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Australia’s unemployment rate has fallen to just four per cent – taking it very close to levels unseen since 1974 and making a rate rise in coming months more likely as inflation soars.
The national jobless rate in February 2022 was the equal lowest since August 2008, during the Global Financial Crisis, after falling from 4.2 per cent in January as 77,400 jobs were created.
Unemployment has never fallen below four per cent since the Australian Bureau of Statistics began compiling monthly labour force data in early 1978.
If it falls any lower, the jobless rate would be at levels unseen since 1974.
In New South Wales, unemployment last month plunged by 0.5 percentage points to just 3.7 per cent.
The drop in unemployment has coincided with high inflation, which increases the chance of the Reserve Bank of Australia raising interest rates in 2022 from a record-low of 0.1 per cent.
Global inflationary pressures on Thursday saw the US Federal Reserve raise its benchmark funds rate for the first time since 2018.
Australia’s unemployment rate has fallen to just four per cent – taking it close to levels unseen since 1974. The national jobless rate in February 2022 was the equal lowest since August 2008, during the Global Financial Crisis (pictured is an apartment construction site worker)
KPMG chief economist Dr Brendan Rynne said the drop in Australian unemployment had surprised the Reserve Bank which wasn’t expecting this ‘until the middle of this year’.
‘This is the lowest unemployment rate since February 2008 and August 2008, and we would need to go back to the mid-1970s to find a similar level of unemployment,’ he said.
Last month, 77,400 new jobs were created as full-time employment increased by 121,900 as part-time jobs fell by 44,500.
The participation rate rose by 0.2 percentage points to 66.4 per cent, which meant 18,500 fewer people were unemployed as more people looked for work.
Financial markets have priced in nine rate rises in 2022 and 2023, that would increase monthly mortgage repayments on a typical loan by $700.
Historically low unemployment means workers are also in a better position to demand higher pay, adding to the inflationary spiral.
Headline inflation last year rose to 3.5 per cent, a level higher than the Reserve Bank’s 2 to 3 per cent target.
Reserve Bank Governor Philip Lowe has hinted a 2022 rate rise was now ‘plausible’ after last year repeatedly ruling out an increase until 2024 ‘at the earliest’.
Now, financial markets are expecting the Reserve Bank cash rate to climb to 2.25 per cent by July 2023, as rates were raised nine times.
Under this scenario, Australia and New Zealand would equally have the rich world’s highest interest rates, that were above the lending rates in the US, UK, European Union and Japan.
In New South Wales, unemployment last month plunged by 0.5 percentage points to just 3.7 per cent. The drop in unemployment has coincided with high inflation, which increases the chance of the Reserve Bank of Australia raising interest rates in 2022 from a record-low of 0.1 per cent (pictured is a construction worker at Darling Harbour in Sydney)
Should variable rates rise in line with Reserve Bank moves, as financial markets are predicting, a borrower paying off a typical Australian home would owe $700 extra a month in repayments by July 2023.
In February, Australia’s median property price stood at $728,034, CoreLogic data showed.
With a 20 per cent deposit, a borrower owing $582,427 is now paying $2,269 every month to the bank on a 2.39 per cent variable loan rate.
A 2.15 percentage point increase in mortgage rates would see those repayments climb to $2,965.
Australia’s unemployment rate has consistently trended lower during 2021, despite the absence of immigration until December, reversing the March 2020 border closure.
As of September 30, Australia was home to 25,750,198 people.
The annual growth rate was just 0.3 per cent, or 68,900 people, a far cry from the 1.5 per cent pace of 1.5 per cent in 2019 before the pandemic.
Source: Daily Mail