Just the job for a rates rethink

Today's strong employment data significantly shrinks the chance of a rate cut in March, and it's now conceivable the next Reserve Bank move could be a hike.

Today's unemployment data have shocked financial markets and those economic pundits who have hogged the output of innumerable power stations publishing silly predictions of labour market gloom and economic Armageddon for the Antipodean nation.

Against almost all expectations – with the exception of this correspondent – Australia's unemployment rate has fallen to 5.1 per cent for the second month running on the back of very strong total jobs growth of 46,300 persons and, importantly, an unchanged participation rate.

As UBS's Scott Haslem commented, "The unemployment rate unexpectedly fell 0.14 percentage points to 5.1 per cent, after several months at 5.2 per cent, and down from a recent peak of 5.3 per cent in Aug/Sep last year... Overall, this was an undeniably strong print for the month... the unemployment rate now more clearly looks to be edging back down from its modest rise to 5.3 per cent (from a recent low of 4.9 per cent in April last year).

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