Market Insight – Australian Job Report Preview

The Australian dollar has continued trading lower against the US dollar, following the release of much stronger CPU data from the US. Now traders digest a key speech from RBA Governor Lowe and await the monthly jobs report from Australia tomorrow.

Reserve Bank of Australia Governor Lowe gave testimony in front of a parliamentary committee today. On interest rates he said he thought they had further to rise but could not say by how much. Both comments seem right. 

Governor Lowe said “There is a risk the bank has tightened policy too much” and the “Risk is that they have tightened enough, which means higher inflate the on.”

He added that “monetary policy is restrictive” and “inflation is way too high, needs to come down.” He also said that government fiscal policy is “broadly neutral.

Traders also have to factor in the Australian job report could be a market mover. Australia’s seasonally adjusted unemployment rate stood at an unexpected 3.5% in December 2022, unchanged from an upwardly revised figure in November and compared with market estimates of 3.4%.

The latest print remained near five-decade lows, as the number of unemployed increased by 5,800 to 499,800. People looking for full-time jobs rose by 1,400 to 326,100, and those seeking part-time jobs – by 4,400 to 173.600.

At the same time, employment fell by 14,600 to 13.75 million, the first drop since July, missing forecasts of a 22,500 growth. Part-time employment declined by 32,200 to 4,128,100, and full-time employment surged by 17,600 to 9,619,000.

Westpac have given their view on the outcome of Thursday job report and said “We suspect that illness-related absences and a ‘catch-up’ in summer leave will result in an employment print slightly below trend, as opposed to another outright decline.”

They note that “The unemployment rate is just 0.1ppts off the 50-year low print of 3.4% in October, signalling a still historically tight labour market. Holding participation at 66.6% and the rate of growth in the working age population steady, this should see a 20k increase in the labour force in December. Our forecast 15k gain in employment is enough to hold the unemployment rate at 3.5%.”