More rises in unemployment levels could be on the cards as the jobless rate comes off historic lows.
Many market economists expected the jobless rate to stay at 4.1 per cent in June, but the Australian Bureau of Statistics said it jumped to 4.3 per cent – the highest level since November 2021.
The increase in unemployment has bolstered predictions the Reserve Bank will cut interest rates when the board meets in August.
Treasurer Jim Chalmers said the jobless figures might have come as a surprise to analysts, but there were expectations the levels would increase by the end of the year.
He said the government did not expect unemployment to go as high as five per cent.
“We think somewhere around the middle fours in our current forecasts, but obviously there’s a lot of uncertainty in that,” Dr Chalmers told ABC Radio on Friday.
“We don’t want it to tick up, but we have expected it to do so and that’s because the global economy is uncertain, our own economy has been relatively soft, those higher interest rates of the last couple of years have been biting.”
Global uncertainty driven by conflict and the ever-changing threat of US tariffs, alongside a few years of high interest rates and cost-of-living pressures, combined to create the conditions for a higher jobless rate.
Following recent discussions with his counterparts in South Africa, Dr Chalmers said the best way to deal with uncertainty was with increased engagement, collaboration, bolstered supply chains and more ambitious domestic economic policy.
While other countries have been hit harder by economic headwinds, Australia is still expected to have a “soft landing” with joblessness staying relatively low and inflation generally modest.
After its July meeting, the RBA disappointed mortgage-holders and shocked market economists by opting to hold the cash rate at 3.85 per cent in a split decision.
But the latest jobs data has been read by some as an early sign of labour market softening.
Combined with moderating inflation, the unemployment figures meant an interest rate cut was “virtually locked in” when the RBA met in August, CreditorWatch’s chief economist Ivan Colhoun said.
However, other economists believe there is still room to move, with VanEck investments head Russel Chesler pointing to the July 30 release of quarterly inflation figures as a vital data point in the Reserve Bank’s next rate decision.
It comes as the federal government unveiled funding on Friday to help people improve their financial literacy.
More than $38 million will be spent over the next four years to organisations that provide financial counselling.
A further $98 million will be set aside to help at-risk Australians manage debt levels and help make informed financial choices.
The funds, which are included in a $460 million package for food relief and financial assistance groups, will be rolled out from October.
Social Services Minister Tanya Plibersek said the funds for charities would help provide assistance to people who need financial support.
“Being able to set yourself up financially for the future and tackle big financial drains like problem gambling is also really important for being able to manage their finances in the long‑term,” she told reporters in Sydney.
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