Latest news with #StatementonMonetaryPolicy
The Advertiser
a day ago
- Business
- The Advertiser
How low can they go? Growth and jobs to rule rates call
With a highly-anticipated Reserve Bank interest rate cut in the bag, the prospect of more mortgage relief in September is looking less secure. After the central bank cut the cash rate by a quarter percentage to 3.6 per cent on Tuesday, Governor Michele Bullock raised hopes of more rate reductions to come. While she wouldn't specifically state where the cash rate would end up when all is said and done, Ms Bullock indicated more cuts would be consistent with the RBA meeting its targets of low inflation and full employment. The bank's quarterly economic forecasts, also released on Tuesday, assumed two more cuts, based on market pricing. "You'll note that in the forecasts, we have inflation coming back down to target and the unemployment rate remaining where it is with a couple more cash rate cuts in there," Ms Bullock said. "That's the best sort of guess, but things can change." Money markets continued to price in two more cuts by early 2026, following the decision. But traders were less hopeful that the RBA would deliver another cut at its next meeting in September, pricing in about a one-third chance. Ms Bullock said the board would take things "meeting-by-meeting", keeping a close eye on upcoming data releases to ensure the economy continues to progress in line with the RBA's aims. CBA senior economist Belinda Allen expects the RBA to wait until November before cutting again, but that could shift depending on how the data unfolds. "The governor did not rule out back‑to‑back cuts. Inflation appears under control, so any acceleration of the cutting cycle we expect would have to be driven by a deterioration in the labour market," she said. Ms Allen said the most important data readings before the next meeting would be labour force surveys released on Thursday and in September, as well as economic growth figures for the June quarter to be released on September 3. RBA staff lowered their GDP growth forecasts as they pared back their expectations for trend productivity growth from one per cent to 0.7 per cent per year. Australia's economy is now expected to expand by 1.7 per cent - down from 2.1 per cent - in 2025. While the uncertainty caused by Donald Trump's trade war had eased, there remained risks to growth. "Recent international developments have so far had little discernible impact on the Australian economy," the RBA's Statement on Monetary Policy said. But given the typical lag, any discernible effects were only expected to start showing up in the second half of 2025 or 2026. While labour force figures are key to the RBA's assessment of the tightness of the jobs market, the bank will keep an eye on wage growth data on Wednesday to confirm low unemployment isn't contributing to an unsustainable rise in wages. With a highly-anticipated Reserve Bank interest rate cut in the bag, the prospect of more mortgage relief in September is looking less secure. After the central bank cut the cash rate by a quarter percentage to 3.6 per cent on Tuesday, Governor Michele Bullock raised hopes of more rate reductions to come. While she wouldn't specifically state where the cash rate would end up when all is said and done, Ms Bullock indicated more cuts would be consistent with the RBA meeting its targets of low inflation and full employment. The bank's quarterly economic forecasts, also released on Tuesday, assumed two more cuts, based on market pricing. "You'll note that in the forecasts, we have inflation coming back down to target and the unemployment rate remaining where it is with a couple more cash rate cuts in there," Ms Bullock said. "That's the best sort of guess, but things can change." Money markets continued to price in two more cuts by early 2026, following the decision. But traders were less hopeful that the RBA would deliver another cut at its next meeting in September, pricing in about a one-third chance. Ms Bullock said the board would take things "meeting-by-meeting", keeping a close eye on upcoming data releases to ensure the economy continues to progress in line with the RBA's aims. CBA senior economist Belinda Allen expects the RBA to wait until November before cutting again, but that could shift depending on how the data unfolds. "The governor did not rule out back‑to‑back cuts. Inflation appears under control, so any acceleration of the cutting cycle we expect would have to be driven by a deterioration in the labour market," she said. Ms Allen said the most important data readings before the next meeting would be labour force surveys released on Thursday and in September, as well as economic growth figures for the June quarter to be released on September 3. RBA staff lowered their GDP growth forecasts as they pared back their expectations for trend productivity growth from one per cent to 0.7 per cent per year. Australia's economy is now expected to expand by 1.7 per cent - down from 2.1 per cent - in 2025. While the uncertainty caused by Donald Trump's trade war had eased, there remained risks to growth. "Recent international developments have so far had little discernible impact on the Australian economy," the RBA's Statement on Monetary Policy said. But given the typical lag, any discernible effects were only expected to start showing up in the second half of 2025 or 2026. While labour force figures are key to the RBA's assessment of the tightness of the jobs market, the bank will keep an eye on wage growth data on Wednesday to