Commerzbank’s Volkmar Baur notes Australia’s labour market remains robust, with unemployment at 4.1% and solid job creation, supporting the Reserve Bank of Australia’s recent hike. However, wage growth is subdued and real wages flat, leading Commerzbank to expect only one further rate increase, viewing current market pricing as too optimistic and AUD upside capped.

Strong jobs but muted pay pressures

"The Australian labor market continues to be in very robust shape, as data released on Thursday shows. Unemployment remained at 4.1%, which is very low by historical standards, while job creation was also solid, with 17,800 new jobs added."

"However, we remain cautious. Data from Wednesday also shows that low unemployment does not seem to be translating into strong wage growth."

"Since trimmed mean inflation in the past quarter was also 3.4% year-on-year, real wage growth in Q4 2025 was actually zero. This is not exactly a figure that would cause concern about inflationary effects."

"Nevertheless, we would assume that the central bank will only raise interest rates one more time. The current market expectations therefore seem somewhat too optimistic to us, which will limit the AUD's further upside potential in the coming months."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)