National Australia Bank has pushed back its time frame for the next cash rate increase after the unemployment rate jumped in April.
National Australia Bank (NAB), which had previously expected a June hike, now believes the Reserve Bank of Australia (RBA) will wait until the August board meeting before lifting the cash rate again.
NAB’s change of view follows the April Labour Force figures, which showed seasonally adjusted employment falling by 18,600 to 14.74 million people and the unemployment rate rising 0.2 percentage points to 4.5 per cent – the highest level since the current tightening cycle began.
Trend figures painted a more measured picture, with employment up 22,100 to 14.75 million and the jobless rate holding steady at 4.3 per cent.
NAB senior economist Taylor Nugent said the numbers sat uncomfortably alongside the RBA’s latest statement on monetary policy, which forecast unemployment averaging 4.2 per cent in the June quarter and ending the year closer to 4.3 per cent.
He said that the April outcome “challenges” those figures and highlighted rising risks on the full‑employment side of the central bank’s dual mandate.
Nugent also stressed that the result reduced the pressure on the RBA to move quickly.
“There is now less urgency for the RBA board to lean more firmly against inflation risk,” Nugent said.
“As a result, we have pushed our expectation for a further 25bp increase in the cash rate to the August meeting.”
CBA sees labour market turning – but slowly
Commonwealth Bank of Australia (CBA) senior economist Trent Saunders described the data as a clear sign that conditions were no longer tightening.
“The April labour force survey pointed to a softening of labour market conditions. Employment fell notably and the unemployment rate increased to its highest rate since November 2021,” Saunders said.
However, he cautioned against reading too much into a single month.
“At this stage, it is too early to tell how much of the rise in the unemployment rate reflects noise or a more fundamental shift in underlying momentum,” Saunders said.
Looking further out, CBA expects a gradual loosening in labour conditions and still believes the May hike was the last rise of the tightening cycle.
“In trend terms, we expect the unemployment rate to rise from here as economic growth in Australia slows, we expect a peak of 4.7 per cent in late 2027,” he said.
Westpac emphasises seasonality, yet backs longer pause
Westpac economist Ryan Wells took a more cautious line on how much signal to take from the April print.
He said the RBA would be aware that “some of this weakness captures an ‘abnormal’ seasonality with Easter, and so it will expect some payback in the May LFS update once this effect washes out”.
Yet he said the data had reinforced Westpac’s view that the RBA would sit tight at its next meeting.
“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.”
Westpac maintained its view that the RBA would hike the cash rate at its August and September meetings.
The bank is forecasting the unemployment rate to lift to a “quarter-average of 5 per cent in early 2027”.
ANZ still sees 4.35% as peak
Australia and New Zealand Banking Group, meanwhile, still believes that the current cash rate of 4.35 per cent represents the high point of the cycle.
Yet head of Australian economics, Adam Boyton, said the RBA would likely stick with its assessment that conditions are still tight at its June meeting, even with unemployment at 4.5 per cent.
Boyton did, however, acknowledge that the ground was shifting.
“The time is approaching when the RBA will need to describe the labour market as ‘balanced’,” he said.
On policy, he said that “overall, today’s print supports our case that 4.35 per cent will mark the peak for the cash rate over this cycle”.
[Related: RBA reveals logic behind May hike as majors split on outlook]
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