VIEW: RBC Reiterate More Tightening To Come

RBC find it “hard to pick any holes in this (labour market) report, with no obvious signs of interest-rate induced weakening in the labour market just yet. The only real blot we can find is hours worked which fell 0.4%, but this is after an unusually large 2.4% spike in Oct and thus off a very high level. The ABS also noted the number of people off work due to illness remains around 1/3 higher than the average for this time of year.”

• “At the margin, the Nov labour market survey adds further to our view that the RBA is not done hiking yet. We continue to expect further increases in the cash rate in Feb and March, with a strong labour market and still-resilient consumer keeping demand higher than the RBA would like to see. This will require more tightening from the bank. Labour market softening will come next year, but not yet.”
• “The Melbourne Institute 1-Year ahead consumer inflation expectations survey fell to 5.2% in the Dec survey (from 6.0% in Nov and a high of 6.7% in June). As we pointed out on Monday these sorts of measures are potentially quite important at the moment, and this might give the RBA some comfort that future expectations are not getting out of hand even if the level is still high.”