Unemployment rises to 4.6%, but a September interest rate hike still looks likely
The jobless rate hasn’t been this high since November 2021. But this is why it’s unlikely to stop the Reserve Bank from lifting interest rates next Tuesday.
In August, Australia's unemployment rate reached 4.6%, according to the latest figures from the Australian Bureau of Statistics. This marks the highest level since November 2021. Over the past six months, the unemployment rate has climbed by 0.5 percentage points, moving from 4.1% in December last year to the current figure. Despite this rise, it seems unlikely that the Reserve Bank will postpone its planned interest rate hike next week, given the central bank's emphasis on combating inflation.
During a recent meeting, Reserve Bank Governor Michele Bullock stated that unemployment may need to climb further to help reduce inflation. She suggested that a rate between 4.5% and 5% could alleviate pressure on the labor market and curb inflationary pressures. Based on the August data, an unemployment rate of 5% would translate to approximately 55,000 additional Australians without jobs, in addition to the 28,000 who became unemployed between July and August.
Since December, Australia's employment has grown by about 1.2%. This growth has been sufficient to maintain the employment rate at 63.9%, which is slightly lower than its peak of 64.4% in 2023 but still higher than the pre-pandemic level of 63.9%. However, the rising unemployment rate, from 4.1% in December to 4.6% in August, is attributed to an increasing number of Australians actively seeking employment.
The labor force participation rate has increased by 0.4 percentage points, reaching 67.1% in August. Additionally, underemployment has risen from 5.7% in December to 6.2% in August. Young job seekers are particularly vulnerable, with their employment proportion dropping from 66.6% in late 2022 to 64% in August. The Reserve Bank has warned about the need to address inflation, attributing it to higher oil prices and a "tight" labor market.
However, recent analysis suggests that unemployment alone is not a strong indicator of a tight labor market, and inflation can be controlled without resorting to an interest rate increase.
Written by urgent.news from The Conversation AU's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
