Optimism key takeaway from RBA’s meeting minutes
The Reserve Bank of Australia’s latest interest rate decision meeting notes were released on Tuesday and provided some rare optimism from the RBA. There was suggestions that over the rest of 2017 things may become slightly more buoyant in the economy as job data looks positive with current and future strength expected for employment growth. The meeting minutes detailed the RBA’s confidence regarding Australian labour market conditions, stating:
Both full-time and part-time employment had recorded solid growth in August. Members noted that this growth had been well above that required to absorb increases in the labour force owing to population growth. Since early 2017, employment growth had been above trend, the unemployment rate and other measures of labour under-utilisation had declined a little and labour force participation had increased, particularly for older workers and prime-aged females. By industry, employment growth over the preceding year had been strongest in the household services sector, particularly health care and education, and had picked up notably in the construction sector. Forward-looking indicators of labour demand, including data on job advertisements, vacancies and hiring intentions, continued to point to slightly above-average growth in employment over the remainder of 2017.
Based on hiring and recruitment data businesses look set to create more jobs, putting more people in work. Some of Australia’s weak data of late has been based around low wage growth which is often common in a quiet jobs market. The meeting also reflected on this:
Wage growth was expected to increase gradually as spare capacity in the labour market diminished, which was in turn expected to contribute to a gradual rise in inflation over time.
Unemployment data tonight
The latest unemployment figures will be released tonight which are set to show no change in the rate of 5.6%. Furthermore, there is only expected to be an improvement of 15,000 new jobs created across the country in September, this is down from 54,200 from the month of August.
Whilst this data is expected to cause little volatility there could always be some volatility should the unexpected happen. The Australian Dollar has started to make back ground against Sterling in the last few days with the GBP/AUD exchange rate falling into the 1.67’s once more.
Where to next for the GBP/AUD exchange rate
All eyes will now be on the Bank of England as the next major mover for the GBP/AUD rate. Previously there was almost expected to be an interest rate hike at the start of November for the UK however there is now some doubt creeping in. UK Inflation yesterday reached the highest level in 5 years, at 3%, touching the top of the Bank of England’s target level. However, following comments from Bank of England Governor Mark Carney and other members, they have been dovish about the prospects of an interest rate hike.
What this does suggest is that come the 2nd November if there isn’t a rate hike, we could see Pound Sterling weakness and if there is a hike expect a boost, it really is a knife-edge decision.