Surprise jobless hike may trigger interest rate relief
The unemployment rate bucked market expectations, rising from 4.1 per cent to 4.3 per cent in June, according to the Australian Bureau of Statistics.
Though the result was unexpected, ex-Reserve Bank economist Luke Hartigan said it met the central bank's year-end unemployment forecast.
"This just adds information to say that some modest reduction in interest rates is warranted," the University of Sydney economics lecturer told AAP.
After its July meeting, the central bank disappointed mortgage-holders and shocked market economists by opting to hold the cash rate at 3.85 per cent in a split decision.
The latest jobs data has been read by some as an early sign of labour market softening.
Combined with moderating inflation, the unemployment figures meant an interest rate cut was "virtually locked in" when the central bank meets in August, CreditorWatch's chief economist Ivan Colhoun said.
But other economists believe there is still room to move, with VanEck investments head Russel Chesler pointing to the July 30 release of quarterly inflation figures as a vital data point in the Reserve Bank's next rate decision.
"The market is still pricing in two more rate cuts by the end of the year, but we consider it premature to be making this call before there is any data to support this," he said.
While the recent unemployment increase has put the rate at its highest level since November 2021, Dr Hartigan maintained other metrics showed the market was still relatively solid.
"This is the first uptick in a little while, so it's a little bit concerning," he said.
"But in the context of where the unemployment rate is now versus where it's been in the past, it is still very low."
Economists would likely need a few more months of continued rise to be sure of a weakening in the labour market.
Treasurer Jim Chalmers called the unemployment uptick an "inevitable consequence" of global economic uncertainty and the ongoing impact of higher interest rates.
"The Australian economy is not immune from global uncertainty but we are well‑placed and well‑prepared to face the challenges ahead," he said.
"The ongoing resilience in our labour market over the past three years remains one of our best defences."
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Sydney Morning Herald
18 minutes ago
- Sydney Morning Herald
Albanese and Rudd will have to sell very different messages on US beef ban's end
If the way to a man's heart is through his stomach, as the anachronistic saying goes, could Donald Trump's love of beef be the key to a tariff exemption for Australia? Anthony Albanese will be hoping so, but the decision to end import restrictions on beef from the United States presents his government with a delicate communications challenge. He must convince Australians the decision is entirely science-based while simultaneously leading Trump to believe the move is a response to his forceful advocacy for US cattle exporters. The hamburger-scoffing president had beef on the brain when he stood in the White House Rose Garden in April to announce his liberation day tariffs. Australians, Trump said, were 'wonderful people' but 'they won't take any of our beef'. 'They don't want it because they don't want it to affect their farmers and you know, I don't blame them, but we're doing the same thing right now starting at midnight tonight, I would say,' Trump fumed. Trump's comments sparked fears of an imminent US ban on Australian beef that did not eventuate, but his grievance with Australian import rules permeated his administration. US Commerce Secretary Howard Lutnick blasted biosecurity measures that stopped American agricultural exports as 'nonsense', saying: 'One-point-four billion people in India and we can't sell them corn, Europe won't let us sell beef, Australia won't let us sell beef.' Loading Cattle ranchers are a key part of Trump's voting base. He is an avid beef eater who once marketed his own brand of steaks. He delights in eating McDonald's aboard his presidential jet. The US has technically been able to export beef to Australia since 2019, but beef sourced from Canada or Mexico, and slaughtered in the US, had been banned because of disease concerns. The integrated nature of the US supply chain meant that little beef made its way to Australia (before even getting into the issue of whether Australians want to buy grain-fed American beef rather than our own grass-fed meat). That rule has now been scrapped.
Sydney Morning Herald
18 minutes ago
- Sydney Morning Herald
Turn AUKUS shipyard into joint naval base with the US, Morrison urges
Washington: Scott Morrison says a planned AUKUS shipbuilding facility in Western Australia should become a joint base with the US to help address the Trump administration's 'legitimate issues' with the submarine deal he designed and announced as prime minister in 2021. The controversial idea, with advocates in both Canberra and Washington, would allow the upgraded facility at Henderson, south of Perth, to host and repair American submarines, not just Australian ones, and give the US direct access to the Indian Ocean, a strategic asset. As the Pentagon reviews the AUKUS agreement to see if it fits with President Donald Trump's 'America First' agenda, one of the key issues is whether the US can part with the three nuclear-powered submarines Australia is due to buy. The slow rate of production is a problem, as is a severe maintenance backlog. Australia has paid $US1 billion (about $1. 6 billion) to the US maritime industrial base so far, with another $US1 billion due by year's end. Morrison - who now provides strategic advice for corporations, including defence industry clients - said the US appreciated and valued AUKUS, 'but that doesn't mean there aren't issues'. Loading 'The issues that [US defence undersecretary] Elbridge Colby has been raising, he's been raising those for years, and they're legitimate issues, and they go to the US's capability to produce submarines,' he said. 'There are many ways you can get more subs out at sea, and it's not just about how quickly you build them; it's also how you maintain them. Australia, through Henderson, has a real opportunity to add to that.' Asked if he meant maintaining US boats at the facility, he said yes. 'That would significantly add to the capability of the US to do what it needs to do.'
Sydney Morning Herald
18 minutes ago
- Sydney Morning Herald
International student surge probably contributed to post-pandemic inflation: RBA
International students spend twice as much as Australian residents and work fewer hours on average, say Reserve Bank economists, who have found they were a probable contributor to the recent inflation surge amid an ongoing political debate over whether international arrivals have put pressure on housing prices. While the RBA's latest bulletin suggests international students add more to demand in the economy than they do to supply in the short term, its economists have rejected the idea that international students have been a major driver of the country's price pressures. The increase in international students was 'just one of the many other forces at play' that drove inflation higher in the years immediately after the pandemic, when international students returned to the country in large numbers, they said. Inflation peaked at 7.8 per cent in December 2022, and both house prices and rents have continued to climb, though at a slowing pace. The total number of international students rose sharply from just under 300,000 in 2022 to 560,000 by the end of 2023, with the RBA's research noting such large swings could shift the dial on inflation, especially when the economy has little spare capacity or flexibility to increase supply. The research found that international students spend about twice as much as residents, with the difference mostly explained by tuition fees. However, their spending – which is higher on average than the amount they earn – is also fuelled by the savings they bring with them. Front-loaded spending on categories such as furniture may have contributed to inflation, the researchers said, as international students set up their lives in Australia and took some time to join the labour market. Figures from the Australian Bureau of Statistics (ABS) in June showed people were leaving Australia in the highest numbers since the pandemic, with international student numbers hovering near record highs but starting to stabilise after years of concern over surging arrivals. In May, the Albanese government's new assistant minister for international education, Julian Hill, refused to rule out another attempt to cap foreign student enrolments after its initial plans to cut down numbers was blocked by the Coalition and the Greens, saying: 'We are not going to back off managing the numbers'. During the election, the Coalition also vowed to slow international arrivals.
