By Shane Wright and Millie Muroi
Anthony Albanese’s hopes of an election campaign buoyed by back-to-back interest rate cuts from the Reserve Bank are under threat after jobs figures revealed a fall in unemployment and ongoing demand for full-time workers.
Just two days after the RBA signalled a near-term rate cut due to easing inflation pressures and a slowdown in wages growth, figures from the Australian Bureau of Statistics showed the jobless rate falling to 3.9 per cent in November.
A super-strong jobs market makes a decision to cut interest rates tougher for the Reserve Bank.Credit: Getty
It was the lowest rate since March as unemployment dropped 0.2 percentage points as 36,000 new jobs were created across the country. Full-time employment jumped by 52,600, offset by a 17,000 dip in part-time work.
The timing of prospective interest rate cuts loom large in Albanese’s planning for the election. The RBA has said key inflation figures due next month, as well as future jobs reports, will be pivotal to when it starts loosening monetary policy.
The numbers complicate the Reserve Bank’s decision when it returns in February. The bank’s forecasts in November showed it expected unemployment to reach 4.3 per cent by December – a virtually impossible result following the latest print.
For underlying inflation to reach 2.5 per cent – the midpoint of the bank’s 2 to 3 per cent target band – the bank has been forecasting unemployment to rise to 4.5 per cent by the middle of next year.
Treasurer Jim Chalmers took credit for the latest jobs print, saying more than a million jobs had been created under the current government.
“Today’s new jobs numbers show unemployment is falling while wages are rising, inflation is moderating, and our policies are helping achieve a soft landing in our economy,” he said.
Betashares chief economist David Bassanese said the “blockbuster” unemployment figure could push back the possibility of a rate cut in February. But coupled with falling inflation, he said the figures could force the RBA to reconsider what it sees as the non-inflationary rate of unemployment, which it assumes is 4.5 per cent.
KPMG chief economist Brendan Rynne suspects companies are “labour hoarding”, meaning they are clinging onto workers despite slower growth to avoid costs of recruiting new hires when the economy rebounds.
The bureau noted there were a larger-than-usual number of people who were counted as employed in November but had been waiting to take up their position since October.
Westpac economist Ryan Wells said while the figures could be interpreted as a threat to inflation, the past year had suggested the jobs market could handle low unemployment without pushing up prices.
“This is corroborated by clear evidence of wages growth decelerating from its peak, even with the unemployment rate trending down since July, suggesting the labour market is closer to balance than what the RBA’s forecasts might imply,” he said.
Highlighting the volatile nature of the figures, unemployment in Western Australia dropped 0.8 percentage points, taking it to 3.3 per cent, while Victoria enjoyed a 0.4 percentage point fall to 4.2 per cent.
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