Murky labour market data and an elf shortage

There are a few Antipodean events out for the week for markets to get their teeth into this week: NZ labour market data; the RBNZ’s Financial Stability Report (FSR), and; the Reserve Bank of Australia’s interest rate announcement.

The labour market data will, unfortunately, give a murky picture of what is going on.  We know the labour market was running red hot prior to the start of the delta community outbreak, but heat has come on businesses up and down the country as a result of months of disruption.  The response rate for the Household Labour Force Survey (HLFS) has been impacted, which reduces its reliability.  The Quarterly Employment Survey, an employer-based measure of jobs, likely missed the lockdown impact altogether.  For the record though, we expect the measured unemployment rate to print at 3.9%, but to rise in the future.  Wage pressures are likely to mount.

Wednesday morning brings the FSR, with housing a key financial stability risk the RBNZ is focusing on.  Introducing debt-to-income ratios is the next step the RBNZ will proceed with.  The FSR will be preceded by a speech Tuesday morning from RBNZ Governor Adrian Orr detailing “the unsustainable level of house prices” and “why the bank cares about the concentration of risk associated with housing and the current drivers of house prices”.

On Tuesday afternoon, financial markets will be bracing for both the Melbourne Cup and to see if the RBA starts to walk away from its bond yield target and its commitment to keep the cash rate on hold until 2024.