A surprise jump in the jobless rate could help cement the case for an interest rate cut, delivering welcome relief for homeowners.
The unemployment rate bucked market expectations, rising from 4.1 per cent to 4.3 per cent in June, according to the Australian Bureau of Statistics.
Though the result was unexpected, ex-Reserve Bank economist Luke Hartigan said it met the central bank’s year-end unemployment forecast.
“This just adds information to say that some modest reduction in interest rates is warranted,” the University of Sydney economics lecturer told AAP.
After its July meeting, the central bank disappointed mortgage-holders and shocked market economists by opting to hold the cash rate at 3.85 per cent in a split decision.
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 central bank meets in August, CreditorWatch’s chief economist Ivan Colhoun said.
But 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.
“The market is still pricing in two more rate cuts by the end of the year, but we consider it premature to be making this call before there is any data to support this,” he said.
While the recent unemployment increase has put the rate at its highest level since November 2021, Dr Hartigan maintained other metrics showed the market was still relatively solid.
“This is the first uptick in a little while, so it’s a little bit concerning,” he said.
“But in the context of where the unemployment rate is now versus where it’s been in the past, it is still very low.”
Economists would likely need a few more months of continued rise to be sure of a weakening in the labour market.
Treasurer Jim Chalmers called the unemployment uptick an “inevitable consequence” of global economic uncertainty and the ongoing impact of higher interest rates.
“The Australian economy is not immune from global uncertainty but we are well‑placed and well‑prepared to face the challenges ahead,” he said.
“The ongoing resilience in our labour market over the past three years remains one of our best defences.”
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