RBA on notice to hold off on rate rises as jobless rate hits five-year high

The chances of an interest rate hike in the run-up to Christmas has fallen sharply after new figures revealed the Australian jobs market is souring as the number of people searching for work reaches its highest level since the depths of the pandemic.

Figures from the Australian Bureau of Statistics released on Thursday showed an unexpected lift in the jobless rate to a five-year high of 4.7 per cent – a 39,300 drop in the number of people with a job and an increase in the underemployment rate.

The participation rate, which measures the number of people in work or looking for it, also fell, preventing the overall unemployment rate from pushing even higher. At 732,000, the number of unemployed reached its highest level since April 2021.

The figures suggest the jobs market started to turn soon after the Reserve Bank’s third interest rate hike this year, which occurred in May.

Since June, full-time employment among men has fallen by 19,100, while there’s been a 7.4 per cent jump in male unemployment across the country. Female unemployment has increased by 4.7 per cent over the same period.

It has been particularly focused on the nation’s largest job market, NSW, where 44,200 jobs have disappeared since June. Of that, 29,500 have been among men.

By contrast, employment has grown – albeit at a slower rate – in Victoria (by 10,000 positions), Queensland (5200) and Western Australia (11,500) over the same period.

NSW’s jobless rate rose by 0.4 percentage points in September to 4.7 per cent. It had been 4 per cent in June.

Full-time employment in NSW has slipped by 32,600, while the rest of the country has added almost 80,000 positions.

The number of unemployed in NSW, which is bearing the brunt of the slowdown in the property market, has jumped by 18 per cent, or 34,300 since June.

The figures had an immediate impact on interest rate expectations. The Australian dollar fell almost a quarter of a cent against its US counterpart on expectations that interest rates may not climb much higher in Australia.

Ahead of the figures, financial markets had put the chance of an interest rate rise at the Reserve Bank’s November meeting at almost one in three. That dropped to almost one in 10 after the weak result, while the chance of a rate rise in December fell to less than 50 per cent.

Oxford Economics Australia economist Oscar Guth said the figures confirmed the overall softening in the nation’s jobs market which had become evident over recent months.

“The rise in the unemployment rate to 4.7 per cent gives the RBA more room to be patient and assess incoming inflation data before raising rates again. This is consistent with our view that a further rate hike will come in the first quarter of next year,” he said.

Westpac economist Ryan Wells said there were a number of factors hitting the jobs market, including the Reserve Bank’s spate of rate rises, and warned the jobs market could “crack” under tight financial conditions.

“The economy faces more challenges in the near term as another round of disruptions in global energy markets combines with further interest rate rises and a deepening housing downturn,” he said.

The figures pre-date the Reserve Bank’s most recent interest rate move which occurred at the end of the month when it pushed the official cash rate to a 15-year high of 4.6 per cent.

At 4.7 per cent, the jobless rate is now well above the RBA’s most recent forecast, which had unemployment climbing to 4.5 per cent by year’s end.

The bank had not expected unemployment this high until the end of 2027.

The numbers were released as Treasurer Jim Chalmers used a meeting of global finance ministers and central bank chiefs in Bangkok to warn that global interest rates on government debt could continue to climb.

Speaking at a meeting of the G20, Chalmers said the AI boom, on top of ongoing supply shocks, tighter monetary policy, rising government debt and growing uncertainty were all adding to the economic pressures facing the world.

He said the way the surge in data centres was being financed, often through private capital markets or direct lending between major AI companies, was a particular risk.

“These markets can make it more difficult for regulators and investors to understand financial linkages, and defaults could have fast and unexpected consequences across the financial system,” he said.

“We must be even more vigilant at a time of rising global bond yields. Within the last month, 10-year yields reached a 15-year high in Australia, a 24-year high in the United States, and a three-decade high in Japan.

“The continuing global fuel and energy shock or worsening geopolitical turmoil could send yields still higher.”

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