Australian Markets Weekly: 12 December 2016

How fast (or slow) is Australian employment growth?

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Key points:

  • The NAB Business Survey and Australian Labour Market data are the key Australian events this week, ahead of the Government’s mid-year budget update (MYEFO) next Monday.
  • A number of indicators suggest that while employment growth has slowed, it has not done so as significantly as suggested by the ABS. A “true” pace of employment growth is likely closer to 15,000 jobs per month than the reported ABS trend of 3,000.
  • That said, we are monitoring recent trends that suggest growth has slowed somewhat – business conditions in the NAB survey overall – and particular in NSW and Retail – have softened in recent months. This is not part of the RBA’s core economic scenario.
  • In markets, the broad post-Trump trends continue (US$ strength/$A softness, higher bond yields, stronger equity markets). Oil prices are up nearly 5% in early Asian trading following the announcement of further production cutbacks on the weekend.
  • The Fed is fully expected to raise interest rates early Thursday morning Australian time. Most focus will be on the accompanying announcement plus any change in FOMC members’ medium-term views of the interest rate track as they incorporate Mr Trump’s stimulus policies and a tighter US labour market into their thinking.

Please see the attached for details