Australia: Employment pop suits neutral RBA - TDS

According to Annette Beacher, chief Asia-Pacific macro strategist at TD Securities, Australia’s unemployment rate remained at 5.0% in January, masking otherwise solid fundamentals as  employment printed +39.1k (TD +20k, mkt +15k) via a rebound in full-time (+65.4k).

Key Quotes

“The participation rate edged back to 65.7%. The RBA expects the unemployment rate to be 5% this year, so today's report is as expected.”

“The RBA also focuses on underemployment, and there was good news there as well. Underemployment and underutilisation rates/ratios have been edging lower (not in a straight line) for the last two years. This bodes well for stronger wage growth in due course (second chart).”

“The AUD has traded $US0.70-73 for some time and today's moves are consistent with that range. OIS is fully priced for a rate cut by year end, and will remain so while many analysts look for cuts.”

“In contrast, we expect the cash rate to remain on hold at 1.5% through to 2020 as we do not expect the ongoing orderly house price correction to derail economic growth and trigger higher unemployment to the extent that cuts are needed in the coming months.”