Australia jobless rate hits near 5-year high of 4.5% in July

In July, Australia's jobless rate reached a near five-year high of 4.5 percent, according to data released on August 20, adding to concerns about a weakening labor market. This marked a significant increase from the previous month, when the economy saw a drop in employment. The Australian dollar experienced a slight decline, dipping by 0.2 percent to US$0.7111.

The Reserve Bank of Australia (RBA) is unlikely to raise interest rates in September, but a decision could still be made by the end of 2026, with the outcome largely dependent on inflation outcomes. The Australian Bureau of Statistics revealed that net employment decreased by 15,800 in July, marking a decline from the revised 80,300 increase in June.

Previous expectations called for an increase of 15,000 jobs. However, full-time employment did grow by 16,300. The jobless rate surpassed the forecast of 4.4 percent, aligning with the RBA's expectation that it would reach 4.5 percent by the end of 2026. Economists noted the recent volatility in the monthly jobs data, with past increases potentially being revised.

The labor market's easing contributed to the RBA's decision to keep interest rates unchanged at 4.35 percent after three increases in 2026. The softer-than-expected data, coupled with a recent decline in wage growth, suggests minimal pressure for an immediate interest rate hike. Other factors, such as underemployment and hours worked, presented a mixed picture, with underemployment reaching a two-year high.

The RBA's assessment of the labor market has softened, which may explain their decision to maintain the current policy rates. In addition to the labor market shifts, economists cited various global risks, including the US-Israeli war on Iran, rapid advancements in artificial intelligence, and insufficient productivity growth as contributing factors to inflation risks.