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Westpac chief economist Bill Evans now expects "that the RBA will begin it's tightening cycle in the first quarter of 2023. By then, we expect that the conditions for that first rate increase around full employment and inflation will have been met while wages growth will be close to 3%."

  • "The May employment report is a major 'game changer' for policy. It underscores the strength of momentum in the economy and endorses the range of other measures pointing to a very strong labour market. The recovery is now clearly into a self-sustaining upswing and the need for emergency stimulus policies has eased significantly. Taken with the clear signal from the Federal Reserve that wider economic risks from the health emergency have eased and policy normalisation can be brought forward the challenges facing the RBA are changing. The stunning fall in the unemployment rate from 5.5% to 5.1% in May, which aligns with other supportive data on the labour market, has substantially lowered our forecast profile of the unemployment rate. Our growth forecasts (incorporating risks around local lock-downs and the timing of the reopening of the foreign border) are consistent with a fall in the unemployment rate of around 1 ppt between June 2021 and June 2022. Our analysis of the May employment report points to a convincing, sustainable improvement in the labour market. We do not assess this report as a "one off"."