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RBA interest rates: NAB punts back prediction of relief for borrowers as jobless figures stay low

Matt Mckenzie & Jake DietschThe Nightly
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National Australia Bank reckons borrowers will be waiting until May for the Reserve Bank to cut rates.
Camera IconNational Australia Bank reckons borrowers will be waiting until May for the Reserve Bank to cut rates. Credit: Jackson Flindell/The West Australian

A major bank has punted back their prediction for interest rate relief as Australia’s jobless rate continues defying gravity.

NAB reckons borrowers will be waiting until May for the Reserve Bank to cut rates, reversing a recent move which brought forward their call to February.

It came as the unemployment rate held steady for the third-straight month at 4.1 per cent in October, according to the Australian Bureau of Statistics.

About 16,000 Australians found work, below market expectations of 25,000 new roles — after a blistering pace in recent months which has seen records tumble.

The RBA has kept a close eye on jobs amid their fight against inflation, because slowing demand through higher interest rates is generally expected to lift unemployment.

But the labour market has been resilient even amid warnings a softer economy would take a toll.

NAB’s top economist Alan Oster said in a research note there would be little urgency for the Reserve Bank to ease pressure.

“The labour market has been stronger than expected and the RBA remains concerned about upside risks to inflation should gradual labour market cooling stall and capacity growth remain sluggish,” Mr Oster said.

“While we expect rates will move lower over time, because the RBA’s policy stance is only modestly restrictive there is little urgency to adjust policy settings while both inflation and the unemployment rate are evolving gradually.”

He said the economy had “substantially moved towards balance”.

Markets on Thursday assessed a roughly three in four chance the RBA would drop the cash rate from 4.35 per cent by May next year.

Yet NAB warned the Reserve may stay on hold “even deeper into 2025”, while analysts at HSBC and VanEck declared the figures would lower the chance of rate relief.

The numbers “paint the picture of a robust jobs market,” VanEck portfolio manager Cameron McCormack said.

“These data points give the RBA little reason to pull forward its rate easing timeline,” he said.

“The strength in the labour market continues to exert upward pressure on already elevated services inflation, which hinders the progress of inflation reducing to the RBA’s target 2 to 3 per cent range.”

AMP economist My Bui viewed the below-expectations jobs growth as underwhelming; while Westpac said it was a “normalisation” after a string of strong results.

Australia was projected to have the second highest inflation rate in the developed world next year but Federal Employment Minister Murray Watt knocked back concerns that was due to higher wages and jobs growth.

“I don’t think it is,” Mr Watt said in Perth at the Australian Worker Union’s national conference on Thursday.

“We’ve often made the point that in Australia, our inflation rose later than it did in other parts of the global economy.

“So it’s no surprise that you do see other nations, who’ve had higher inflation than Australia and whose inflation rate started rising earlier than in Australia, it’s no surprise to see it starting to come down a bit earlier in those other countries.

“But I think what these figures that we’ve seen over the last couple of days show, is that because of the Albanese government’s responsible economic management, we’re able to see inflation falling while at the same time, jobs are being created and wages are rising.

“And that’s a terrific thing for all of those Australians who are dealing with those cost of living pressures.”

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