Australia’s Unemployment Rate Continues Steady Rise
The jobless rate climbed to 3.7% in October from 3.6% in September, despite employment jumping by 55,000 over the month
The jobless rate climbed to 3.7% in October from 3.6% in September, despite employment jumping by 55,000 over the month
SYDNEY—Australia’s unemployment rate continued to rise in October, potentially ruling out a further hike in interest rates in December.
The jobless rate climbed to 3.7% in October from 3.6% in September, despite employment jumping by 55,000 over the month, the Australian Bureau of Statistics said Thursday.
The rise in the unemployment rate was expected by economists, but the jump in employment was more than twice the consensus estimate for a 20,000 increase.
The labor force participation rate rose to 67.0% in October from 66.8% in September, the ABS said.
The solid gain in employment in October follows news on Wednesday that wages grew at their fastest pace in more than a quarter of a century in the third quarter as a big rise in the minimum wage helped drive broad strength in new wage agreements.
Still, neither the employment gains nor the rising momentum in wages are likely to be enough to spark a further rise in interest rates at the RBA’s next policy meeting in early December.
The central bank is likely to look at the level of the official cash rate again in February when it reviews its economic forecasts and has seen another quarter of inflation data.
The RBA raised interest rates last week for the first time since June and left open the prospect of further increases if inflation pressures remain resilient. The central bank also revised up its forecasts for inflation in 2024 and 2025.
“It’s a very solid jobs report, highlighting continued tightness in the labor market and illustrating the dilemma the RBA faces as it looks to end its rate hike cycle in line with its global central bank peers,” said Tony Sycamore, market analyst at IG.
“While we don’t think today’s jobs [data] will prompt the RBA to raise rates next month, the RBA will need to see labor market and inflation data ease in the coming months to avoid having to raise rates early in 2024,” he added.
The large increase in employment in October followed a small increase in September of around 8,000 people, the ABS said.
The annual growth rate in hours worked fell to 1.7% in October, down from growth of around 5.0% in the middle of the year, showing that the job market is slowly losing momentum.
The underemployment rate remained at 6.3% in October, the ABS said. While this was 0.4 percentage points higher than October last year, the result was still around 2.4 percentage points lower than before the Covid-19 pandemic.
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The budget is being framed ahead of a federal election expected to be held in early 2025
SYDNEY—Australian Treasurer Jim Chalmers will deliver the government’s 2024-2025 federal budget next Tuesday amid concerns that strong revenue growth will tempt him toward a jump in spending, stoking the case for higher interest rates.
Economists expect Chalmers to announce a budget surplus for 2023-2024, supported in part by high commodity prices and strength in the job market, with unemployment continuing to hover near its lowest level in half a century.
The question on the lips of the governor of the Reserve Bank of Australia, Michele Bullock , will be how much of that revenue will flow back into the economy by things like added measures aimed at easing a cost-of-living surge for consumers.
Bullock told reporters Tuesday that the RBA’s board had considered a further rise in interest rates, sending a shot across the bow of the center-left Labor government ahead of the budget.
The budget is being framed ahead of a federal election expected to be held in early 2025.
The public acknowledgment of the RBA board’s discussion of what would be a 14th interest-rate rise in two years signaled that the central bank has grown more concerned about the inflation outlook after first-quarter data came in above its own expectations.
Economists have warned that the RBA isn’t even close to a decision to cut interest rates, and the more likely outcome at the moment is that the central bank will need to tighten the policy screws further before the end of this year.
“The challenge fiscal policymakers face is that although they are flush with revenue, a cautious approach ought to be taken to additional spending because the economy is still operating at full employment, and inflation is still too high,” said Paul Bloxham, chief economist at HSBC Australia.
“Loosening fiscal policy settings at this point could mean that monetary policy would need to be tightened further yet—or that rates need to be higher for longer,” he added.
The RBA is conscious of the fact that significant income tax cuts will be delivered midyear and that they target low- and middle-income earners, who are more likely to spend added income than save it.
The government has already signalled its plans to spend in the area of subsidies for local manufacturing, including for the production of solar panels.
In addition, the budget will focus on business tax incentives, increased defence spending, funding for domestic violence support, changes to student debt policy and infrastructure.
Chalmers has played down the risk over the budget stoking the flames of inflation.
“It will be a responsible budget, a restrained budget, and it will maintain our focus on that inflation fight,” he said Thursday in a radio interview.
“There will be help for people with the cost of living, but we’ll make sure that that cost-of-living help is part of the solution and not part of the problem when it comes to inflation,” he added.
A risk that the RBA will also be alert to is the probability that the government will hold back some of its revenue gains to support added spending closer to the election.
Josh Williamson , chief economist at Citi Australia, said Chalmers will likely push new spending into the future to avoid overheating the economy now.
“The government does not want to be seen promoting policies that add to the risk of further policy tightening,” he said.
This suggests that new spending will be pushed into the government’s forward budgetary projections, while measures that directly reduce inflation could be announced virtually immediately, Williamson added.
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