Jobless rate slides to over six-year low of 5pc

The unemployment rate has slid to a more-than-six-year low of 5pc, as the jobless rate in NSW tapped 4.4pc.

A Centrelink office in Logan south of Brisbane. Picture: AAP

The unemployment rate fell to its lowest level in more than six years in September, bringing the nation’s central bank a step closer to its first rate increase since 2010.

The jobless rate dipped to 5.0 per cent from 5.3 per cent in August, the government statistician said Thursday. Economists had expected no change.

The Australian dollar climbed on the data, cementing a foothold above US71 cents as traders pondered what the fall in unemployment might mean for the Reserve Bank of Australia, which in August forecast it would take until the end of 2020 before unemployment dropped as low as 5 per cent.

The RBA has long estimated 5.0 per cent as the natural rate of unemployment, or full employment, a likely trigger point for stronger wage growth and a higher inflation rate.

Still, economists said the RBA won’t rush to signal a change in its neutral policy stance on the back of one month of employment data, especially as the drop in unemployment was due mostly to fewer people looking for work.

Only 5600 new jobs were created in September, while the workforce participation rate fell to 65.4 per cent from 65.7 per cent in August.

The RBA has left interest rates on hold at a record low 1.5 per cent since mid-2016, and has signalled repeatedly that it needs to see rising wages and higher inflation before it raises rates.

The underemployment rate was steady at 8.3 per cent in September, while the workforce underutilisation rate fell 0.2 percentage point to a still-high 13.3 per cent, the statistician said.

“It is too early to declare that the economy is at full employment, as wage growth remains subdued and rates of underutilisation in the labour force remain high,” said Janu Chan, economist at St George Bank.

Unemployment in the states of New South Wales and Victoria dropped to 4.4 per cent and 4.5 per cent, respectively, in September. Still, neither state is reporting a broadbased rise in wages, a sign that the wait for incomes to rise might still be lengthy.

Paul Dales, chief economist at Capital Economics, said there are three key reasons why wages will remain subdued.

The natural rate of unemployment rate is actually closer to 4.0 per cent, he said, while spare capacity in the labour market remains elevated.

Technological changes are affecting hiring globally and these forces aren’t going to disappear, he added.

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