Rate cut hopes rise as labour market cools
The number of dole recipients rose by 21,500 over two-months late last year, as the labour market shed 65,100 jobs last month and raised expectations of rate cuts by December.
The number of dole recipients rose by 21,500 over two months late last year, as the labour market shed 65,100 jobs last month and raised expectations of rate cuts by December.
Amid an apparent slowdown in the jobs market and spike in company insolvencies, Australian Bureau of Statistics data showed the booming post-pandemic labour market moderated faster last month compared with market forecasts.
Department of Social Services statistics also revealed the number of JobSeeker and Youth Allowance (Other) recipients grew in October and November, rising from 826,360 in September to almost 850,000.
The DSS data, which does not include December figures, reports more than 190,000 Australians have received JobSeeker payments for more than five years, despite the unemployment rate on Thursday remaining at a historically low 3.9 per cent.
CBA head of Australian economics Gareth Aird predicted the unemployment rate would gradually lift over 2024 to end the year at 4.5 per cent, putting pressure on the Reserve Bank of Australia to lower the 4.35 per cent cash rate.
Treasury last month forecast unemployment would rise to 4.25 per cent by June and to 4.5 per cent over the next two financial years.
“We believe RBA rate cuts will be required this year to prevent the unemployment rate from rising much above 4.5 per cent (our base case sees the RBA commence an easing cycle in September),” Mr Aird said.
ABS head of labour statistics David Taylor said “with employment dropping by 65,000 people, along with a small fall in the number of unemployed people, the unemployment rate remained steady at 3.9 per cent in December”.
“The fall in employment in December followed larger-than-usual employment growth in October and November, a combined increase of 117,000 people, with the employment-to-population ratio and participation rate both at record highs in November,” Mr Taylor said.
“While the December employment fall was large, the number of employed people was still 52,000 higher than September. Looking over the past 12 months, seasonally adjusted employment increased by an average of 32,000 people per month, showing reasonably strong underlying growth during 2023.”
The Australian understands processing arrangements put in place by Services Australia to address a backlog in outstanding claims may have contributed to the increase in JobSeeker numbers. As at November 24, there were 39,618 JobSeeker Payment and 6942 Youth Allowance (other) claims outstanding.
From a pandemic peak of around 1.6 million JobSeeker recipients, the cohort of welfare recipients fell to near pre-pandemic levels in September.
While 250,000 people have been on JobSeeker payments for less than 12 months, almost 65,000 Australians have relied on dole payments for more than 10 years.
A further 126,000 have been on the payment for more than five years, 200,000 for more than two years and 121,000 for more than one year. As of November 30, the average duration for recipients on JobSeeker payments was 186 weeks.
Treasurer Jim Chalmers said “despite everything that’s been thrown at us from around the world, Australia’s resilient labour market remains one of our greatest strengths, and our unemployment rate remains near historic lows”.
“(The) data shows Australia’s unemployment rate was steady at 3.9 per cent but we’re also seeing the impact of global challenges and higher interest rates, which are slowing our economy in expected ways,” Dr Chalmers said.
Anthony Albanese, who has sought advice from Treasury on new cost-of-living relief measures, said it was positive that unemployment remains low as inflation moderates.
“We are working on ways in which we can put that downward pressure on inflation whilst as well supporting employment to the best of our capacity, putting in place the mechanisms that drive that,” the Prime Minister said.
“We are a party that are founded upon the need to provide secure work and that’s a commitment that we make. But we are engaged as well, of course, in the fight against inflation.”
Opposition Treasury spokesman Angus Taylor said “more than 106,000 full-time jobs were lost, while part-time employment increased by 41,400”.
“Australians are being smashed at the moment with falling real disposable incomes, rising prices, rising interest rates and rising taxes all having a big impact on family budgets,” Mr Taylor said.
“In GDP per capita terms, we are in a recession. At the end of the day, that’s the economic reality that counts – the personal.
“We are seeing the impact of an economy that’s going backwards. This is the biggest fall in jobs since 1993, outside of Covid.”
As companies warn of rising cost pressures, Business Council of Australia chief executive Bran Black said the government was “making it harder to employ Australians … You can’t make anti-business policy and expect there to be no impact on jobs”.