In Brief
- Australia’s unemployment rate held steady at 4.1 per cent for January, with nearly 18,000 jobs created.
- Experts say the data increases the risk of a second rate rise after the central bank raised the official cash rate this month.
In a development that could signal an upcoming shift in economic policy, the robust condition of the national job market has heightened the likelihood of another interest rate increase in the near future, according to economic analysts.
Recent figures from the Australian Bureau of Statistics (ABS) reveal that Australia’s unemployment rate held firm at 4.1% in January. This stability comes as the country added nearly 18,000 new jobs, suggesting a resilient employment landscape. Although these figures fell slightly short of expectations, they remain notably strong, especially when viewed alongside the impressive December surge, which saw an additional 65,000 jobs being created.
Shane Oliver, AMP’s chief economist, interprets these numbers as contributing to the risk of a subsequent interest rate hike by 2026, particularly when considered in conjunction with recent high inflation metrics. “The labor market remains fairly strong, which diminishes the chances of any rate cuts,” Oliver commented.
Despite the absence of official data, it appears that government spending on public sector positions is likely playing a significant role in maintaining the current tight labor market, Oliver further noted.
“The labour market remains fairly strong … this further dents any prospect for any rate cut,” he said.
While official data was yet to be released, government spending on public sector roles was likely keeping the jobs market tight, Oliver added.
Other economists agreed the jobs data would make interest rate increases more likely.
“In our view, the Reserve Bank will raise the cash rate further, most likely in the first half of this year to combat inflationary pressures, including those stemming from the labour market,” EY chief economist Cherelle Murphy said.
Most analysts who expect a hike believe it will happen in May, not at the Reserve Bank of Australia’s (RBA) next board meeting in March.
The ABS data shows the number of people in full-time work increased by 50,000, but that was partly offset by a 33,000-strong fall in the number of part-time employees.
Treasurer Jim Chalmers said the jobs market was remaining resilient during a challenging economic period.
“The unemployment rate has remained steady at 4.1 per cent, meaning it continues to remain at very low levels by historical standards and participation remains close to record highs,” he said.
But Opposition workplace relations spokeswoman Jane Hume said the data showed Australians were working harder while real wages went backwards.
“Australians are doing their bit, they’re turning up to work, they’re taking on extra hours, and in many cases, they’re juggling multiple jobs, but they’re still falling behind,” she said.
The RBA has been warning about tightness in the nation’s labour market — a concern the January figures will do little to relieve.
A number of other crucial data points will be released before the RBA’s next interest rate decision, including inflation figures later in February.
The central bank raised the official cash rate by 25 basis points during its meeting at the start of February, imposing more pain on borrowers in a bid to tackle rising inflation.
Wage figures released on Wednesday showed pay packets weren’t keeping up with inflation.
Seasonally adjusted wages rose to 3.4 per cent for the year to December, but below the 3.8 per cent for annual inflation.
It’s the first time there has been a drop in real wages since September 2023.
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