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Business Times
6 days ago
- Business
- Business Times
Australian unemployment at four-year high bolsters rate-cut case
[CANBERRA] Australian unemployment unexpectedly climbed to a four-year high in June as hiring almost stalled, suggesting a loosening of the labour market and bolstering the case for the Reserve Bank to reduce interest rates next month. The currency declined by more than a half per cent as the jobless rate increased to 4.3 per cent, the highest level since November 2021 and exceeding forecasts for an unchanged 4.1 per cent, data from the Australian Bureau of Statistics showed on Thursday (Jul 17). Employment rose by 2,000 driven entirely by part-time roles, against economists' expectations of a 20,000 gain. The yield on policy-sensitive three-year government bonds fell almost 10 basis points while stocks advanced. Money market bets firmed to fully price a cut in August and another after that, with a better than 50 per cent chance of a third. The data is crucial for RBA policymakers as the resilience of the labour market, and worries about it rekindling price pressures, have been key reasons why they've shown patience in the current easing cycle. The central bank has cut twice since the start of the year – shocking the market last week with a decision to hold at 3.85 per cent – and today's weak jobs report, following a subdued reading in May, could suggest a turn in fortunes. 'There is now a deeper question of whether we might be starting to see the labour market resume its gradual softening after this recent period of resiliency,' said Ryan Wells, an economist at Westpac Banking Corp. 'The data strengthen the already-strong case to deliver the next rate cut in August.' The central bank's board said after its shock pause at 3.85 per cent that it wanted to wait for further evidence that inflation was sustainably hitting the midpoint of its 2-3 per cent target. The quarterly CPI report due on July 30 is seen as the next major reading for the policy outlook. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Investors will be watching a speech by governor Michele Bullock next Thursday and a fireside chat with her deputy, Andrew Hauser, a day after the inflation data for further clues. Economists also expect the RBA to downgrade its employment forecasts in August. Australia's economic momentum remains subdued with consumer confidence and household spending tepid. Global uncertainty is also elevated in the run-up to President Donald Trump's tariff deadline on Aug 1. Australian Treasurer Jim Chalmers, in a statement after the jobs data, pointed to the 'inevitable consequence of economic uncertainty and volatility around the world and the ongoing impact of higher interest rates.' The trade uncertainty is weighing on business investment and prompting firms to rethink hiring plans, economists said. Even though Australia got off lightly with a 10 per cent baseline tariff rate, as an export-reliant economy its fortunes are heavily geared to those of its trading partners. Chalmers, who is attending a Group of 20 meeting in South Africa, added that ongoing labour market resilience is one of Australia's best defences against volatile global conditions. 'We are well‑placed and well‑prepared to face the challenges ahead,' he said. Australian Prime Minister Anthony Albanese is in China this week as he looks to boost ties with his country's No1 trading partner in order to generate local jobs and spur the domestic economy. The two sides agreed to keep expanding engagement in bilateral trade, climate change and people-to-people links, they said in a joint statement on Tuesday. BLOOMBERG
Perth Now
19-05-2025
- Business
- Perth Now
Australian shares edge lower after US credit downgrade
Australian shares are set to snap their eight-session streak after a United States credit rating downgrade spooked markets. The S&P/ASX200 fell 13.7 points, or 0.16 per cent, to 8,327.1, around noon on Monday, as the broader All Ordinaries lost 19.5 points, or 0.23 per cent, to 8,560.4. The fall came after Moody's reduced its sovereign credit rating for the US from AAA to AA1. "Moody's announced a downgrade of the US credit rating as the government continues to struggle with deficits, debt and interest costs," Westpac economist Ryan Wells said. "Markets are yet to fully react to the news, with the spike in bond yields and fall in the USD very late in Friday's session likely to continue playing out at the start of the week." The US has debts of more than $US36 trillion ($A56 trillion), which Moody's projected would rise to 134 per cent of GDP by 2035. "While the move is largely symbolic, it may put slight upward pressure on Treasury yields, which could tighten financial conditions globally - especially in more rate-sensitive parts of Asia," senior market analyst Kyle Rodda said. Three of 11 local sectors were trading lower on Monday morning, with five in the green and three roughly flat. Materials and energy weighed heavily on the bourse, down more than one per cent each in early trading. Large cap miners BHP, Rio Tinto and Fortescue were all bleeding lower, tracking with a 1.6 per cent decline in iron ore futures since mid-last week to $US100.20 a tonne. Gold prices rose along with bond yields as the US credit downgrade led investors back to the safe haven, pushing the precious metal to $US3,233 ($A5,045) and lifting local gold miners. The banking sector pushed the bourse lower, with three of the big four banks down more than 0.5 per cent, while the Commonwealth Bank pushed 1.1 per cent higher to $171.60. Macquarie Group slipped 2.3 per cent and is down roughly five per cent after the corporate watchdog sued it over misreporting millions, potentially billions, of short-selling transactions. IT stocks offered some relief in the sea of red, up 0.9 per cent and tracking with broader investor reallocation into higher growth assets last week. Coal producer New Hope Corporation was one of the worst performers of the top-200, down 6.9 per cent after cutting its sales and production guidance. Looking ahead, the Reserve Bank will hand down its interest rate decision tomorrow, and markets still expect it to cut the cash rate by 25 basis points to 3.85 per cent, despite some hotter than expected jobs and wages figures in April. Later in the week, producer data from the US, Europe and the UK could hint at the early impacts of recent trade volatility. The Australian dollar is buying 64.04 US cents, down from 64.27 on Friday at 5pm.
