Unemployment in September rose to 4.7 per cent for the first time in five years with economists fearing the Reserve Bank will hike rates again in three weeks’ time at the expense of jobs in a bid to bring inflation under control.
The jobless rate last month hit the highest level since October 2021, when Sydney and Melbourne were still in COVID lockdown, with 39,300 jobs lost.
This was worse than market forecasts of unemployment holding steady at 4.6 per cent as 19,600 jobs were created.
The Australian Bureau of Statistics released the figures on Thursday, just two days after the International Monetary Fund predicted a 4.7 per cent jobless rate for 2027.
The Reserve Bank of Australia’s own forecasts in August didn’t have unemployment reaching 4.7 per cent until December 2027.
But Ebury economist Anthony Malouf said it appeared the RBA would be more inclined to focus on bringing down inflation, with another rate hike on November 3, at the expensive of jobs.
“This is the last labour market print before the RBA’s November meeting. If the RBA does raise rates, we expect it this side of the year, most likely in November, but we think the weight has shifted towards inflation,” he said.
“The RBA looks willing to let the labour market cool to bring inflation down.”
Australia is now in a situation where the labour market is now potentially no longer in full employment as inflation at 4 per cent in August remained above the RBA’s 2-3 per cent target.
Victoria had Australia’s highest unemployment rate of 5.1 per cent, boding badly for State Labor as it tries to next month win a fourth consecutive term.
Governor Michele Bullock last month denied the RBA would be simultaneously failing its dual mandates on the labour market and inflation, after her monetary policy board voted unanimously to raise the cash rate to a 15-year high of 4.6 per cent.
Both have worsened since that decision, with unemployment and inflation both worsening in September.
“Well, I wouldn’t call inflation of 3.5 per cent and an unemployment rate of 4.6 per cent stagflation,” Ms Bullock said on September 29, citing July inflation and August unemployment data.
“That’s a pretty good unemployment rate historically. Stagflation you typically associate with very high inflation and very high unemployment, and I don’t think we have very high unemployment.”
More to come...