RBA on notice to hold off on rate rises as jobless rate hits five-year high

The Reserve Bank is facing pressure to hold off on any further interest rate rises after unemployment reached its highest level in almost five years.

Figures from the Australian Bureau of Statistics showed the jobless rate reached 4.7 per cent in September, with a 39,000 drop in the number of people holding down a job. Unemployment is now at its highest level since October 2021.

There was a 9000 increase in the total number of unemployed which reached 732,000, its highest level since April 2021.

The jobless rate would have been higher but for a 0.2 percentage point drop in the participation rate which measures the number of people in work or looking for it.

Economists had been expecting the unemployment rate to remain steady after it lifted in August.

The result was driven by NSW where the unemployment rate jumped by 0.4 percentage points to 4.7 per cent. It would have been higher but for a large fall in its participation rate.

NSW shed 35,000 jobs during the month, while its jobless rate has now reached a near-5 year high. In June, the state’s jobless rate was just 4 per cent.

Unemployment eased in Victoria, by 0.1 per cent to 5.1 per cent, and in South Australia where it dropped by half a percentage point to 4.2 per cent.

Total employment in Queensland eased slightly but the state has put on 37,700 jobs over the past 12 months, compared to 34,700 in Victoria and 51,900 in NSW.

The bureau’s head of labour statistics, Sean Crick, said the employment to population ratio had also fallen in September.

“This September a higher proportion of people remained unemployed compared to recent years,” he said.

The figures had an immediate impact on interest rate expectations. The Australian dollar fell almost a quarter of a cent against its US counterpart on expectations that interest rates may not climb much higher in Australia.

Oxford Economics Australia economist Oscar Guth said the figures confirmed the overall softening in the nation’s jobs market which had become evident over recent months.

“The rise in the unemployment rate to 4.7 per cent gives the RBA more room to be patient and assess incoming inflation data before raising rates again. This is consistent with our view that a further rate hike will come in the first quarter of next year,” he said.

The figures pre-date the Reserve Bank’s most recent interest rate move which occurred at the end of the month when it pushed the official cash rate to a 15-year high of 4.6 per cent.

At 4.7 per cent, the jobless rate is now well above the RBA’s most recent forecast which had unemployment climbing to 4.5 per cent by year’s end. The bank had not expected unemployment this high until the end of 2027.

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