confirm low unemployment isn't contributing to an unsustainable rise in wages. With a highly-anticipated Reserve Bank interest rate cut in the bag, the prospect of more mortgage relief in September is looking less secure. After the central bank cut the cash rate by a quarter percentage to 3.6 per cent on Tuesday, Governor Michele Bullock raised hopes of more rate reductions to come. While she wouldn't specifically state where the cash rate would end up when all is said and done, Ms Bullock indicated more cuts would be consistent with the RBA meeting its targets of low inflation and full employment. The bank's quarterly economic forecasts, also released on Tuesday, assumed two more cuts, based on market pricing. "You'll note that in the forecasts, we have inflation coming back down to target and the unemployment rate remaining where it is with a couple more cash rate cuts in there," Ms Bullock said. "That's the best sort of guess, but things can change." Money markets continued to price in two more cuts by early 2026, following the decision. But traders were less hopeful that the RBA would deliver another cut at its next meeting in September, pricing in about a one-third chance. Ms Bullock said the board would take things "meeting-by-meeting", keeping a close eye on upcoming data releases to ensure the economy continues to progress in line with the RBA's aims. CBA senior economist Belinda Allen expects the RBA to wait until November before cutting again, but that could shift depending on how the data unfolds. "The governor did not rule out back‑to‑back cuts. Inflation appears under control, so any acceleration of the cutting cycle we expect would have to be driven by a deterioration in the labour market," she said. Ms Allen said the most important data readings before the next meeting would be labour force surveys released on Thursday and in September, as well as economic growth figures for the June quarter to be released on September 3. RBA staff lowered their GDP growth forecasts as they pared back their expectations for trend productivity growth from one per cent to 0.7 per cent per year. Australia's economy is now expected to expand by 1.7 per cent - down from 2.1 per cent - in 2025. While the uncertainty caused by Donald Trump's trade war had eased, there remained risks to growth. "Recent international developments have so far had little discernible impact on the Australian economy," the RBA's Statement on Monetary Policy said. But given the typical lag, any discernible effects were only expected to start showing up in the second half of 2025 or 2026. While labour force figures are key to the RBA's assessment of the tightness of the jobs market, the bank will keep an eye on wage growth data on Wednesday to confirm low unemployment isn't contributing to an unsustainable rise in wages. With a highly-anticipated Reserve Bank interest rate cut in the bag, the prospect of more mortgage relief in September is looking less secure. After the central bank cut the cash rate by a quarter percentage to 3.6 per cent on Tuesday, Governor Michele Bullock raised hopes of more rate reductions to come. While she wouldn't specifically state where the cash rate would end up when all is said and done, Ms Bullock indicated more cuts would be consistent with the RBA meeting its targets of low inflation and full employment. The bank's quarterly economic forecasts, also released on Tuesday, assumed two more cuts, based on market pricing. "You'll note that in the forecasts, we have inflation coming back down to target and the unemployment rate remaining where it is with a couple more cash rate cuts in there," Ms Bullock said. "That's the best sort of guess, but things can change." Money markets continued to price in two more cuts by early 2026, following the decision. But traders were less hopeful that the RBA would deliver another cut at its next meeting in September, pricing in about a one-third chance. Ms Bullock said the board would take things "meeting-by-meeting", keeping a close eye on upcoming data releases to ensure the economy continues to progress in line with the RBA's aims. CBA senior economist Belinda Allen expects the RBA to wait until November before cutting again, but that could shift depending on how the data unfolds. "The governor did not rule out back‑to‑back cuts. Inflation appears under control, so any acceleration of the cutting cycle we expect would have to be driven by a deterioration in the labour market," she said. Ms Allen said the most important data readings before the next meeting would be labour force surveys released on Thursday and in September, as well as economic growth figures for the June quarter to be released on September 3. RBA staff lowered their GDP growth forecasts as they pared back their expectations for trend productivity growth from one per cent to 0.7 per cent per year. Australia's economy is now expected to expand by 1.7 per cent - down from 2.1 per cent - in 2025. While the uncertainty caused by Donald Trump's trade war had eased, there remained risks to growth. "Recent international developments have so far had little discernible impact on the Australian economy," the RBA's Statement on Monetary Policy said. But given the typical lag, any discernible effects were only expected to start showing up in the second half of 2025 or 2026. While labour force figures are key to the RBA's assessment of the tightness of the jobs market, the bank will keep an eye on wage growth data on Wednesday to confirm low unemployment isn't contributing to an unsustainable rise in wages.
