SYDNEY: Australian unemployment tumbled in May in response to a burst of hiring, further fuelling expectations that Reserve Bank governor Philip Lowe will not extend the timeline of the bank’s yield control measures next month.
The unexpected drop in the jobless rate to 5.1% in May, despite a paring back of government employment support points to a recovery that is charging ahead of the curve.
It will also likely strengthen speculation that the Reserve Bank of Australia (RBA) will raise interest rates earlier than previously thought amid heightened global expectations of a pulling back of crisis stimulus following the Federal Reserve’s latest policy meeting.
The strong labour market data showing the creation of 115, 200 new jobs, almost four-times the expected number, came less than two hours after Lowe said the bank saw scenarios in which interest rates could go up in 2024.
Lowe said a July 6 decision on whether to roll over the yield target to the November 2024 bond from the current April 2024 depended on the probability of an interest-rate rise in the next three years.
“The board will review these scenarios at its next meeting, ” he told an Australian Farm Institute Conference in Queensland.
The yield on sovereign bonds maturing in November 2024 surged as much as 12 basis points as investors bet that a more hawkish Fed and the stronger jobs data add to the case for the RBA to decide against rolling forward its yield control. — Bloomberg