The exits from the bull camp for Australian interest rates have been full since the RBA’s Board meeting earlier this month but not everyone is so convinced that we’ll have to wait till 2014 for a possible rate cut.
JP Morgan in a weekly note to clients says they still think the RBA has an easing bias even if it is data-dependent. On this front unemployment is widely viewed in the market as the most likely key to the future path of interest rates in Australia and on this JPM says:
Thursday’s labour force survey should support our call for a further 25bp rate cut at the early November meeting, with the unemployment rate likely to climb to 5.9%, a new cycle high.
Markets will get a lead on this at 11.30am AEDT today with the release of the ANZ job ads which are a great lead on overall employment in Australia.
But the more interesting part of JPM’s thought process is the take on Business Confidence. The NAB Business survey will be released also at 11.30am and is arguably the single most important data release in Australia each month because of the depth of coverage in the sub-indices.
RBA officials previously have expressed their bemusement with the low level of business confidence, which has been tracking in a dire range for the past two years, despite the cash rate diving 225bp. We expect this trend to have continued in this week’s release, with the NAB business measure to tick lower. More importantly, we expect the conditions indices to stay in negative territory.
This will be an interesting release in that it will either confirm or deny the recent improvement in the AiG manufacturing, Services and Construction indices.
We’ll know more at 11.30am – stay tuned.
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