All of the Big Four banks expect the RBA will hold interest rates in June, but there could be further hikes later in the year. · Source: Getty/AAP
Aussie mortgage holders are expected to be spared another back-to-back interest rate hike next month following a jump in the unemployment rate. Major bank NAB has pushed back its rate hike expectations, while Westpac and ANZ say the numbers reaffirm expectations the Reserve Bank of Australia (RBA) will hit pause in June.
NAB shifted its call for a final rate hike from June to August, after the unemployment rate hit 4.5 per cent in April to mark its highest level since the pandemic. The number of employed people fell by 18,600 in the month, while the number of unemployed rose by 33,000.
The jobless rate was higher than NAB had expected, with senior economist Taylor Nugent stating the soft print would challenge the RBA’s judgement that the labour market would remain resilient this year.
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“There is now less urgency for the RBA Board to lean more firmly against inflation risks, and the balance of risks has shifted in favour of the Board’s characterisation that they have some ‘space’ to monitor incoming data for both inflation and activity impacts due to higher oil prices and uncertainty coming out of the Middle East,” Nugent said.
Westpac economist Ryan Wells said the data included some “abnormal” seasonality due to Easter, but it was “still genuinely weaker than expected”.
“Our call for the RBA to pause in its June policy meeting is now high-conviction, and the chance that the RBA waits even longer is non-zero,” Wells said.
“Ultimately, though, the most immediate and pressing concern for the RBA is inflation. We continue to expect that the RBA will resume raising the cash rate when the size and pace of pass-through of the energy price shock is revealed.”
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Westpac is expecting further rate hikes in August and September, which would take the cash rate to 4.85 per cent.
ANZ chief economist Adam Boyton said the numbers supported the bank’s expectations that the RBA will hit “pause” at the June meeting.
“We suspect that the RBA will still choose to assess the labour market as ‘tight’ in the June post-meeting statement,” he said.
ANZ and Commonwealth Bank do not currently expect any further interest rate hikes in this cycle.
Commonwealth Bank senior economist Trent Saunders said the data showed signs that labour market conditions were easing.
“However, it is too early to tell how much of the rise in the unemployment rate in April reflects noise or a more fundamental shift in underlying momentum,” he said.