Sunday, May 31, 2009

Australian & New Zealand Weekly - RBA: On Hold In June; To Cut From August

Week beginning 1 June 2009

  • RBA: on hold in June, to cut from August.
  • Australian Q1 GDP: recession deepens as business cut spending.
  • Australian Q1 current account: as good as it gets.
  • Aus data: April - retail sales, building approvals, trade balance.
  • BoC, BoE & ECB: expected to leave rates unchanged.
  • US data: payrolls, ISM's, factory orders. core PCE deflator.
  • Key economic & financial forecasts.

RBA: On Hold In June; To Cut From August

The Reserve Bank Board meets on Tuesday. We expect the Board will decide to keep rates on hold for another month although as indicated in the Minutes from the May meeting there is likely to be a vigorous discussion on whether to cut rates again.

We do not expect the next move until the August Board meeting when a cut of 50bp's is entirely possible. Our view is that the Bank is not in the camp which is expecting the global economic recovery to be V shaped. Certainly the Bank's growth forecasts for 2009 and 2010 depict an economy which will experience its growth low point in the first three quarters of 2009 but the pace of recovery will be well below trend and weaker than is usually recorded as an economy comes out of recession. That means the Bank would see very limited risks in overstimulating and moreover, would be mindful of downside risks given the tentative pace of recovery. However the decision to wait seems the best option at this stage.

Financial markets (credit markets; government bond yield curves; commodity prices and commodity currencies) are currently flirting with a V shaped recovery. Whilst that may seem unlikely to the RBA why not wait for more data to assess those risks, particularly when the most important Australian data - the employment series, has just registered a 0.3ppts reduction in the unemployment rate. As forecasters we have to make a call on whether that single release was a 'rogue' number whereas the RBA has the luxury of waiting. We certainly believe that release was a rogue and are in line with the government's forecast that the unemployment rate will increase to around 8.25% by June next year. Given that the RBA and the government are broadly in line with their GDP forecasts (RBA does not release an unemployment forecast) we expect they would have a similar view to the government on the likely unemployment rate.

If the unemployment rate does climb to over 8% it would be extraordinary for the Bank to sit by and not be seen to be doing something to bolster confidence - especially when Australian rates are so much higher than other countries (including even NZ). However, without that expected deterioration in the labour market and a realisation through the second half of 2009 that the mooted V shaped recovery is an illusion, then our forecast will be wrong and market pricing, which is close to no more moves, will be right.

Over the last few days I have seen some of the largest real money managers in Europe. Among this group there is little belief in the sharp steepening of curves; the pricing of rate hikes in 2009; or the particularly rapid rate hike profile now priced into the Australian curve. The longer term 'thinkers' are dismissing current market mood as inconsistent with the economic outlook. Markets need to be dynamic. At the moment the focus is on quantitative easing; fiscal deficits and an improvement in the second derivative of data (contracting at a slower pace). It seems they are currently overlooking the convincing body of evidence that points to the slow patchy nature of any recovery associated with a financial crisis (let alone a globally coordinated crisis).

We expect that the deterioration in the Australian labour market will be apparent by August and that the markets will be on to the next big thing which is likely to be deflation risks; or ongoing financial difficulties; or recession continuing and improved second derivatives not translating into improved first derivative. Take your pick but this will all conspire to make the RBA's decision quite easy - lower rates.

Aust Q1 GDP: recession deepens as business cut spending

Conditions in the Australian economy weakened further early in 2009 as business responded to the global recession and as declining commodity prices lowered national income. The hit to incomes is evident from the labour market, where wages growth has slowed, and from company balance sheets, with declining profits.

Our Q1 GDP forecast is -0.2%qtr, -0.4%yr. Our non-farm GDP forecast is -0.3%qtr, -0.8%yr. Notably, non-farm activity contracted by 1.0% over the second half of 2008. A rapid rebound in farm output, from drought conditions, provided a partial offset.

With the world economy contracting particularly sharply in the final quarter of 2008 and again in the first quarter of 2009, as well as the widespread nature of the downturn, it would be remarkable if the Australian economy did not contract.

However, one consideration is the boost from the unprecedented $8.4bn cash handout from the Government to households in December, representing 3.0% of quarterly GDP. The upshot was that real retail sales accelerated to a 1.0% increase in Q1.

