NAB changes rate cut call to May 2025
Key takeaways
The latest unemployment rate remains steady at 4.1%
This will challenge the RBA’s forecast for it to rise to 4.3% in Q4 2024…with less confidence in its inflation trajectory as a consequence
The NAB changed its RBA rate cut call to May 2025.
The NAB has changed its rate cut forecast from February 2025 to May 2025.
This comes after the latest unemployment rate came in steady at 4.1% for October.
Even though this was widely expected, it does challenge the RBA’s forecast track of the unemployment rate increasing to 4.3% in Q4 2024.
The NAB believes that given the labour market is stronger than expected and the RBA’s concerns about upside risks to inflation, it is unlikely the RBA will be confident enough to cut rates as soon as February 2025.
As a result the NAB pushed out its call for the first rate cut to May 2025.
The NAB also noted that there is a real risk that policy rates stay on hold even longer should the labour market remain tight and services inflation remain elevated.
The latest Labour Force Report for October paints a picture of a still very tight labour market.
The unemployment rate stayed steady at 4.1%, a level it’s held since June 2024.
And if that wasn’t enough to show how tight things are, underemployment dipped slightly to 6.2%—the lowest it’s been since April 2023.
While the overall job growth figure came in at 15,900 (a bit below the expected 25,000), the trend number, which smooths out the bumps, was much stronger at 36,800.
Hours worked edged up by 0.1% month-on-month, aligning with this steady job growth.
So, how does a slightly lower-than-expected job growth number match up with an unchanged unemployment rate?
The answer lies in the participation rate, which ticked down just a touch from 67.2% to 67.1%.
But even so, it’s still hovering near all-time highs.
When we break it down by state, Victorian unemployment is lagging a bit behind, sitting at 4.5% compared to 4.0% in New South Wales.
Overall, this latest snapshot of the job market really confirms its strength.
NAB’s quarterly business survey highlights that businesses are still struggling to find workers, and job vacancies remain high. It’s clear that despite a few fluctuations, the labour market remains robust.
Source of all charts National Australia Bank
