Australian labour force data for June came in well ahead of expectations,with employment rising 76.3k against consensus and our forecasts of+15.2k and +16.5k respectively, while the unemployment rate held steadyat 4.4%. Looking at the composition of jobs growth, both FT and PTemployment jumped strongly, with FT employment rising 29.3k, while PTemployment was up 47k. The participation rate rose to near record highsof 67% (from 66.7%), and was largely the reason the unemployment rateheld steady through the month.Overall, the data pointed to some resilience in the labour market, thoughthe monthly series can be volatile. The ABS noted that part of the growthin employment this month came from those who were waiting to start ajob in May, representing a stronger June movement than has beenobserved in recent years.Looking through the noise of the monthly data, we still see signs ofcooling in the Australian labour market, with employment growth(3m/3m) steadying at 0.25% and largely supported by stronger PTemployment growth. Labour force growth (3m/3m) was also steady at0.47%, well ahead of labour demand. In our view, this trend will continueto push the unemployment rate higher over time, and we continue toexpect it to peak at 4.6% by late 2026.The Aussie dollar jumped as high as 70.2 US cents following the release,as the data came in well ahead of expectations. We'd expect ratemarkets to firm their pricing for a further RBA hike later this year, but westill don't see the case. The labour market continues to show signs ofcooling (as highlighted above), and the economy is expected to slowfurther as it absorbs the full impact of the RBA's recent hikes. We alsocontinue to expect inflation to ease further in the second half of this year,though the recent escalation in the Middle East poses some upside riskto that view. Additionally, the unemployment rate at 4.4% now sits0.2ppts above where the RBA expected it to be in its May-26 SMP. Whilewe expect these forecasts to be revised when the Board meets nextmonth, we expect the revisions to be to the upside. Overall, we retain ourview that the RBA remains on hold for the remainder of this year and into2027, before cutting rates in mid-2027.
