Australia’s labour market is expected to come under renewed scrutiny this week, with economists watching Thursday’s June employment figures for signs that the Reserve Bank’s campaign of interest rate increases has reached its limit.
After lifting the cash rate three times this year to 4.35 per cent, the Reserve Bank has held steady since May as it weighs stubborn inflation against growing evidence that the labour market is losing momentum. The June labour force figures, due on Thursday morning, could shape expectations ahead of the bank’s next board meeting on 4 and 5 August.
The latest official data, covering May, painted a mixed picture. The unemployment rate eased from 4.5 per cent to 4.4 per cent, but most of the 40,300 jobs created were part-time positions. Full-time employment increased by just 5,200, while total hours worked fell 1.1 per cent, suggesting employers were spreading available work across more people rather than expanding overall labour demand.
The trend unemployment rate, regarded as a more reliable measure because it smooths monthly volatility, edged up from 4.3 per cent to 4.4 per cent.
Over the past year, the number of unemployed Australians has risen by more than 50,000, while employment growth has failed to keep pace with population growth. The employment-to-population ratio has also declined over the same period.
Leading indicators have continued to point towards further weakening.
Most market economists expect the official unemployment rate to remain at 4.4 per cent or edge up to 4.5 per cent. A reading below 4.4 per cent would run against most of the available economic indicators
The latest NAB business survey showed hiring intentions had fallen alongside business confidence, a combination that has often preceded softer official employment figures.
Roy Morgan Research, which uses a broader measure of unemployment than the Australian Bureau of Statistics, estimated Australia’s “real” unemployment rate at 11.7 per cent in June, up 1.3 percentage points from a year earlier and the highest level since January 2021.
Most market economists expect the official unemployment rate to remain at 4.4 per cent or edge up to 4.5 per cent. A reading below 4.4 per cent would run against most of the available economic indicators.
The employment figures arrive at a delicate point for monetary policy.
Underlying inflation remains above the Reserve Bank’s 2 to 3 per cent target range, giving policymakers reason to remain cautious. At the same time, the bank’s own forecasts released in May anticipated unemployment moving above 4.3 per cent. If Thursday’s data shows unemployment at 4.5 per cent or higher, the labour market would have weakened faster than the Reserve Bank had expected.
MacroBusiness economist Leith van Onselen argued the softening labour market “remains the number one barrier to the Reserve Bank hiking rates again.”
A result of 4.5 per cent or higher would make another increase in the cash rate increasingly difficult to justify and shift attention towards when interest rates could begin to fall. Financial markets have already begun pricing in the possibility of a rate cut before the end of the year.
A stronger-than-expected result, with unemployment falling to 4.3 per cent or below, would strengthen the case for keeping interest rates elevated for longer, although most analysts consider that outcome less likely.
For households, the figures have immediate financial implications.
A borrower with a $750,000 variable-rate mortgage is now paying more than $50,000 a year in interest. The three rate rises delivered this year have added roughly $5,600 to annual repayments. Each future quarter-percentage-point rate cut would reduce interest costs by about $1,875 a year.
The Reserve Bank will have one more major economic release before its August meeting, with the June quarter inflation figures due on 30 July. Together with Thursday’s labour force data, they are expected to shape the board’s next interest rate decision.
Support Independent Community Journalism
Dear Reader,The Indian Sun exists for one reason: to tell stories that might otherwise go unheard.
We report on local councils, state politics, small businesses and cultural festivals. We focus on the Indian diaspora and the wider multicultural community with care, balance and accountability. We publish in print and online, send regular newsletters and produce video content. We also run media training programs to help community organisations share their own stories.
We operate independently.
Community journalism does not have the backing of large media corporations. Advertising revenue fluctuates. Platform algorithms change. Costs continue to rise. Yet the need for credible, grounded reporting in a multicultural Australia has never been greater.
When you support The Indian Sun, you support:
• Independent reporting on issues affecting migrant communities
• Coverage of local and state decisions that shape daily life
• A platform for small businesses and community groups
• Media training that builds skills within the community
• Journalism accountable to readers
We cannot cover everything, but we work to cover what matters.
If you value thoughtful reporting that reflects Australia’s diversity, we invite you to contribute. Every donation helps us maintain the quality and consistency of our work.
Please consider making a contribution today.
Thank you for your support.
The Indian Sun Team
