For the full picture, download the report – Australian Markets Weekly 9 July 2019.

• The RBA has cut the cash rate to 1%, arguing that lower rates are an effort to reduce unemployment and not a response to a deteriorating outlook, which it still views as “reasonable”.
• The forward indicators of labour demand tell a different story. All three major measures of job vacancies are falling, while surveyed hiring intentions have rolled over. That said, surveyed unemployment expectations are mixed.
• Constructing a summary index from these leading indicators, the labour market has rapidly cooled and is at a point consistent with unemployment edging higher and lower interest rates. With the RBA cutting rates, this deterioration contradicts its more optimistic narrative, where we think a weaker outlook will see it cut rates again later this year, alongside the government delivering additional fiscal stimulus.

The week ahead – NAB business survey and an update from regulators; Fed testimony

The June NAB Business Survey is released on Tuesday and will show if the post-election bounce in business confidence has translated into improved business conditions. The Council of Financial Regulators, which is chaired by Governor Lowe, is publishing a quarterly update on regulation and the housing market on Wednesday. Internationally, Fed Chair Powell delivers his semi-annual testimony to the House on Wednesday and the Senate on Thursday and the FOMC minutes are out on Wednesday.

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