Australia: Labour market soft in 2016 - TDS

Research Team at TDS notes that the Australian employment in Dec rose by +13.5k (TD +20k, mkt +10k) skewed towards full-time employment.

Key Quotes

“However, for 2016 only +92k jobs were created, +126k in part-time, while -34k full-time jobs were lost.”

“Hours worked are being driven by part-time employment, so it is difficult to construct a case for a rapid pickup in wages and overall inflation. Our call for a higher cash rate by year end is driven by household debt and financial stability risks.”

“AUD OIS is practically flat to cash (8% chance of another 25bp cut in May) and 3yr bond yields at 2.04%, both anticipate that the next move is up for the cash rate. While we agree (+25bp in November to curb financial stability risks) this benign labour market demands a very gentle tightening cycle, leaving overall policy conditions very accommodative for quite some time.”

“The AUD at $US0.75 is more or less at fair value, but the TWI at 65.7 is marginally higher than the RBA’s November assumption of 65, so there is no free pass of a “weaker” exchange rate boosting growth and inflation at this juncture.”