The RBA haslifted official interest rates to 4.35 per cent to help cool the economy and push inflation,which peaked around 8 per cent late last year,back down to its target range of 2-3 per cent.
The combination of high interest rates and persistently high inflation has hit households and business budgets,and as a result of the tougher economic conditions,the unemployment rate is expected to rise further.
The RBA forecasts it will reach 4 per cent by the middle of next year,while Treasury’s expectations are slightly higher at 4.25 per cent.
HSBC chief economist for Australia,New Zealand and global commodities Paul Bloxham said the strong jobs market had helped keep mortgage arrears and defaults low despite the rapid increase in interest rates,and was helping steer the country clear of a recession.
“In broad terms,this is the soft landing that has been hoped for,” he said.
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Commonwealth Bank senior economist Belinda Allen said the rising underemployment rate,which gained 0.2 percentage points to 6.5 per cent,and a negligible change in monthly hours worked were signs the jobs market was softening.
At the same time,she pointed out that the working-age population was growing at a rapid pace – about 3 per cent over the past year – which could make it hard to keep the unemployment rate at its ultra-low level into next year.
“This means around 35,000 jobs are required to be added each month just to keep the unemployment rate steady,” she said. “If migration slows,as intended,this number could slow in 2024,but still should outpace demand for labour.”
Callam Pickering,Asia Pacific economist at job site Indeed,also noted that the quality of jobs being created appeared to have slipped.
“Just one-third of employment gains over the past six months[came] from full-time employment,” he said. “That’s in stark contrast to the full-time-led jobs boom that we experienced … post-lockdown.”
AMP deputy chief economist Diana Mousina said the slowing employment market would make the central bank cautious about lifting interest rates further.
“In our view,the December-quarter inflation data,which is released in late January,would need to show a decent upside surprise for the central bank to consider pulling the trigger again on another interest rate increase,” she said.
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