Australia's jobs roar back in October, rate cut prospects tumble

By Stella Qiu SYDNEY (Reuters) -Australian employment surged in October as firms took on more full-time workers, pulling the jobless rate down from a four-year high and bolstering a growing view that the current easing cycle may have run its course. The strong report sent the Australian dollar up 0.3% to a ten-day high of $0.6560, while three-year government bond futures tumbled 11 ticks to 96.17, the lowest in over seven months. Markets were quick to sharply scale back the chance of any more policy easing from the Reserve Bank of Australia next year, with the probability for a May cut collapsing to 25%, down from nearly 70% before the data. "Today's print is both a blessing and a curse for the RBA," said Harry Murphy Cruise, head of economic research for Oxford Economics Australia. "Renewed strength in the labour market risks putting upward pressure on prices at a time when inflation is already rising." Figures from the Australian Bureau of Statistics on Thursday showed net employment rose 42,200 in October from September, when it increased 12,700. That was far above market forecasts of a 20,000 gain, and underpinned by a 55,300 surge in full-time roles. The participation rate held steady at 67%, while hours worked rose another solid 0.5%. Most crucially, the jobless rate eased back to 4.3% from 4.5%, which had been the highest reading since November 2021. INFLATION PRESSURES KEEP RBA CAUTIOUS The RBA held interest rates at 3.6% this month after three rate cuts this year, saying it was cautious about easing further given higher inflation, firmer consumer demand and a revival in the housing market. A surprisingly high third-quarter inflation reading meant the central bank now saw inflation stuck above the 2-3% target band until mid-2026 and settling at 2.6%, above the 2.5% mid-point of its target range. It has judged the labour market to be on the tight side, but does not expect much loosening from here, with the jobless rate forecast to hover at 4.4% for the foreseeable future. The robust jobs added to a slew of upbeat data suggesting there was little urgency for the RBA to cut rates anytime soon as policymakers debate whether the monetary policy is restrictive. Business surveys are generally upbeat and the consumer mood turned optimistic for the very first time in nearly four years as lower borrowing costs and past tax cuts feed through to incomes. "The Reserve Bank has highlighted that the economy may be close to its supply capacity, which means it cannot cut the cash rate much further, if at all, without generating inflation," said Cherelle Murphy, chief economist at EY. "A surprise uptick in underlying inflation and a continuation of the tight jobs market means there may be no more interest rate cuts in the foreseeable future." (Reporting by Stella Qiu; Editing by Jacqueline Wong and Shri Navaratnam)

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