Australia’s unemployment rate hits five-year high in August as more seek work

In August, Australia's unemployment rate hit a five-year high, as more individuals sought employment, according to data released on Thursday. Despite a rise in employment, the unemployment rate increased to 4.6%, above forecasts of a steady 4.5%, making it the highest since late 2021. The participation rate climbed to 67.1%, up 0.2 percentage point, as the growth in the labour force resulted in more people moving from outside the labour force to being unemployed.

The Australian Bureau of Statistics reported that net employment rose by 39,500 in August from July, when it had fallen by 15,800. However, full-time jobs decreased by 6,300. Sean Crick, head of labour statistics at the ABS, noted that the higher proportion of people previously not in the labour force becoming unemployed contributed to the increased participation rate. The labour market, while easing slightly, remains tight.

RBA Governor Michele Bullock stated that a range of unemployment rates between 4.5% and 5.0% could help curb inflation. This suggests that a rise in interest rates could be necessary. The central bank has already raised rates three times this year, bringing the policy rate to 4.35% to combat inflation. However, core inflation remains at 3.6%, well above the RBA's target range of 2% to 3%.

Bullock has warned that inflation risks are materializing due to the Middle East conflict and a data centre investment boom. With oil prices back above $100 a barrel, markets have re-priced the global rate outlook, with Australia's cash rate now expected to peak at 5.1%.