Standard Chartered’s Nicholas Chia notes that recent Australian economic data, including a rise in the unemployment rate, weaker PMI readings, and moderating wage growth, support the view that the Reserve Bank of Australia (RBA) has likely reached its peak cash rate of 4.35% [1]. Specifically, Australia’s unemployment rate increased by 0.21 percentage points to 4.49% in April, marking the highest level since late 2021 [1]. Additionally, the flash services PMI for May declined to 47.7, indicating contraction, while Q1 wage growth eased to 3.3% year-on-year, aligning with the RBA’s latest forecast [1].
Despite these softer indicators, Chia cautions against describing the labour market as 'breaking,' noting that monthly hours worked were still up 0.8% month-on-month on a seasonally adjusted basis [1]. Standard Chartered believes that the April labour market report reinforces the view that the RBA’s cash rate may have peaked at 4.35% [1]. The bank sees a high threshold for further rate hikes unless there is a re-acceleration in demand, especially given the government’s fiscal restraint in the latest budget [1].
Looking ahead, Standard Chartered suggests that only a sharp deterioration in economic activity—while not their base case—could prompt the RBA to consider unwinding some of this year’s policy tightening [1]. No immediate market reaction or analyst consensus beyond Standard Chartered’s view is discussed in the article.
CONCLUSION
Recent Australian economic data points to a cooling labour market and subdued activity, supporting the view that the RBA’s cash rate has likely peaked at 4.35%. Unless economic conditions worsen significantly, further rate hikes appear unlikely, and policy easing would only be considered if activity deteriorates sharply.