Australian jobs, business confidence and GDP spur economic climate but macros still remain

Total employment: 71.4k from 56.1k

Unemployment rate: 5.8% from 5.9%

Total employment has now grown 342k (or 3.0%yr) in the year to November, a significant acceleration from the continuing the acceleration from 2.0%yr in September to 2.7%yr in October.

Overall all indicators suggest Australia currently has a robust labour market outside WA.

Last weeks' announcement on GDP on q/q basis was strong rebound from previous 0.3% to 0.9% beyond streets' forecasts which were at 0.7%.

NAB's business confidence index is also spike from 3 to 5.

Exports are rising modestly, supported by the lower currency but constrained by still sluggish world growth. A net 3% of firms reported a lift in exports. 

On the contrary, rampant of commodity prices:

If severe enough, either of these outcomes would risk a recession in Australia. While policy makers would have scope to deliver both fiscal and monetary easing, we suspect this outcome would be quite bearish for the currency as growth expectations shift lower, rate differentials narrow and Australia's AAA credit rating is questioned.  

Supply side constraints force the Fed into a more aggressive tightening cycle:

If the Fed is surprised by a still-falling unemployment rate in 2016, short rate differentials could compress by more than forecast, forcing AUD/USD lower. This dynamic could be exacerbated if Australia struggles to escape sub-trend growth in 2H16.

Finally, intensification of the EM debt deleveraging cycle, which risks a marked slowing in Australia's trading partner growth.

We think risks to the AUD are biased to the downside, relative to our forecasts, starting with positive surprises.