Australian job advertisements surged by the most in a decade in February while firms reported improving sales and confidence, providing fresh signs of economic strength that add to the case for yet higher interest rates. The Australian dollar edged up and interbank futures eased as investors narrowed the odds for another hike as early as April, though May and June are more favoured given it was just a week since the last move.
The Reserve Bank of Australia (RBA) has already lifted its cash rate by 100 basis points since October as the economy surprised everyone with its vigour. "We have rises pencilled in for May, August and November," said Alan Oster, chief economist at National Australia Bank.
"That said, every meeting in 2010 is probably live and a decision will very much be data dependent," he added. "We expect rates to be around 4.75 percent by end-2010." The market currently shows around a 36 percent chance of a hike to 4.25 percent in April, up from as little as 22 percent last week.
Interbank futures imply around a 70 percent chance of a move in May and are fully priced for June. Much will depend on whether the labour market sustains its amazing run. A massive 194,600 jobs were created between October and January, driving the unemployment rate down half a percentage point to 5.3 percent.
The February jobs report is due on Thursday and another strong outcome would greatly add to the risk of a hike in April. Going by Tuesday's data on labour demand, that was a distinct possibility. ANZ's monthly measure of job advertisements in newspapers and on the Internet jumped 19.1 percent in February, the biggest increase since web ads were included in 1999.
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