Pressure is mounting on the Reserve Bank of Australia to follow in the US Federal Reserve’s footsteps and raise interest rates next quarter after the jobless rate fell to a 14-year low, signalling further tightening in the labour market.

The drop in the unemployment rate to a lower than expected 4 per cent last month pushed the Australian dollar 0.2 per cent higher to US73.1¢ by midday on Thursday. It surged 1.4 per cent overnight after the Fed raised its cash rate for the first time since 2018, making it the best session for the Australian currency since November 2020.