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
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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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New research suggests spending 40 percent of household income on loan repayments is the new normal
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Requiring more than 30 percent of household income to service a home loan has long been considered the benchmark for ‘housing stress’. Yet research shows it is becoming the new normal. The 2024 ANZ CoreLogic Housing Affordability Report reveals home loans on only 17 percent of homes are ‘serviceable’ if serviceability is limited to 30 percent of the median national household income.
Based on 40 percent of household income, just 37 percent of properties would be serviceable on a mortgage covering 80 percent of the purchase price. ANZ CoreLogic suggest 40 may be the new 30 when it comes to home loan serviceability. “Looking ahead, there is little prospect for the mortgage serviceability indicator to move back into the 30 percent range any time soon,” says the report.
“This is because the cash rate is not expected to be cut until late 2024, and home values have continued to rise, even amid relatively high interest rate settings.” ANZ CoreLogic estimate that home loan rates would have to fall to about 4.7 percent to bring serviceability under 40 percent.
CoreLogic has broken down the actual household income required to service a home loan on a 6.27 percent interest rate for an 80 percent loan based on current median house and unit values in each capital city. As expected, affordability is worst in the most expensive property market, Sydney.
Sydney
Sydney’s median house price is $1,414,229 and the median unit price is $839,344.
Based on 40 percent serviceability, households need a total income of $211,456 to afford a home loan for a house and $125,499 for a unit. The city’s actual median household income is $120,554.
Melbourne
Melbourne’s median house price is $935,049 and the median apartment price is $612,906.
Based on 40 percent serviceability, households need a total income of $139,809 to afford a home loan for a house and $91,642 for a unit. The city’s actual median household income is $110,324.
Brisbane
Brisbane’s median house price is $909,988 and the median unit price is $587,793.
Based on 40 percent serviceability, households need a total income of $136,062 to afford a home loan for a house and $87,887 for a unit. The city’s actual median household income is $107,243.
Adelaide
Adelaide’s median house price is $785,971 and the median apartment price is $504,799.
Based on 40 percent serviceability, households need a total income of $117,519 to afford a home loan for a house and $75,478 for a unit. The city’s actual median household income is $89,806.
Perth
Perth’s median house price is $735,276 and the median unit price is $495,360.
Based on 40 percent serviceability, households need a total income of $109,939 to afford a home loan for a house and $74,066 for a unit. The city’s actual median household income is $108,057.
Hobart
Hobart’s median house price is $692,951 and the median apartment price is $522,258.
Based on 40 percent serviceability, households need a total income of $103,610 to afford a home loan for a house and $78,088 for a unit. The city’s actual median household income is $89,515.
Darwin
Darwin’s median house price is $573,498 and the median unit price is $367,716.
Based on 40 percent serviceability, households need a total income of $85,750 to afford a home loan for a house and $54,981 for a unit. The city’s actual median household income is $126,193.
Canberra
Canberra’s median house price is $964,136 and the median apartment price is $585,057.
Based on 40 percent serviceability, households need a total income of $144,158 to afford a home loan for a house and $87,478 for a unit. The city’s actual median household income is $137,760.
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