While acknowledging this risk, our top down assessment and recent updates on housing and business investment suggest the economy did contract in Q1, albeit modestly compared with our peers.

Private business surveys, which should incorporate the boost from the cash handouts, point to recessionary conditions. The Westpac- ACCI survey actual composite index fell 10.4pts to 34 in Q1. In addition, the Westpac-MI Leading Index turned negative from October and the Coincident Index took another leg down in Q1.

Moreover, we know that import volumes have collapsed, falling by an estimated 14% over Q4 and Q1. That points to a contraction in domestic demand and also, in our view, a further large inventory run-down (-2.0% in Q1, with a neutral impact on GDP).

We're forecasting private demand to contract by a hefty 1.8% in the quarter as business reacted to the recessionary environment by cutting investment spending (-8.0%). A further and significant adjustment in business investment will unfold over 2009.

By contrast, there was a temporary improvement in consumer spending (0.6%, up from 0.1% in Q4), on the back of the $8.4bn cash handout. An additional $12.7bn cash transfer, concentrated in Q2, will support household incomes in the near-term.

The downturn in dwelling construction intensified early in 2009, (-5.0%qtr, with new residential approvals down 24% from 2008Q2). However, a housing construction upswing, which is set to emerge later this year in response to recent very low interest rates and the FHB scheme, will help to lead the economy out of recession.

Public demand (as distinct from cash transfers) is cushioning the downturn. We expect a moderate rise of 0.9%qtr, ahead of a more significant boost during 2009/10.

The other sector that plays a supportive role in Australian recessions is net exports. That is again the case. A sizeable contribution of 1.0ppts is expected in Q1, as import volumes contracted sharply.

Australia: Data Wrap

Q1 construction work done

  • The eight year construction upswing has ended, with a 3.7% decline in the March quarter 2009. The fall, which was in line with expectations, will subtract almost 0.7ppts off Q1 GDP.
  • Construction activity is set to weaken significantly through 2009 and into 2010 as the global recession and associated tightening of lending conditions and lower commodity prices impact.
  • The level of construction activity was still very high at $34.5bn in the March quarter. The downturn follows a 114% rise between December 2000 and December 2008.
  • Private sector construction work fell by 6.2% in the quarter with widespread weakness.
  • The upswing in public works continued, with a rise of 4.4%. A further lift in public works is in prospect boosted by the Commonwealth's recent fiscal packages. This will cushion, but not fully offset, the downturn in private work.
  • There is some good news on the private sector front, with a recovery in residential activity set to emerge during the second half of 2009 - with low interest rates and the First Home Buyer scheme triggering a sharp rise in finance.

Apr private credit

  • Credit to the private sector expanded early in 2009 - but very slowly. Credit increased by just 0.1% in each of February, March and April, loweing 3mth annualised growth to 1.1% - the weakest pace since the post recession period of the early 1990s.
  • The response of business to the global and domestic recession is coming through. With firms looking to lower debt, business credit has contracted for the last three months, with a 0.5% decline in April.
  • Housing credit growth has improved since last August, albeit gradually, with a 0.7% increase in April. Significantly, investor housing credit growth appears to have turned the corner, with firmer results in March and April. We expect to see a further improvement in coming months.


  • The tone of the CAPEX survey was in line with our general view: business investment commenced a downturn in Q1, a significant downturn; and 2009/10 intentions were downgraded and now point to a contraction.
  • CAPEX spending in Q1 declined by 8.9%, with equipment falling by 10.8%. Weakness, was apparent in all sectors, although the drop in mining investment was less dramatic, down 1.2%.
  • The 2008/09 intentions have been progressively downgraded from, an originally reported, 29% rise (3rd est), to 24% (4th est), to 16% (5th est) and to 14% (6th est).
  • Investment plans for 2009/10 were downgraded, particularly by the manufacturing and services sectors.
  • The 2009/10 intention of $76.9bn implies a 4% decline in nominal spending, a downgrade from the 6% rise implied by the 1st estimate. Further downgrades are in prospect.
  • Our forecast is for total nominal business investment to decline by about 13% in 2009/10. In this cycle we expect real business investment to fall by 25% over the eight quarters to December 2010. That would be on a par with the last two recessions.

May Westpac-MI Leading Index

  • The annualised growth rate of the Westpac-Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months into the future, was -5.1% in March well below its long term trend of 2.8%. The annualised growth rate of Coincident Index was 0.7%; also well below its long term trend of 3.3%.

