Economists and analysts are predicting that the Reserve Bank of Australia (RBA) will maintain the cash rate at 4.35% following a slight increase in the unemployment rate to 4.1%. This rise, revealed in the seasonally adjusted figures released by the Australian Bureau of Statistics (ABS) on Thursday, was partially offset by the addition of 50,000 new jobs, with labour force participation also higher than anticipated.
Key statistics – Trend
| May-24 | Jun-24 | Monthly change | Monthly change (%) | Yearly change | Yearly change (%) | |
|---|---|---|---|---|---|---|
| Employed people | 14,360,100 | 14,402,500 | 42,300 | 0.3% | 387,600 | 2.8% |
| Unemployed people | 600,400 | 605,100 | 4,700 | 0.8% | 78,000 | 14.8% |
| Unemployment rate | 4.0% | 4.0% | 0.0 pts | na | 0.4 pts | na |
| Underemployment rate | 6.5% | 6.5% | 0.0 pts | na | 0.1 pts | na |
| Participation rate | 66.8% | 66.8% | 0.0 pts | na | 0.2 pts | na |
| Monthly hours worked in all jobs | 1,961 million | 1,967 million | 6 million | 0.3% | 25 million | 1.3% |
Ben Udy, lead economist at Oxford Economics Australia, noted that Thursday’s data likely won’t have a significant impact on the RBA’s decision, emphasizing that the upcoming inflation data, due on July 31, will be more influential. “We’re not expecting a big rise in inflation, which is driving the market speculation of a rate increase,” Udy stated.
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Despite a “very gradual loosening in the labour market,” Udy highlighted that it remains tight. “The monthly labour market has been volatile over the last year, partly due to the timing of holidays and reluctance to start new jobs after Christmas and Easter,” he explained. He also pointed out that although the unemployment rate ticked up, a rise in full-time employment led to a decrease in the underemployment rate.
Anders Magnusson, BDO Economics Partner, dismissed concerns that Australia’s tight labour market would drive inflation higher. He emphasized other indicators, such as decreasing job mobility, vacancies, and advertisements, as signs of a weakening market. Magnusson also expects the RBA to hold the cash rate in August, cautioning against overinterpreting the misleading May monthly inflation data.
David Bassanese, chief economist at Betashares, suggested the RBA’s decision could be finely balanced, with the potential for the Consumer Price Index (CPI) to reach 4%, possibly prompting a rate hike. “My expectation is that annual growth in both headline and trimmed mean inflation will be 3.9% in the June quarter,” Bassanese said, adding that if inflation rates exceed 4%, the RBA will be under pressure to act.
Bjorn Jarvis, head of labour statistics at the ABS, highlighted that the employment-to-population ratio and participation rate remain near their 2023 highs, with immigration driving growth in the labour force. “With employment rising by around 50,000 people and the number of unemployed growing by 10,000 people, the unemployment rate rose slightly to 4.1%,” Jarvis said. The participation rate in June was 66.9%, just 0.1 percentage points lower than the historical high of 67.0% in November 2023.
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Jarvis also noted that while unemployment increased in June, it is still significantly lower than pre-pandemic levels. “The unemployment rate was 0.5 percentage points higher than June last year and 1.1 percentage points lower than March 2020,” he added.
In summary, while the labour market shows signs of both strength and weakness, economists largely agree that the RBA is likely to hold the cash rate in August, with future inflation data playing a crucial role in upcoming decisions.