Perth Now
a day ago
- Business
- Perth Now
How low can they go? Growth and jobs to rule rates call
With a highly-anticipated Reserve Bank interest rate cut in the bag, the prospect of more mortgage relief in September is looking less secure. After the central bank cut the cash rate by a quarter percentage to 3.6 per cent on Tuesday, Governor Michele Bullock raised hopes of more rate reductions to come. While she wouldn't specifically state where the cash rate would end up when all is said and done, Ms Bullock indicated more cuts would be consistent with the RBA meeting its targets of low inflation and full employment. The bank's quarterly economic forecasts, also released on Tuesday, assumed two more cuts, based on market pricing. "You'll note that in the forecasts, we have inflation coming back down to target and the unemployment rate remaining where it is with a couple more cash rate cuts in there," Ms Bullock said. "That's the best sort of guess, but things can change." Money markets continued to price in two more cuts by early 2026, following the decision. But traders were less hopeful that the RBA would deliver another cut at its next meeting in September, pricing in about a one-third chance. Ms Bullock said the board would take things "meeting-by-meeting", keeping a close eye on upcoming data releases to ensure the economy continues to progress in line with the RBA's aims. CBA senior economist Belinda Allen expects the RBA to wait until November before cutting again, but that could shift depending on how the data unfolds. "The governor did not rule out back‑to‑back cuts. Inflation appears under control, so any acceleration of the cutting cycle we expect would have to be driven by a deterioration in the labour market," she said. Ms Allen said the most important data readings before the next meeting would be labour force surveys released on Thursday and in September, as well as economic growth figures for the June quarter to be released on September 3. RBA staff lowered their GDP growth forecasts as they pared back their expectations for trend productivity growth from one per cent to 0.7 per cent per year. Australia's economy is now expected to expand by 1.7 per cent - down from 2.1 per cent - in 2025. While the uncertainty caused by Donald Trump's trade war had eased, there remained risks to growth. "Recent international developments have so far had little discernible impact on the Australian economy," the RBA's Statement on Monetary Policy said. But given the typical lag, any discernible effects were only expected to start showing up in the second half of 2025 or 2026. While labour force figures are key to the RBA's assessment of the tightness of the jobs market, the bank will keep an eye on wage growth data on Wednesday to confirm low unemployment isn't contributing to an unsustainable rise in wages.
