AUSTRALIA DATA: Weak Productivity, Rising Compensation & ULC Above 5% y/y
There was no progress on the productivity front in Q1 with GDP per hour worked posting its second consecutive unchanged quarter leaving it down 0.9% y/y. A 0.2% q/q drop in Q2 is needed to reach the RBA’s May Q2 productivity forecast of -0.6% y/y, and so that remains possible but may be a little pessimistic. Unit labour costs growth rose again at 5.1% y/y up from 4.7% and the highest since Q2 2024.
Australia productivity vs ULC y/y%
Source: MNI - Market News/ABS
- Average compensation per employee rose 1.0% q/q, the second straight quarterly rise around 1% or above since Q3 2022. Annual growth picked up to 3.7% y/y from 3.5%. Q1 WPI inflation rose 0.2pp to 3.4% y/y. While wage growth is subdued it appears to be picking up and with weak productivity growth is not consistent with the RBA’s inflation target.
- Total employee compensation rose 1.5% q/q to be up 6.5% y/y in Q1, the highest in a year, after 2.0% & 6.0%.
- The current RBA GDP outlook and slower but steady hours worked doesn’t achieve sustained productivity growth of the historical average of 1%. If hours fall over the rest of 2025, then some solid growth can be realised above 2%.
- Unit labour cost growth would slow to around 2.5% y/y if hours worked continue to rise but if they fall then it will trough at around 0.5% y/y.
Australie average compensation per employee y/y%
Source: MNI - Market News/LSEG
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AUD: AUDUSD Continues Trending Higher On US$ Weakness, AUDNZD Lower
AUDUSD is off its intraday low of 0.6432 to be up 0.5% to 0.6468 following Friday’s outperformance. It reached a high of 0.6481 earlier helped by US President Trump suggesting today that some trade deals could be announced this week. With the US dollar continuing to weaken (USD BBDXY index -0.4%), the G10 is broadly stronger against the greenback.
- AUDJPY is lower in the softer risk environment. The pair is down 0.2% to 93.25 after a high of 93.59.
- AUDNZD has trended down through the session and is now -0.2% to 1.0816 after a low of 1.0814.
- AUDEUR is little changed at 0.5703 off the intraday trough of 0.5686. AUDGBP is 0.2% higher at 0.4865.
- Many Asian markets are shut today but equities are generally weaker with ASX down 0.8% and TAIEX -2.1%. The S&P e-mini is down 0.7%. Oil prices are sharply weaker with WTI -3.9% to $56.01/bbl. Copper is up 0.6% and iron ore is steady around $97/t.
- Later US services ISM/PMI data are released. The UK is closed.
ASIA STOCKS: Strong Inflows Continue Resume for Taiwan
Taiwan has experienced very strong inflows as signs of a thawing in the trade war resonate with investors.
- South Korea: Recorded outflows of -$65m as of Friday, bringing the 5-day total to +$722m. 2025 to date flows are -$12,329m. The 5-day average is +$144m, the 20-day average is -$254m and the 100-day average of -$144m.
- Taiwan: Had inflows of +$1,244m as of Friday, with total inflows of +$2,144m over the past 5 days. YTD flows are negative at -$17,215. The 5-day average is +$429m, the 20-day average of +$53m and the 100-day average of -$173m.
- India: Had inflows of +$20m as of the 30th, with total inflows of +$1,814m over the past 5 days. YTD flows are negative -$12,266m. The 5-day average is +$363m, the 20-day average of +$74m and the 100-day average of -$111m.
- Indonesia: Had inflows of +$8m as of Friday, with total inflows of +$18m over the prior five days. YTD flows are negative -$3,055m. The 5-day average is +$4m, the 20-day average -$51m and the 100-day average -$37m
- Thailand: Recorded outflows of -$41m as of Friday, outflows totaling -$12m over the past 5 days. YTD flows are negative at -$1,645m. The 5-day average is -$2m, the 20-day average of -$24m the 100-day average of -$19m.
- Malaysia: Recorded inflows of +$80m as of Friday, totaling +$227m over the past 5 days. YTD flows are negative at -$2,579m. The 5-day average is +$45m, the 20-day average of -$16m and the 100-day average of -$32m.
- Philippines: Saw inflows of +$12m as of Friday, with net inflows of +$45m over the past 5 days. YTD flows are negative at -$252m. The 5-day average is +$9m, the 20-day average of -$2m the 100-day average of -$4m.
INDONESIA: VIEW: Goldman Sachs Expects 100bp Easing By End-2025
The impact on headline inflation of the government’s electricity discount continued to unwind in April with the CPI rising 1.95% y/y from 1.0% y/y in March and -0.1% in February. Core remained at 2.5% y/y for the third consecutive month but well within Bank Indonesia’s (BI) 1.5-3.5% target corridor. Goldman Sachs continues to forecast BI will ease by a further 100bp by end-2025 if the rupiah will allow it. It sees a risk that rate cuts could continue to be delayed if the “IDR continues to underperform peer currencies”.
- GS said “Indonesia's headline CPI inflation increased to 2.0% yoy in April, returning to the central bank's inflation target band of 1.5-3.5% (vs. 1.0% yoy in March). Today's reading was above our and Bloomberg consensus expectations. On a seasonally adjusted, sequential basis, headline CPI slowed to 1.1% mom s.a. in April from 1.6% mom s.a. in the previous month.”
- “Housing and utilities inflation rebounded to 1.6% yoy in April (vs. -4.7% yoy in March) mainly from a normalization of electricity tariffs. This contributed 26bp towards the headline inflation in April, compared to -77bp the previous month.”
- “Core inflation, which excludes food and administered goods, was unchanged at 2.5% yoy in April as faster personal care inflation driven by high gold prices being offset by generally slower domestic goods and services inflation.”
