Australia's march job dip: economic challenges ahead, RBA rate decision looms

The Australian economy shed 6.6k jobs in March, contrasting sharply with the significant 116.5k job increase in February. Unemployment ticked up to 3.8% from the previous 3.7%, as the participation rate slightly declined to 66.6% from 66.7%.

The underutilisation rate, encompassing both unemployment and underemployment, held steady at 10.3%. This figure represents a modest 0.5 percentage point rise from March 2023, yet it stands 3.6 percentage points below the March 2020 level.

The Australian Bureau of Statistics (ABS) noted that "the flows into employment had returned to a more usual pattern," referring to the seasonal holiday distortions that have hampered the ABS's labour force data in recent months.

Labour market tightness and RBA rate speculation

Although today's figures are unlikely to influence the upcoming RBA meeting—where it's widely anticipated that rates will be maintained—the persistently tight labour market may cause reconsideration among those advocating for RBA rate cuts before the latter half of the year.

The market will seek further insights into the economy's trajectory and the path of RBA interest rates from the following key data ahead of the next RBA meeting on May 7th.

• Q1 inflation (Wednesday, the 24th of April
• Retail sales (Tuesday, the 30th of April)

We reiterate our call for the RBA to cut rates by 25 basis points (bp) in August before a second cut in November, which will see the cash rate end the year at 3.85%. However, we may push back the expected timing of rate cuts if next week's Q1 inflation data is hotter than expected.

Australian unemployment rate

AUD/USD technical analysis

Last week's reversal lower from Tuesday's .6644 high saw the AUD/USD cascade through several important support levels, including the 200 days moving average at .6540.

As a follow-up to the main act, the AUD/USD broke below its year-to-date low of .6442 this week, trading to a fresh five-month low of .6389.

While the AUD/USD is now oversold, it needs to clear short-term resistance at .6450 to alleviate short-term downside pressures and avoid another step lower towards weekly support at .6330.

AUD/USD daily chart

• ^{Source TradingView. The figures stated are as of 18 April 2024. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}