In May 2025, ANZ Job Advertisements dropped by 1.2% compared to a previous decline of 0.3%. This suggests a decrease in job opportunities across Australia during this time. The Melbourne Institute’s monthly inflation gauge showed a 0.4% decline month-on-month, marking the largest drop in 33 months. On a yearly basis, inflation fell from 3.3% in April to 2.6%.

Trimmed Mean Analysis

The trimmed mean, which offers a more stable view, decreased by 0.3% month-on-month. This is the biggest drop in three years, with a year-on-year decline from 3.3% in April to 2.8%. Clearly, there is a noticeable drop in labor demand alongside slower price growth. The consecutive monthly decline in job ads indicates that businesses are becoming cautious. As hiring slows, it appears that employers are hesitant to bring on new staff due to weaker demand and ongoing cost concerns. When companies reduce recruitment, this often signals a future slowdown in overall economic activity. Inflation dynamics are shifting more rapidly than many anticipated. The 0.4% month-on-month decline in the headline figure is significant—it represents the steepest drop in nearly three years. Comparatively, inflation decreased from 3.3% to 2.6% year-on-year, comfortably within the RBA’s target range. The trimmed mean, which eliminates unpredictable items, has also seen a notable decline, easing to 2.8% from 3.3%, marking its lowest level since mid-2021.

Market Implications

Together, both labor demand and consumer prices are trending downwards. This suggests that underlying momentum is weakening, reducing the likelihood of tightening measures. These trends are not isolated; they point to a cooling economy. From a strategic outlook, investors may want to adjust their positions in rate products. With inflation decreasing and job growth slowing, chances for further rate hikes are lessening. Similar situations in the past, where we observed softening price pressures alongside reduced employment activity, have led to quick adjustments in monetary policy expectations. Currie’s team had earlier noted that inflation trends could change rapidly, supporting recent outcomes. It’s not just about peak inflation being behind us; we are now focusing on how far below that peak we may go, which has implications across the board. We are closely monitoring upcoming business confidence indicators and wage data. If wage growth stabilizes or declines, similar to headline inflation, this will further lessen the case for restrictive policies going forward. In terms of market volatility, we may see a shift toward lower dispersion. With a clear downward trend, realized volatility could decrease, despite some short-term event risks. However, as expectations adjust, previously priced-in risk premiums might start to unwind. Bond market investors may find opportunities to slightly extend duration, especially in the front and intermediate parts of the yield curve, as future expectations change. We have seen similar shifts swiftly occur when data consistently underperforms. It’s important to note that Anderson pointed out last month that services inflation remained sticky. However, if the overall data continues to decline, even that aspect may begin to change. We will closely examine subcomponents—especially housing and transport—in the next reports. Whenever there is synchronized moderation in labor demand and prices, we believe in taking action rather than waiting. Create your live VT Markets account and start trading now.

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