Perth Now
2 days ago
- Business
- Perth Now
Productivity a tough puzzle for central bank boffins
Australian living standards will recover slower than expected, the Reserve Bank has forecast, acknowledging it has consistently been wrong about a key economic assumption. Economists at the central bank downgraded their estimate for Australia's medium-term productivity performance in quarterly forecasts released simultaneously to the RBA board cutting interest rates to 3.6 per cent on Tuesday. Because productivity is a key factor flowing through to growth in the economy and living standards, both were downgraded by around 0.3 percentage points. That's roughly in line with the assumption that trend productivity growth will fall from one to 0.7 per cent. Labour productivity is expected to recover - increasing 0.7 per cent by the end of 2027, after declining 0.7 per cent over the past year. The bank conceded it had consistently been proven wrong by productivity outcomes. "For some time, our forecasts have implicitly assumed that productivity growth was temporarily weak and would gradually return to, and be sustained at, higher historical growth rates," RBA staff wrote in the Statement on Monetary Policy. "More often than not, this has not eventuated, resulting in the RBA's implied productivity forecasts consistently overestimating the actual outcomes." The RBA's new assumption aligns with the average growth rate for non-farm labour productivity - how much extra has been produced per each hour worked - over the past 20 years. Productivity is closely correlated to real household disposable income, a crude measure of living standards. It brings the RBA more in line with other Australian financial institutions, including NSW Treasury which recently revised its long-term growth assumption to 0.8 per cent. The concession comes as RBA governor Michele Bullock prepares to address the government's productivity roundtable next week. Treasurer Jim Chalmers has assembled a range of experts, business leaders and unions to discuss how Australia's tax and regulation frameworks can be reformed in a bid to revitalise the nation's anaemic productivity growth. The downgrade in the outlook was not a sign the bank was pessimistic about the summit's prospects for success, the RBA said. But any policy changes that might result in higher efficiency would take at least a couple of years to flow through to the economy, beyond the central bank's forecast horizon. Through its liaison with businesses, the RBA said firms told it regulation and labour availability were key barriers to lifting productivity. "Firms said the complexity, cumulative volume and frequency of change in regulation has been hard to manage, particularly for smaller firms." Technology was viewed as important to driving productivity, though some businesses noted not all technology enhanced productivity. While technology might initially drag down productivity as businesses require more staff for its adoption, most survey participants expected artificial intelligence to save labour in the future. Lower skilled jobs were especially at risk as the workforce transitioned to higher skilled roles. While GDP growth was revised down as a result of the productivity downgrade, the inflation outlook was largely unchanged, with both the trimmed mean and headline inflation expected to hit the midpoint of the RBA's 2-3 per cent target band by the end of 2027. That's because the RBA assumed the economy would quickly adjust to the lower growth in supply capacity. The unemployment rate is expected to hold at 4.3 per cent over the duration of the RBA's forecast horizon. The bank noted its forecast was "close to full employment", reiterating that its estimate of the non-accelerating inflation rate of unemployment is still above that of many market economists, who have posited it is actually closer to four per cent.
Perth Now
29-07-2025
- Business
- Perth Now
Economic outlook blooms with key data to guide rate cut
Australia's economic growth prospects have been upgraded by an international financial body as mortgage holders await fresh inflation figures that could cement a Reserve Bank rate cut. United Nations financial agency the International Monetary Fund on Tuesday said a modest de-escalation in trade tensions had boosted the prospects of the global economy. The fund has raised its forecast for Australian GDP growth this year to 1.8 per cent in its July update to its World Economic Outlook, 0.1 per cent higher than its last projection in April. Global growth is also expected to be 0.1 per cent higher at three per cent, while both the Australian and world economies received a 0.2 per cent upgrade for 2026, at 2.2 and 3.1 per cent respectively. But despite the easing of tariff threats as countries strike trade deals with the United States, the risks to the economy remain weighted firmly to the downside, said IMF chief economist Pierre-Olivier Gourinchas. "The current trade environment remains precarious," he said. "Tariffs could well reset at much higher levels once the 'pause' expires on August 1 or if existing deals unravel." IMF models suggest that would constrain the global economy by 0.3 per cent in 2026. US President Donald Trump on Monday flagged he was considering raising the baseline tariff rate for all countries, including Australia from 10 per cent to "somewhere in the 15 to 20 per cent range". Despite the tariff threat, Australia's economy is still expected to keep growing as falling interest rates give a boost to consumers. The RBA could cut rates again as soon as August 12, with the Australian Bureau of Statistics' all-important quarterly consumer price index print on Wednesday the potential green-light the central bank board needs to lower the cash rate to 3.6 per cent. Westpac senior economist Pat Bustamante expects trimmed mean inflation - which is the RBA's preferred measure - to come in at 2.7 per cent over the 12 months to June. That is 0.1 per cent higher than RBA staff economists predicted in their May Statement on Monetary Policy. But Mr Bustamante said that shouldn't stop the board from cutting, given the CPI is a lagging indicator and more forward-looking indicators of inflation, such as the labour market and private demand, have softened recently. Westpac expects the data to show a pick-up in the housing costs component, which includes electricity, accelerated in the quarter, as government energy rebates roll off. "Where we differ from the Reserve Bank is on the unit labour cost story," Mr Bustamante told AAP. Governor Michele Bullock cited concerns over weak productivity growth, which despite a gradual easing in the jobs market, could contribute to higher labour costs and flow through to inflation. But inflation has eased regardless. That is because much of Australia's weak productivity performance has been driven by the mining and non-market sectors, whereas the market sector excluding mining has been running at 0.8 per cent per year, closer to the long run average, Mr Bustamante said. "We're not as concerned as the RBA because a lot of the lower productivity outcome has been driven by sectors that don't flow into the CPI."
