With employment growth picking up pace in November/December, the Reserve Bank of Australia is unlikely to cut interest rates in February. However, the employment growth is likely to slow over the first half of 2020, forcing the central bank to take action, ANZ analysts mentioned in their weekly research note.
The drop in unemployment over the later part of 2019 is a surprise given the slowdown in growth. The link with economic growth makes it difficult to think that employment can continue to be as strong as it was over November/December.
As such we think the RBA is still likely to ease further.
We no longer expect a rate cut in February. We think the Bank will want to see data on consumer spending over Q4 and January before acting.
April is the likely date for the next rate cut, with another a few months later. We see the cash rate at 0.25% by the end of the third quarter at the latest.
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