Australia’s labor market conditions remain strong, RBA likely to hold rates in 2016, 2017

March’s labor market report for Australia came in above expectations, suggesting that the Australian labour market conditions continue to be strong, albeit not as strong as in 2015, according to ANZ. The annual trend employment in March grew 2.2%, as compared with December 2015’s growth rate of 2.6%.

Meanwhile the recovery in trend unemployment rate for over one year now reflects stronger growth, said ANZ. This confirms the upbeat trends witnessed in business surveys, though at a less strong pace than seen in 2015. The seasonally adjusted jobless rate declined to 5.7% in March. The seasonally adjusted number of persons employed increased by 26,100 in March 2016, while the number of persons unemployed decreased by 7,300.

Meanwhile the Labor Market Indicator composite of ANZ points towards a strong underlying labor demand and hints at 2% growth in annual jobs in following months, noted ANZ. The Australian central bank is seeking proof that the labor market recovery seen in 2015 is continuing, added ANZ.

Even if inflation data for Q1 is low, the strong growth momentum is likely to keep the central bank from taking an action regarding its easing bias, added ANZ. At present, there is no evidence that loose policy is required to help support demand.

“We expect the cash rate to remain at 2% this year and next, albeit with the risks tilted towards further rate cuts at some stage over that horizon”, said ANZ.