Jobless rate improves and takes pressure off RBA

Marco Green
January 25, 2020

The change of forecast comes on the heels of an upbeat Australian employment report released at 00:30 GMT, which sent the Australian dollar higher and tempered market expectations for a rate reduction at the February 4 meeting. A trend has been in place for some months now and has resulted in 51.k rise in part-time jobs since September while in the same period time full-time jobs have fallen by 8.0k.

Australia's unemployment rate edged down for the second consecutive month to end 2019 at 5.1 per cent, its lowest level since March a year ago. EUR/AUD slumped from 1.6204 to 1.6145.

That tipped the jobless rate down slightly to 4.3 percent, the lowest in the state's recorded history. The rule of thumb in currency markets is that when a central bank cuts interest rates, the currency it issues falls, and vice versa.

Released separately, the expected inflation rate, reported in the Melbourne Institute Survey of Consumer Inflationary and Wage Expectations, increased from 4.0% in December to 4.7% in January.

"With unemployment improving for two months in a row, there is now greater uncertainty over the probability of a February rate cut", she said. "So it is too soon to say RBA rate cuts are done. We still think further rate cuts are more likely than not over the course of 2020, however". "Continued weakness in consumer spending and soft business investment suggest that progress toward lower unemployment will stall at a level that is inconsistent with the RBA achieving its policy objectives".

Other reports by Click Lancashire

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