The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Thursday, July 12, 2012

Do today's jobless numbers have implications for the RBA?

The jobless rate printed, as widely expected, at 5.2% in seasonally-adjusted terms. The monthly "trend" unemployment rate was unchanged at a slightly lower 5.1%. The jobless rate has been bobbing around this near-fully-employed level since 2010, and remains below the peaks touched in the middle of 2011. The RBA has forecast since January that it will rise to 5.5% by end 2012. Enclosed are some comments from ANZ and Citi, and a few charts from HSBC...


We continue to expect that Australia’s unemployment rate will drift a little higher in the near term, which is consistent with the RBA’s view. Given this and that the Bank focuses more on the unemployment rate than the highly volatile monthly employment data, today’s data alone are unlikely to cause too much concern within the RBA. We recently pushed back to October our previous call for a policy rate cut in August, and kept a November cut pencilled in – this call is unaffected by today’s data. Job ads are the key data to watch.


We view today’s weak labour force report as being consistent with the rate cuts already taken by the RBA to support the economic outlook. By itself the report is not a trigger for a further cut next month (Figure 5). This would require a very low underlying Q2 inflation result (0.5% or possibly even lower) and further near-term bad news in Europe. That said, the RBA Deputy Governor’s comments today make clear that the RBA harbours serious concerns about the economic outlook in Europe and the implications more broadly. So the next move in rates is still most likely down, but not imminently