Solid labour markets conditions to keep RBA on the sidelines even if inflation prints ‘low’

Australia employment change seasonally adjusted came in at +26.1K in March, above forecasts of +17k, with the unemployment rate s.a. at 5.7% vs forecasts of 5.9% and 5.8% last. Fulltime employment stood at -8.8k vs previous 15.9K, while part-time employment rose by 34.9k from previous -15.6k. Participation rate was 64.9% vs expected 65.0 and prior of 64.9%.

Today’s labour market report beat expectations and the underlying trends in employment and unemployment continue to reflect stronger growth. It corroborates the positive trends seen in the major business surveys, albeit at a less robust pace than last year.

RBA’s statement at its April policy meeting made it clear that a rate cut will ultimately be driven by the labor market and inflation outcomes. Data suggests that Australia's underlying labour market conditions remain solid even if not as strong as in 2015. This will likely keep the RBA on the sidelines even if inflation prints ‘low’.

"Our view is that even if Q1 inflation prints ‘low’ on 27 April, the solid momentum in growth will keep the RBA from acting on its stated easing bias. There is no evidence, at this stage, that easier monetary policy is needed to “lend support to demand”." said ANZ in a report