Round-up of local data released last week

Date Release Previous Latest Mkt f/c
Wed 27 Mar Westpac-MI Leading Index, annual'd -6.0% (r) -5.1% -
Q1 construction work done 2.3% -3.7% -3.0%
Thu 28 RBA Deputy Governor Battellino speaking - - -
Q1 CAPEX 7.3% -8.9% -5.0%
2009/10 CAPEX intentions, AUDbn 80.6 (r) 76.9 -
Fri 29 Apr private credit 0.1% 0.1% 0.2%

New Zealand: Week ahead & Data Wrap

Rating outlook: budge it up

This week's Budget was a reflection of the tough times, striking a balance between supporting the economy through the recession in the short term, and implementing fiscal discipline further out. While it wasn't as frugal as we thought it could have been, it was enough to satisfy the credit rating agencies.

As expected, the Budget revealed a worse economic picture underpinning the fiscal forecasts than depicted in the half-year update in December. Real GDP growth is forecast to remain well below trend over the next three years, registering growth of -0.9% in March 2009, -1.7% in March 2010, and just 1.8% in March 2011, as the impact of the global economic slowdown and a combination of domestic factors sees businesses and households cut back on investment and spending. Unemployment is expected to rise substantially over that period, peaking at 8% in September 2010.These are some reasonably conservative forecasts - the Government is clearly not counting on growing its way out of deficits.

With tax revenues falling sharply and spending commitments rising, the outlook has rapidly changed from surpluses to deficits for the foreseeable future. Without any changes to policy, gross Government debt was projected to be 70% of GDP and rising by 2023 - a prospect alarming enough to prompt Standard & Poor's to place New Zealand's foreign currency rating of AA+ on negative outlook back in January.

Some tough choices had to be made in order to keep projected debt at more manageable levels. In the end the Government took the path of least resistance, by maintaining existing entitlements (i.e. no-one is left significantly worse off) while cutting back on future policy commitments. That meant axing the personal tax cuts scheduled for 2011 and 2012, suspending contributions to the Super Fund, and reducing the allowance for new spending initiatives in future Budgets. While some have portrayed this as a slash-and-burn Budget, most of the ‘cuts' have actually come in the form of smaller projected increases in spending - Government is still set to expand from 31.8% of the economy in 2008 to 37.3% in 2010 and 36.3% in 2013. Indeed, we are a little surprised that the Government has not done more to rein in future expenses.

Even with these sacrifices, a return to operating surpluses isn't forecast until 2019. Gross debt is expected to lift from 17.5% of GDP in 2008 to 38.6% by 2013, and is not projected to peak until 2017 when it will reach at 43% of GDP. It appears this was sufficiently under control to satisfy the rating agencies, with S&P returning New Zealand's rating to a stable outlook and Moody's affirming their previous judgement.

The market response to the Budget was (1) relief that a rating downgrade had been avoided, and (2) a view that the Treasury's gloomy economic forecasts would put more pressure on the RBNZ to keep interest rates low for longer. We disagree with the latter, for two reasons. First, the RBNZ assesses inflationary pressures in terms of how the economy is performing relative to its potential; weak growth for a sustained period of time tends to be associated with weak potential growth as well, limiting the disinflationary effects.

Second, the fiscal stimulus projected in this Budget is well above what the RBNZ had factored in at the time of the March Monetary Policy Statement. The estimated fiscal stimulus was broadly unchanged for 2009, but more than doubled to 3.3% of GDP for 2010. The Treasury stressed that the increased stimulus reflects a non-policy related structural change, that is, a fall in revenue rather than an increase in spending - though we'd argue that choosing not to reduce spending in line with revenues is still a policy choice. On its own, the huge upward revision to the fiscal impulse would suggest that less work needs to be done by the RBNZ, not more.

There was plenty of other news this week, most of which supported our view that the RBNZ can afford to pause on rates at the 11 June MPS. Business confidence rose further in May, turning positive for only the second time in the last seven years. While many of the key indicators remain lower than in any previous slowdown, it appears that our forecast of a 1% decline in Q2 GDP may be too pessimistic.

Merchandise trade reached a $276m surplus in April. Meat and dairy exports benefited from good growing conditions and stabilising world prices. Imports remained soft, especially cars which are down 32% on a year ago. Export prices have held up better than the RBNZ expected, which in their minds will justify some of the recent strength in the NZD.

