TD Securities’ Global Strategy Team expects a solid January labour market report in Australia, projecting 25k jobs added and a participation rate of 66.8%, keeping unemployment at 4.2%. They argue the tight labour market will sustain wage gains and inflation pressures, reinforcing their call for another 25 bps Reserve Bank of Australia rate hike in May.

Labour data seen backing May hike

"We expect 25k jobs to be added to Australian payrolls in Jan after the blowout 65k headline addition in Dec. The participation rate should improve to 66.8%, pinning the unemployment rate at 4.2%. The tight labour market is likely to fuel wage gains and add to inflation pressures, which is now a concern to the RBA, and we expect another follow-up 25bps hike from the RBA in May."

"Q4 Wages data landed in line with the RBA's forecast continuing the series' reputation for not sparking major surprises. Headline wages rose 0.8% q/q to be 3.4% y/y. Both public and private sector wages rose 0.8% q/q, but annual public sector wage growth at 4% outpaced the private sector at 3.4%."

"While real wages growth was -0.4% y/y, this did not stop household consumption ending the year on a strong note. The focus now moves to tomorrow's jobs print for Jan. We are looking for +25k (mkt +20k) and the u/e rate ticking up to 4.2% (mkt 4.2%)."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)