The Advertiser
19-06-2025
- Business
- The Advertiser
Labour market stays tight despite surprise drop in jobs
A surprise fall in jobs will do little to further improve the prospects of a Reserve Bank rate cut as the central bank weighs up the impact of a tight labour market. Australia's unemployment rate held steady at 4.1 per cent in May, but 2500 jobs dropped out of the economy, the Australian Bureau of Statistics reported on Thursday. Despite the result confounding forecasts of a 21,200 gain in employment, economists don't expect the RBA to read too much into it as it followed a jump of 87,600 jobs in April. The fall in employment suggested some "payback" in the labour market, IG market analyst Tony Sycamore said. Employment was still up by 2.3 per cent since May 2024, a rise bigger than the pre-pandemic, 10-year average annual growth rate of 1.7 per cent, bureau head of labour statistics Sean Crick said. "This fall in employment, combined with a drop in unemployment of 3000 people, meant that the unemployment rate remained steady at 4.1 per cent for May," he said. The volatility in employment figures has not been reflected in the jobless rate, which has held within a tight 3.9 to 4.4 per cent range since March 2024. The participation rate fell 0.1 per cent to 67 per cent. "Together, today's numbers imply the labour market is continuing to gradually cool," Mr Sycamore said. The Reserve Bank watches the labour market closely as it is a key influence on inflation. Mr Sycamore expects the RBA to lower interest rates by 25 basis points at its next board meeting in July, but the rates market marginally reduced the odds of a July cut to 63 per cent following the latest release. ANZ economists Aaron Luk and Adam Boyton said the labour market was tracking healthier in the June quarter than the RBA expected in its May forecast. But they expect the central bank to ignore some of the noise of the fluctuating employment growth figures. "The unemployment rate has averaged 4.07 per cent over the June quarter so far versus the RBA's forecast of 4.2 per cent," they said, while employment growth was also tracking higher than forecasts. "These aren't large differences, but they do show a better near-term labour market picture than the RBA's starting point in the May Statement on Monetary Policy. "That said, we suspect these data won't sway the market or analysts one way or another on the July RBA board meeting." Treasurer Jim Chalmers said low unemployment was one of the best defences against uncertainty in the global economy. "While other countries have sacrificed much higher unemployment for progress on inflation, Australia has been able to preserve the gains we've made in our labour market at the same time as we've got inflation down and jobs up," he said. Meanwhile, population growth slowed to 0.1 percentage points to 91,133 in the final three months of 2024, as net overseas migration dropped by a fifth. Alongside the slowdown in immigration, a recent recovery in dwelling approvals meant the pace of new housing entering the market was finally on track to meet growth in underlying demand, AMP economist My Bui said. Australia's population was just over 27.4 million people at the end of 2024, the bureau said. Queensland and Western Australia were the only jurisdictions to experience positive net interstate migration, while NSW was the biggest loser. More than 28,000 people abandoned the nation's first state for cheaper housing markets. A surprise fall in jobs will do little to further improve the prospects of a Reserve Bank rate cut as the central bank weighs up the impact of a tight labour market. Australia's unemployment rate held steady at 4.1 per cent in May, but 2500 jobs dropped out of the economy, the Australian Bureau of Statistics reported on Thursday. Despite the result confounding forecasts of a 21,200 gain in employment, economists don't expect the RBA to read too much into it as it followed a jump of 87,600 jobs in April. The fall in employment suggested some "payback" in the labour market, IG market analyst Tony Sycamore said. Employment was still up by 2.3 per cent since May 2024, a rise bigger than the pre-pandemic, 10-year average annual growth rate of 1.7 per cent, bureau head of labour statistics Sean Crick said. "This fall in employment, combined with a drop in unemployment of 3000 people, meant that the unemployment rate remained steady at 4.1 per cent for May," he said. The volatility in employment figures has not been reflected in the jobless