Residential building consents rose 11.2% in April, continuing their recovery from record lows in recent months. With little more than 1,000 consents being issued per month, the number of new homes being built is now below that required to keep pace with population growth - especially with net migration surging, as fewer Kiwis head offshore. Along with historically low mortgage rates and a marked increase in home sales in recent months, there is a clear signal for new home construction to pick up the pace.

On a more disappointing note, Fonterra's first payout forecast for the 2009/10 season was on the low side of expectations, at $4.55 per kg of milksolids. Fonterra tend to be conservative with their first estimate, but if this figure were to eventuate, dairy farmers' income would be by around $900m lower compared to the last season.

Round-up of local data released last week

Date Release Previous Latest
Tue 26 May Apr merchandise trade NZDm 447 276
Q2 RBNZ infl ation expectations 2.3% 2.2%
Wed 27 May May NBNZ business confidence -14.5% 1.9%
Thu 28 May Budget 2009 NZDbn 5.64 2.92
Fri 29 May Apr building consents s.a. -1.7% 11.2%

Data Previews

Aus Q1 company profits

Jun 1, Last: -6.5%, WBC f/c: -7.0%

Mkt f/c: -4.5%, Range: -11% to 1.0%

  • We expect to see another sharp fall in company profits, forecasting a 7% drop in Q1 after a 6.5% fall in Q4.
  • The mining sector - which has a 40% weight in this survey - is likely to be the major negative. Mining profits were resilient in Q4, rising 1.7%. However, commodity prices are off their highs, down more than 10% in Q1.
  • Profitability in the broader economy is under pressure as the recession bites. The ABS reported a drop of more than 10% in Q4. Declines were evident in all sectors, with particularly sharp falls in manufacturing and construction. We expect profitability in the non-mining sector to fall a little further in Q1, despite following such a large contraction in Q4.

Aus Q1 inventories

Jun 1, Last: -2.0%, -1.4ppts, WBC f/c: -2.0%, 0ppts

Mkt f/c: -1.4%, Range: -3.0% to flat

  • We're forecasting business inventories to be neutral for Q1 GDP growth. However, this forecast comes with a warning - the chance of a sizeable surprise is significant.
  • Firms are in a cutting mode as they look to lower costs and respond to weaker demand during this recession. Cutting back on inventory levels is one aspect of this adjustment.
  • We expect inventory levels to fall during 2009, but with a sharp 2.0% decline in Q4 the magnitude of any drop in Q1 is unclear. Our forecast is for a repeat of the 2.0% drop last period. The 1980s recession saw a similar rapid and dramatic adjustment, while the 1990s recession was less severe. One key reason to expect another chunky fall in inventory levels is the plunge in import volumes, -6.8% in Q4 and an estimated -7.5% in Q1.

Aus Apr retail trade

Jun 1, Last: 2.2% (sa, trend series suspended), WBC f/c: -0.5%

Mkt f/c: 0.5%, Range: -0.8% to 2.5%

  • Retail sales posted a surprisingly strong 2.2% bounce in March after a 2.0% fall in Feb. The Govt's 2nd round of fiscal payments started going out to consumers in March. These were expected to give a more muted initial boost to spending than the 1st package due to consumer caution and the more 'spread out' timing of payments. Govt spending figures suggest more of the stimulus was 'front-loaded' into March than initially thought (about $5bn of the $12.7bn). What is unclear is if there has also been some easing in consumer caution.
  • Policy influences (including rate cuts) will again be a major source of uncertainty for April retail sales. The strength of the March bounce suggests some pull-back, something also suggested by industry anecdotes. Overall we expect a 0.5% fall but the risks around this are very large, especially with design changes making a 'dog's breakfast' of the survey.

Aus RBA policy announcement

Jun 2, Last: 3.0%, WBC f/c: 3.0%

Mkt f/c: 3.0%

  • The RBA is widely expected to leave rates unchanged at the June meeting - as they did in March and May. The Bank is content to assess the impact of past rate cuts, particularly with evidence that the housing sector is in recovery mode.
  • With the cash rate at 3.0%, down from a high of 7.25%, the majority of the easing cycle has occurred. Interest rates, notably variable mortgage rates, are now at very low levels.
  • The timing of additional monetary policy easing is, in part, a tactical decision. We see 2.0% as the low point. With the unemployment rate set to rise sharply, this will create an environment in which the Bank is likely to feel the need to provide an additional stimulus to counter downside risks.

