Labour Market Continues To Outstrip RBA Expectations

A quick reminder that the latest round of RBA SoMP projections showed that the Bank expects unemployment to sit at 6.5% in June and 6.0% in December. The headline unemployment rate in Australia fell to 5.8% in February, although the trajectory in the post-March data isn't expected to be a straight line given the cessation of the JobKeeper scheme (which comes at the end of this month). While the labour market has evolved in a stronger manner than the RBA projected, recent months have seen the Bank switch its focus to actual not projected outcomes, noting that "the Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. For this to occur, wages growth will have to be materially higher than it is currently. This will require significant gains in employment and a return to a tight labour market. The Board does not expect these conditions to be met until 2024 at the earliest." A recent Q&A session saw RBA Governor Lowe note that it is plausible that NAIRU could be below 4.0% when he was questioned on the matter.