing in the data that suggests the need for a rate increase.
According to Westpac Economist Ryan Wells, the gradual cooling of the labour market is evident when looking past the monthly fluctuations. The RBA’s main concern is inflation, and they are not willing to let it stay high for longer than their current forecasts indicate. As long as the inflation outlook remains on track, the central bank will maintain the cash rate at its current level. However, if there are indications of higher inflation risks, the RBA is prepared to take action.
In a recent fireside chat, Governor Bullock reiterated the RBA’s stance on policy. While acknowledging that the tightening measures are causing difficulties for some parts of the community, the Governor emphasized that the Bank is mindful of these challenges. Bullock will have two more speaking engagements before the November Board meeting, providing an opportunity to further address the outlook and policy framework.
Looking ahead, economists at Westpac Economics have released their preview for the September quarter inflation release. Senior Economist Justin Smirk predicts a 1.1% quarterly increase in both headline and trimmed mean inflation. Unless there is a significant upside surprise in these figures, it is unlikely to sway the RBA Board’s decision to keep rates unchanged in November.
While there are some immediate risks to inflation, such as housing prices picking up unexpectedly and the uncertain outlook for China’s economy, there are also medium-term risks to consider. The recent rise in long bond yields, coupled with global fiscal policies that may be less contractionary, could lead to higher term premia in the future.
In conclusion, the September labour data points to a cooling job market and supports the RBA’s view of leaving rates unchanged. The central bank remains vigilant about inflation and is prepared to act if necessary. The upcoming inflation release and Governor Bullock’s speeches will provide further insights into the RBA’s policy outlook. However, the current data and trends suggest that a rate increase is unlikely in the near term.