Aus Apr dwelling approvals

Jun 2, Last: 3.5%, WBC f/c: 1.5%

Mkt f/c: 2.0%, Range: -2.2% to 9.0%

  • The long awaited up-tick in dwelling approvals gained more convincing traction in March, rising 3.5% after an apartmentdriven 8% jump in February.
  • Key indicators continue to point to the start of an upturn in dwelling construction. Housing finance approvals for the construction & purchase of newly built dwellings continued to surge in March and are now up 46% from their August lows. New home sales are also up strongly (22% since Dec). Resurgent first home buyer demand has been the main driver.
  • Dwelling approvals have been slow to reflect this improvement and may continue to lag as finance remains hard to secure for developers. However, gains should be well sustained with a solid 1.5% rise forecast for April. However, the upturn won't lift actual building until 2009H2 with sharp falls likely in H1.

Aus Q1 current account balance, AUDbn

Jun 2, Last: -6.5, WBC f/c: -4.5

Mkt f/c: -5.4, Range: -6.1 to -4.5

  • We're forecasting the current account deficit to narrow by $2bn to $4.5bn in Q1. The trade surplus is expected to rise by $1bn as import volumes fall faster than exports. The net income deficit is expected to improve by $1bn, to a still hefty $9.5bn, on an improvement in net equity income outflows.
  • For Australia, this is as good as it gets. The quarterly deficit will represent just 1.5% of GDP. Since the start of the 1980s there have only been 4 quarters of deficit less than 2% (the last in 2001) and only 1 quarter of deficit less than 1.5% and that was back in 1980Q1.
  • The terms of trade weakened by 2% in Q1. Larger falls are in prospect in Q2 and Q3 as iron ore and coal prices step sharply lower. This is expected to see the current account deficit rise from Q2 and approach 6% of GDP by year end

Aus Q1 net exports

Jun 2, Last: 1.5ppts, WBC f/c: 1.0ppts

Mkt f/c: 1.0ppts, Range: 0.2ppts to 1.8ppts

  • Net exports are expected to make back to back hefty contributions to quarterly GDP. We're forecasting a contribution of 1.0ppt in Q1, following a 1.5ppts contribution. Prior to this, there were eight consecutive quarters of subtraction, with a cumulative impact of -4.2ppts.
  • In a race to the bottom, imports are the clear winner over the last six months as domestic demand contracts and the cost of imports are up on the lower AUD. Import volumes fell by an estimated 7.5% in Q1, after a 6.8% drop in Q4.
  • Export volumes fell by an estimated 4% in Q1, following small declines of less than 1% for the previous two quarters.
  • Going forward, we expect imports to contract at a slower pace and for net exports to be broadly neutral.

Aus Q1 public spending

Jun 2, Last: flat, WBC f/c: 0.9%

Mkt f/c: 1.4%, Range: 0.4% to 1.6%

  • Public demand, after disappointing over the second half of 2008, is forecast to rise by a moderate 0.9% in Q1. We saw public demand go sideways in Q4 and increase by 0.6% in Q3 - that was after a brisk 5.2% rise the year prior.
  • Governments, facing budget pressures, have been looking for "efficiency gains" - ie keeping a lid on the size of the public service. As such, growth in public consumption (80% of public demand) has slowed appreciably. We expect this constraint to remain evident in Q1.
  • The public investment upswing stumbled over 2008H2, with very little growth. State governments, unsure about their funding position, may have become more restrained. We expect the upswing to regain momentum in Q1, with the public construction data showing a healthy rise of 4.4%.

Aus Q1 GDP

Jun 3, Last: -0.5%, WBC f/c: -0.2%

Mkt f/c: -0.2%, Range: -0.7% to 0.1%

  • The Australian economy most likely contracted in Q1, with our forecast for GDP of -0.2%qtr, -0.4%yr. Sizeable declines in dwelling construction and business investment were the major drag on activity in the quarter.
  • A major upside risk is from the unprecedented $8.4bn cash transfer from the Commonwealth to households in December, representing 3% of quarterly GDP. That saw real retail sales accelerate to an increase of 1.0% in Q1. The volatile inventories data is also a key risk.
  • The global backdrop and private business surveys, which should capture the retail boost, point to the Australian economy being in recession. We note that the non-farm economy has contracted since mid-2008.

