- The unemployment rate stands at 4.2 percent
- The news dampened hopes for interest rate cuts
Australia’s unemployment rate held steady at 4.2 percent in August, raising expectations that interest rates will be cut this year.
During the month, 47,500 jobs were added to the economy, more than the 25,000 forecasters had expected.
Kate Lamb, director of labour statistics at the Australian Bureau of Statistics, said the employment gains were accompanied by a fall in the number of unemployed by about 10,000.
“This resulted in the unemployment rate remaining stable at 4.2 percent and the participation rate remaining at its all-time high of 67.1 percent,” he said.
The strong jobs market has dampened hopes that the Reserve Bank of Australia could begin cutting interest rates before 2025.
RBA Governor Michele Bullock has strongly indicated that rate cuts are not on the table due to mounting price pressures in the labour-intensive services sector.
Job growth lifted the employment-to-population ratio by 0.1 percentage point to 64.3 percent, just shy of its November 2023 record.
“The high employment-to-population ratio and participation rate show that there are still a large number of people entering the labour force and finding work, as employers continue to seek to fill a larger than usual number of job vacancies,” Ms Lamb said.
Australia’s unemployment rate held steady at 4.2 percent in August, dampening hopes for a further interest rate cut (file image)
The labor market has proven resilient to a broader economic slowdown designed to reduce inflation, although it has been easing gradually.
Thursday’s labor force reading follows the U.S. central bank’s decision to cut interest rates by 50 basis points, leaving borrowers wondering whether the Reserve Bank of Australia will follow suit when it meets next week.
The RBA maintains it has more work to do on inflation and has been pushing back on expectations of near-term cuts, even as easing is already underway in several peer economies.
Treasurer Jim Chalmers said the US central bank faces a different economic outlook compared to the Australian central bank.
“What we saw in the United States overnight was pretty much what we expected,” he told Channel Nine’s Today programme on Thursday.
“When the Reserve Bank meets next week they will be looking at a whole range of issues, including that, but they will focus primarily on inflation, as will the Government.”
The benchmark federal funds rate had risen more than Australia’s cash rate, and remains higher even with the recently announced cut.
The Fed’s target range for the rate now stands at 4.75 to 5.0 percent after the half-percentage point cut, compared with Australia’s cash rate of 4.35 percent.
The labor market has proven resilient to a broader economic slowdown designed to reduce inflation, although it has been easing little by little (file image)
The Reserve Bank’s last rate cut was in 2020, when the cash rate fell to 0.10 per cent.
The US announcement was just one of many factors, including inflation, that the Reserve Bank must consider in its monetary policy decisions.
“The global economy is a pretty uncertain place, which is one of the reasons we’re seeing these rate cuts in places like the US,” Dr Chalmers said.
‘As far as the Australian situation is concerned, inflation is coming down quite substantially.
“The Reserve Bank will assess that aspect.”
