Aussie c. bank observes unexpected employment growth

The Reserve Bank of Australia (RBA) has expressed surprise at the continued strength of the country’s employment growth, according to Deputy central bank Governor Andrew Hauser.

In a speech delivered on Monday, Hauser stated that policymakers remain prepared to adjust monetary policy in response to changes in the economic outlook.

Hauser noted that there are several possible interpretations for the robust labour market. It could be a sign of excessive demand conditions or a relatively weak supply side of the economy.

In September, Australia’s employment data exceeded expectations for the sixth consecutive month, while the unemployment rate remained steady at 4.1 per cent. This reinforced the perception of a tight labour market and reduced market expectations for near-term interest rate cuts.

Hauser emphasised the RBA’s data-dependent approach to monetary policy. While acknowledging the importance of the employment data, he stressed that the focus should be on the implications for the overall economic outlook.

“We will obviously react to it because that data outturn affects our view about the outlook, but it is the implication of the data for the outlook, not the data itself, that should be most relevant to policy.”

The economy is stagnant due to high interest rates, with inflation persisting despite gradual labour market improvements. As a result, markets predict a 26 per cent chance of a rate cut in December, with the first cut likely in April next year.

The central bank has maintained interest rates at their current level since November, believing that the 4.35 per cent cash rate is sufficiently restrictive to achieve its inflation target of 2-3 per cent while preserving employment gains.

Attribution: Reuters

Subediting: M. S. Salama