Aus Apr trade balance, AUDbn

Jun 4, Last: 2.50, WBC f/c: 0.35

Mkt f/c: 1.7, Range: -1.0 to 3.0

  • The trade surplus is expected to narrow sharply in April - to a forecast $350mn, down from $2.5bn in March - because of lower commodity prices, particularly from coal.
  • Exports are forecast to fall by 11%. The higher AUD, up 7% to US71¢, lowers both export and import prices. Also, commodity prices are down 14% in US terms, with coal prices cut in half. Imports are forecast to fall by just 2.5%, with published customs data showing goods down only 2%. However, that follows sharp falls of late in response to weak demand.
  • Risk: we do not expect iron ore price changes (likely to be -40%) to be in the April release, but rather to be incorporated as a revision when annual contracts are finalised. This was the approach adopted last year. When iron ore prices are updated the trade balance is likely to be close to deficit.

US Apr core PCE deflator

Jun 1, Last: 0.2%, WBC f/c: 0.2%

  • The core PCE deflator was flat in Q4 2008, but rose 0.2% in each month of Q1 this year. It is currently running at 1.8% yr, just above the 1.7% yr recorded in Jan, which was its lowest since early 2004, when deflation fears were last circulating through the US Federal Reserve and indeed in the market.
  • Those concerns do seem to be abating again, given the slower pace of economic decline and the aggressively reflationary policies pursued by governments globally.
  • Core CPI was just above zero per month in late 2008, but rose to 0.2% through Q1 and was 0.253% in April. Core PCE tends to be a little lower, hence our 0.2% April forecast.
  • Also in the release, personal income is likely to decline given falling hours worked and minimal earnings growth; weak retail sales means personal spending was at best flat in April

US May ISM factory and non-manufacturing reports

Jun 1, Factory Last: 40.1, WBC f/c: 44.0

Jun 3, Non-Man Last: 43.7, WBC f/c: 46.0

  • The regional Fed surveys all recovered somewhat in May, consistent with a slower pace of industrial decline in the middle of the second quarter, although one (Richmond) actually turned slightly positive for the first time in a year.
  • We expect ISM manufacturing to follow a similar pattern with a further improvement likely in May, though we do not expect any of the activity components (or the headline) to rise back above 50 for some months yet.
  • The non-manufacturing index should follow the general pattern of global PMIs, which has been one of "less contraction" so far in the second quarter. The recent upswing in energy prices might be a constraining factor on serviceprovider confidence.

Banks of England & Canada & European Central Bank

Jun 4, BoE Last: 0.5%, WBC f/c: 0.5%

Jun 4, ECB Last: 1.0%, WBC f/c: 1.0%

Jun 4, BoC Last: 0.25%, WBC f/c: 0.25%

  • The BoE policy committee unanimously voted to keep rates on hold at 0.50% and to extend the quantitative easing program by two months and £50bn in May. With some signs that the pace of economic decline might be abating, we expect the status quo to be maintained in June - steady rates and no further QE announcements.
  • The ECB is due to provide details of its €60bn covered bond purchase program, which will be sterilised (ie the cash mopped up in liquidity operations) so is not really "QE" - yet! Still some chance of a further rate cut but that is not our forecast.
  • In April the BoC committed to hold rates steady at 0.25% till 2010. BoC officials have suggested there is "less need" for QE so the June announcement is unlikely to reveal anything new.

US May non-farm payrolls to fall by 520k

Jun 5, Payrolls Last: -539k, WBC f/c: -520k

Jun 5, Unemployment Last: 8.9%, WBC f/c: 9.3%

  • April's 539k payrolls decline was the smallest for six months, although most of the detail in the report - hours worked, earnings, unemployment - remained consistent with a chronically weak labour market. Govt jobs were boosted by 2010 census hiring, without which payrolls would have fallen by 600k.
  • Initial unemployment insurance claims, consumer job market expectations, and the employment indicators in the regional business surveys all indicate that job losses, while still very steep, have past their peak. Auto sector layoffs and modest further census hiring could be offsetting special factors.
  • A surprise jump in the Apr household survey jobs measure is likely to be reversed in May, contributing to another sharp rise in the jobless rate.

Westpac Institutional Bank


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