Daily Commentary BY THE CURVE TEAM –

Daily Insights – Employment Falls Sharply

17th of September, 2021

Employment Falls Sharply

  • Employment fell 146 300 over August, a 1.1% fall.
  • 68 000 of those were full time, 78 200 were part time.
  • Unemployment dropped to 4.5%, as the participation rate fell 0.8% points to 65.2%.
  • Underemployment rose 1% point to 9.3% and hours worked fell 3.7%.
  • NSW was most pronounced in the falls, with employment down 4.2% and the participation rate down 2.5% points.
  • Victoria recorded a rise in employment despite lockdown, so next month’s survey may fall further if Victoria’s lockdown impacts employment.

Judo Bank Credit Rating

  • S&P rated Judo A-3 (short term) and BBB- (long term) with a positive outlook.
  • They are issuing only term deposits currently and their middle market rates (also available to financial institutions) are well above market.
  • Their focus on small and medium enterprises, which has them as the third largest lender to these clients behind CBA and Macquarie, means they receive higher interest on their loans so can offer higher rates on deposits.
  • S&P referred to the ‘short track record in terms of both lending and profitability’ as the reasoning for being a notch below the BBB rating of many other ADIs.
  • S&P are weary of industry risks to the banker sector as well. If these subside and the longer Judo exist to have proven themselves across multiple business cycles, the more likely a rating upgrade is.

CLF Composition

  • Self-securitisation accounts for 70% of the CLF.
  • This increases the likelihood that ADIs will need to raise new funds to meet their HQLA requirements.
  • Banking Day reckons margins could increase ‘by around 30 basis points’ for ADI bonds and RMBS as ADI demand for these assets declines.

Josh Stewart

Associate - Money Markets