Unemployment rate rises to a higher-than-expected 5.2pc

The unemployment rate rose in April to 5.2pc, bringing closer the first interest rate cut in three years.

A Centrelink office. Pic: AAP

Australia’s unemployment rate rose in April, despite a strong gain in employment, bringing closer the first interest rate cut in three years.

The unemployment rate rose to an unexpected 5.2 per cent in April as more people were looking for work, the Australian Bureau of Statistics said. The bureau also revised March’s unemployment rate up to 5.1 per cent from 5.0 per cent.

The Australian dollar sank after the jobs data to a four-month low of US68.93c, down from US69.22c.

The number of people employed in April rose 28,400, higher than the expected 15,000. Full-time employment fell by 6300 but the number of those in part-time work rose by 34,700.

Workforce participation rose to 65.8 per cent in April, from 65.7 per cent in March.

Following news this week that wages growth stalled in the first three months of this year and that firms have turned negative in regard to hiring, the RBA looks closer to cutting interest rates at its June 4 policy meeting.

RBA Governor Philip Lowe said last week that unemployment needs to fall if wages and inflation are to rise toward the desired 2-3 per cent target band.

Inflation has undershot the band for over three years, and in the first quarter moved away from the target, prompting the RBA to lower its forecasts for inflation.

Financial markets have built in a 40 per cent probability that a cut, the first since August 2016, will be delivered in June. A cut in August is fully priced in.

While the RBA this month said it would closely monitor the labour market as it mulls its policy settings, BIS Oxford Economics analyst Sarah Hunter said the central bank would still be reluctant to cut the cash rate as early as next month from its historic low of 1.5 per cent.

“It will raise pressure on the board to loosen policy to support the economy in the second half of the year, particularly given a number of downside risks appear to be crystallising in the international economy,” Ms Hunter said.

Economists widely expect minutes of the RBA’s May policy meeting on Tuesday will confirm an overt easing bias, with a speech later in the day by Dr Lowe in Queensland to cement the change.

Economic growth has slowed sharply since the middle of 2018, as consumers have reined in spending as house prices have fallen, wages growth remains flat and household debt soars at record levels.

Dow Jones Newswires, AAP