VIEW: Goldman Sachs Look For 75bp Hike In August

Goldman Sachs note that “Australia's Labour Force Survey was stronger than expected in June, with employment rising 88.4k and the unemployment rate falling -40bp to 3.5% (GSe/BBG: 3.8%) to reach its lowest level since 1974. The details of the report were firm, with the participation rate rising +10bp to a record high 66.8%, although hours worked continued to be weighed down by elevated rates of illness & sick leave. Given the strong outcome, we now expect the RBA to accelerate the pace of rate hikes to +75bp to 2.1% in August as our base case (previously +50bp, with 35% chance of +75bp in August). While a close call, we continue to expect the pace of hikes to slow to +50bp/25bp/25bp/25bp in Sep/Oct/Nov/Dec, to reach a terminal rate of 3.35% (vs 3.1% previously).”