Insights 
VT 
In May 2025, there was a decrease of 1.2% in ANZ Job Advertisements month-on-month from the previous decrease of 0.3%. This indicates a reduction in job opportunities within Australia during this period.
The Melbourne Institute’s Australian headline monthly inflation gauge showed a decline of 0.4% month-on-month, marking the largest drop in 33 months. Year-on-year, the inflation gauge dropped to 2.6% from 3.3% in April.
Trimmed Mean Analysis
The trimmed mean, which provides a more stable measure, fell by 0.3% month-on-month. This is noted as the biggest fall in three years, with a year-on-year decrease to 2.8% from 3.3% in April.
Immediately, what stands out is the sharp contraction in labour demand and the concurrent slowing of price growth. The back-to-back monthly drop in job ads suggests businesses are turning noticeably cautious. With hiring slowing even further from the modest decline seen previously, it’s not just a blip. Employers, it seems, are reluctant to commit to new staff in the current conditions, likely reflecting weaker demand and ongoing cost concerns. When firms pull back on recruitment, we interpret that as a precursor to future restraint in broader activity.
Meanwhile, inflation dynamics have shifted more abruptly than many had expected. The headline figure falling 0.4% month-on-month isn’t just a soft print—it marks the steepest month-on-month decline in nearly three years. On a yearly comparison, we’ve seen inflation drop from 3.3% to 2.6%, which brings it comfortably within the RBA’s target band. It’s not just headline that’s revealing this pattern—the trimmed mean, which irons out the volatile items, has also slipped markedly. That measure has also eased to 2.8%, down from 3.3%, its most subdued position since mid-2021.
Market Implications
Taken together, we now observe both labour demand and consumer prices moving in the same direction: lower. For us, this is an early signal that underlying momentum is weakening, and the need for tightening—should it have been considered—is diminishing. These aren’t isolated figures; they are part of a broader trend, one pointing towards a cooling economy.
From a positioning perspective, one might adjust exposure in rates products accordingly. With inflation swiftly retreating to within range and hiring decelerating, the probability of further rate hikes is reduced. We’ve monitored similar combinations before—softening price pressures coupled with reduced employment activity—and in those cases, monetary policy expectations recalibrated quickly.
Currie’s team had flagged the inflation pulse earlier in the quarter as vulnerable to quick reversals, a view that finds support in these outcomes. It’s no longer just about peak inflation being behind us—it’s increasingly about how far below peak we could go. That has repercussions across the curve.
We’re now keeping close attention on upcoming business confidence indicators and wage data due out shortly. If wage growth begins to flatten or soften, as headline inflation already has, this will further reduce the case for a restrictive policy stance moving forward.
In terms of implied volatilities, the market may begin to lean towards lower dispersion. With a clear trend in place, realised vol could drift lower, even if short-term event risks persist. But remember, as expectations adjust, some of the earlier embedded risk premia may start to unwind.
Bond market participants could find value shifting duration slightly longer, particularly in the front and intermediate parts of the curve, as forward expectations recalibrate. We’ve seen shifts like these develop rapidly when data batches arrive consistently weaker.
It is worth noting that Anderson highlighted last month how services inflation remained sticky. But if the broader data set continues in this direction, even that component may begin to move. We’ll be examining subcomponents closely—particularly housing and transport—next time around.
As ever, when labour and prices show this kind of synchronised moderation, we prefer to act, not wait.