rate, which has held within a tight 3.9 to 4.4 per cent range since March 2024. The participation rate fell 0.1 per cent to 67 per cent. "Together, today's numbers imply the labour market is continuing to gradually cool," Mr Sycamore said. The Reserve Bank watches the labour market closely as it is a key influence on inflation. Mr Sycamore expects the RBA to lower interest rates by 25 basis points at its next board meeting in July, but the rates market marginally reduced the odds of a July cut to 63 per cent following the latest release. ANZ economists Aaron Luk and Adam Boyton said the labour market was tracking healthier in the June quarter than the RBA expected in its May forecast. But they expect the central bank to ignore some of the noise of the fluctuating employment growth figures. "The unemployment rate has averaged 4.07 per cent over the June quarter so far versus the RBA's forecast of 4.2 per cent," they said, while employment growth was also tracking higher than forecasts. "These aren't large differences, but they do show a better near-term labour market picture than the RBA's starting point in the May Statement on Monetary Policy. "That said, we suspect these data won't sway the market or analysts one way or another on the July RBA board meeting." Treasurer Jim Chalmers said low unemployment was one of the best defences against uncertainty in the global economy. "While other countries have sacrificed much higher unemployment for progress on inflation, Australia has been able to preserve the gains we've made in our labour market at the same time as we've got inflation down and jobs up," he said. Meanwhile, population growth slowed to 0.1 percentage points to 91,133 in the final three months of 2024, as net overseas migration dropped by a fifth. Alongside the slowdown in immigration, a recent recovery in dwelling approvals meant the pace of new housing entering the market was finally on track to meet growth in underlying demand, AMP economist My Bui said. Australia's population was just over 27.4 million people at the end of 2024, the bureau said. Queensland and Western Australia were the only jurisdictions to experience positive net interstate migration, while NSW was the biggest loser. More than 28,000 people abandoned the nation's first state for cheaper housing markets. A surprise fall in jobs will do little to further improve the prospects of a Reserve Bank rate cut as the central bank weighs up the impact of a tight labour market. Australia's unemployment rate held steady at 4.1 per cent in May, but 2500 jobs dropped out of the economy, the Australian Bureau of Statistics reported on Thursday. Despite the result confounding forecasts of a 21,200 gain in employment, economists don't expect the RBA to read too much into it as it followed a jump of 87,600 jobs in April. The fall in employment suggested some "payback" in the labour market, IG market analyst Tony Sycamore said. Employment was still up by 2.3 per cent since May 2024, a rise bigger than the pre-pandemic, 10-year average annual growth rate of 1.7 per cent, bureau head of labour statistics Sean Crick said. "This fall in employment, combined with a drop in unemployment of 3000 people, meant that the unemployment rate remained steady at 4.1 per cent for May," he said. The volatility in employment figures has not been reflected in the jobless rate, which has held within a tight 3.9 to 4.4 per cent range since March 2024. The participation rate fell 0.1 per cent to 67 per cent. "Together, today's numbers imply the labour market is continuing to gradually cool," Mr Sycamore said. The Reserve Bank watches the labour market closely as it is a key influence on inflation. Mr Sycamore expects the RBA to lower interest rates by 25 basis points at its next board meeting in July, but the rates market marginally reduced the odds of a July cut to 63 per cent following the latest release. ANZ economists Aaron Luk and Adam Boyton said the labour market was tracking healthier in the June quarter than the RBA expected in its May forecast. But they expect the central bank to ignore some of the noise of the fluctuating employment growth figures. "The unemployment rate has averaged 4.07 per cent over the June quarter so far versus the RBA's forecast of 4.2 per cent," they said, while employment growth was also tracking higher than forecasts. "These aren't large differences, but they do show a better near-term labour market picture than the RBA's starting point in the May Statement on Monetary Policy. "That