Steady unemployment signals end to rate cuts: HSBC
With the Australian unemployment rate holding steady at 5.4 per cent, the Reserve Bank of Australia (RBA) could be at the bottom of its easing cycle, according to HSBC Global Research.
The latest labour market numbers show that the market added 10,700 jobs in October, following a 15,500 increase in September.
"Employment growth has averaged 10,900 per month since the start of the 2012 and is 1.1 per cent higher in annual terms," according to HSBC.
A large drop in job advertisements did not translate into a jump in unemployment, which has been viewed as a key risk by economists, said the HSBC report.
"[Yesterday's] labour market numbers would be a comfort to the RBA. They vindicate the decision to hold the cash rate steady earlier this week," said the report.
"There is no smoking gun here for another cash rate cut in December on the basis of the domestic economy.
"Indeed, if the unemployment rate stays under 5.5 per cent from here - as monetary policy supports the interest rate-sensitive sectors of the economy enough to offset the forthcoming slowdown in mining investment next year - the economy should rebalance quite smoothly.
"If this plays out, the RBA could be done for this cycle," said HSBC.
However, global risks will continue play a role in the RBA's decision-making, as will "the impact that the high AUD is having on the exchange rate-sensitive sectors of the economy," said HSBC.
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