Jobless rate climbs along with expectations of post-election rate cut


The bureau also reported a lift in the under-employment rate, which reached 8.5 per cent, up 0.2 percentage points on the March result.

The under-utilisation rate, a good indicator of slack in the jobs market, rose to 13.7 per cent, its highest level since July. All states recorded an increase, with the rate in Tasmania at its highest rate since 2015 while in the Northern Territory it climbed to an 11-year high.

Separate figures from job listings website Seek point to ongoing softness, with its monthly measure of job advertisements falling in April to be 8.9 per cent lower over the past year.

The biggest falls were in advertising (down 24.1 per cent), trades and services (down 23.4 per cent) and construction (down 23.2 per cent). Only four sectors showed any growth, with the best performed, education and training, up 11.9 per cent.

By state, ads for NSW jobs dropped by 11.3 per cent over the past year, while in Victoria they slipped 9.3 per cent.

The RBA, in its monetary policy statement released last week, cited the unemployment rate as a key factor in the future direction of interest rates. It has noted the jobless rate would need to fall to 4.5 per cent to push the inflation rate back to the middle of its 2 to 3 per cent inflation target band.

The weak result increases the risk that the RBA acts in June, where we now put the odds of a cut at 50-50.

NAB’s economics team

Ahead of the figures, financial markets put the chance of an interest rate cut at the RBA’s meeting next month at 41 per cent. But by the end of Thursday, this had increased to a 66 per cent chance, with two cuts fully priced in by the end of the year.

National Australia Bank’s economics team said there was now a real risk the RBA would use its meeting on June 4 to cut rates to 1.25 per cent.

“We had pencilled in a rate cut in July, but the weak result increases the risk that the RBA acts in June, where we now put the odds of a cut at 50-50,” it said.

TD Securities’ senior rates strategist, Prashant Newnaha, said the RBA had been clear in arguing that unemployment needed to fall so it could meet its inflation target.

He said the lift in the under-utilisation rate pointed to extra spare capacity in the economy, making it even more difficult for inflation and wages to pick up speed.

“Easing in June would appear rushed, with the RBA likely wanting to see more data before acting. It would also run counter to the stance the bank has adopted for so long – to be a source of financial stability,” he said.

Ernst and Young senior economist Jo Masters said of most concern was the lift in under-employment, especially after this week’s lower than expected wage price index report.

“The rise in the unemployment and under-employment rates, alongside the wage data earlier this week, will be disappointing for the RBA. It seems inevitable that rate cuts are coming,” she said.

“The RBA’s own forecasts have two 25 basis point rate cuts embedded, and a forecast decline in the unemployment rate over time, and even then the inflation profile remains very gradual.”

Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.

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