said, we suspect these data won't sway the market or analysts one way or another on the July RBA board meeting." Treasurer Jim Chalmers said low unemployment was one of the best defences against uncertainty in the global economy. "While other countries have sacrificed much higher unemployment for progress on inflation, Australia has been able to preserve the gains we've made in our labour market at the same time as we've got inflation down and jobs up," he said. Meanwhile, population growth slowed to 0.1 percentage points to 91,133 in the final three months of 2024, as net overseas migration dropped by a fifth. Alongside the slowdown in immigration, a recent recovery in dwelling approvals meant the pace of new housing entering the market was finally on track to meet growth in underlying demand, AMP economist My Bui said. Australia's population was just over 27.4 million people at the end of 2024, the bureau said. Queensland and Western Australia were the only jurisdictions to experience positive net interstate migration, while NSW was the biggest loser. More than 28,000 people abandoned the nation's first state for cheaper housing markets. A surprise fall in jobs will do little to further improve the prospects of a Reserve Bank rate cut as the central bank weighs up the impact of a tight labour market. Australia's unemployment rate held steady at 4.1 per cent in May, but 2500 jobs dropped out of the economy, the Australian Bureau of Statistics reported on Thursday. Despite the result confounding forecasts of a 21,200 gain in employment, economists don't expect the RBA to read too much into it as it followed a jump of 87,600 jobs in April. The fall in employment suggested some "payback" in the labour market, IG market analyst Tony Sycamore said. Employment was still up by 2.3 per cent since May 2024, a rise bigger than the pre-pandemic, 10-year average annual growth rate of 1.7 per cent, bureau head of labour statistics Sean Crick said. "This fall in employment, combined with a drop in unemployment of 3000 people, meant that the unemployment rate remained steady at 4.1 per cent for May," he said. The volatility in employment figures has not been reflected in the jobless rate, which has held within a tight 3.9 to 4.4 per cent range since March 2024. The participation rate fell 0.1 per cent to 67 per cent. "Together, today's numbers imply the labour market is continuing to gradually cool," Mr Sycamore said. The Reserve Bank watches the labour market closely as it is a key influence on inflation. Mr Sycamore expects the RBA to lower interest rates by 25 basis points at its next board meeting in July, but the rates market marginally reduced the odds of a July cut to 63 per cent following the latest release. ANZ economists Aaron Luk and Adam Boyton said the labour market was tracking healthier in the June quarter than the RBA expected in its May forecast. But they expect the central bank to ignore some of the noise of the fluctuating employment growth figures. "The unemployment rate has averaged 4.07 per cent over the June quarter so far versus the RBA's forecast of 4.2 per cent," they said, while employment growth was also tracking higher than forecasts. "These aren't large differences, but they do show a better near-term labour market picture than the RBA's starting point in the May Statement on Monetary Policy. "That said, we suspect these data won't sway the market or analysts one way or another on the July RBA board meeting." Treasurer Jim Chalmers said low unemployment was one of the best defences against uncertainty in the global economy. "While other countries have sacrificed much higher unemployment for progress on inflation, Australia has been able to preserve the gains we've made in our labour market at the same time as we've got inflation down and jobs up," he said. Meanwhile, population growth slowed to 0.1 percentage points to 91,133 in the final three months of 2024, as net overseas migration dropped by a fifth. Alongside the slowdown in immigration, a recent recovery in dwelling approvals meant the pace of new housing entering the market was finally on track to meet growth in underlying demand, AMP economist My Bui said. Australia's population was just over 27.4 million people at the end of 2024, the bureau said. Queensland and Western Australia were the only jurisdictions to experience positive net interstate migration, while NSW was the biggest loser. More than 28,000 people abandoned the nation's first state for cheaper housing markets.
