Australia’s seasonally adjusted unemployment rate rose to 3.7% in Jul, from 3.5% in Jun, signaling the labour market may be at a turning point. Separately, wages disappointed again, with the wage price index (WPI) rising 0.8% q/q in 2Q23, against consensus of a 0.9% increase. Annually, wage growth eased to 3.6%, from a decade-high of 3.7% in 1Q23. 

The RBA has held rates unchanged for two consecutive months, and following the slew of data we think they will keep policy unchanged at its next two meetings on 5 Sep and 3 Oct, unless we get upside inflation surprises from Jul CPI data on 30 Aug and Aug CPI data on 27 Sep.

However, we believe there is a chance it will hike one last time this year, taking the cash rate target to a peak of 4.35%. In terms of timing, this is likely to occur at the 7 Nov meeting, following the release of the 3Q23 CPI on 25 Oct.