Australian unemployment expectations to improve

The Westpac-Melbourne Institute Unemployment Expectations Index fell 13.7% in Oct, the largest fall in the index since Jan 2010. The index has fallen in 8 of the last 12 months to be down 9.2% in the year. 

In trend terms, the index fell 1.6% in Oct following a 1.2% decline in Sep and a 0.9% decline in Aug. The index is now down 5.2%yr highlighting the shift households being relatively more upbeat about the labour market.

Households appear to be getting more positive about the labour market. Unemployment expectations are still high historically, but the trend is moving in the right direction.

Employment growth has been running faster than population growth since late 2014 and finally we are seeing household labour market expectations catch up.

Westpac's job index, a composite of the various business surveys, continues to suggest that the labour market is sound and thus unemployment expectations should be expected to improve (fall) further in the months ahead. 

The level of unemployment expectations is consistent with low rates but the rate of change in expectations suggests there is no pressure on the RBA to cut rates.