Australian job advertisements slid for the 11th straight month in March, a survey showed on Monday, painting a bleak outlook for unemployment and adding to the case for another cut in interest rates as early as this week.
The prospects of an easing in monetary policy at the Reserve Bank of Australia's (RBA) meeting on Tuesday were further enhanced by a private gauge of inflation which showed a slackening in price pressures in March. "The RBA will take comfort from the dip in prices and as a result it is likely to resume the interest rate cutting cycle when it meets tomorrow," said Stephen Koukoulas, global strategist at TD Securities.
He expects a cut of half a percentage point to 2.75 percent.
The market has been divided on the chance of an easing after the RBA skipped a move in March, with a Reuters poll of 21 analysts finding 13 expected no move and the rest a cut.
RBA watchers in the media have also been at odds, with one influential commentator tipping no change and another a reduction to 2.75 percent.
After Monday's data, investors ratcheted up the betting on a cut with interbank futures rallying and swap rates pricing in 35 basis points of easing. "The case for a 50 basis-point cut remains strong," said Rory Robertson, interest rate strategist at Macquarie Bank. "The economy has surprised the RBA significantly on the downside since February, with the downturn it forecast morphing into a recession it didn't."
Just last week, RBA Deputy Governor Ric Battellino effectively downgraded the central bank's forecast for the economy by predicting gross domestic product would decline this year, instead of growing marginally as previously expected.
UNEMPLOYMENT ON THE UP
The central bank has already cut its key cash rate by 4 percentage points since September, easily the most aggressive easing since the last recession in 1991.
The dramatic move has pulled mortgage rates sharply lower, boosting household income and supporting demand for homes.
Yet consumers are also chosing to save more and spend less, in part because they fear losing their jobs. The unemployment rate has jumped 0.7 percentage points already this year to 5.2 percent, and analysts expect data out on Thursday to show a further rise to 5.4 percent, the highest since September, 2004.
The bleak outlook was underlined by a survey from Australia and New Zealand Banking Corp which showed the total number of job advertisements in newspapers and on the Internet fell a steep 8.5 percent in March.
That brought the fall since March last year to a huge 44.6 percent, the biggest annual decrease on record.
"Sharply falling job ads is consistent with an extended period of labour market weakness that is likely to see the unemployment rate heading higher throughout 2009 and 2010," said said Warren Hogan, ANZ's head of Australian economics.
ANZ now expects the jobless rate to top 8 percent in 2010 and the economy as a whole to contract by 1 percent this year.
Also out on Monday was a monthly gauge of inflation from TD Securities and the Melbourne Institute, which showed a drop of 0.1 percent in March, the fourth fall in six months.
That brought annual inflation down to 2.6 percent, from 3.1 percent the month before, and back into the RBA's 2 to 3 percent target band, making it easier to justify another rate cut.
