Unemployment rate falls, not enough for RBA

Yasmine Raso

Senior Journalist, Financial Newswire

21 November 2022

New research from Barclays has found that while the Australian unemployment rate has edged lower amid strong job and wage growth, the Reserve Bank of Australia (RBA) is expected to focus more on economic growth to determine rate hikes.

Australia’s unemployment rate fell by 0.1 per cent in October to 3.4 per cent, as the labour market reported a stronger performance than the previous two months with 305,000 jobs added to date in 2022 and the number of unfilled jobs falling month-on-month.

The decrease in unemployment was mainly driven by a steady participation rate at 66.5 per cent and full-time employment rising to 47,200. The total number of hours worked also increased by 2.3 per cent due to a lower number of people taking annual leave in October.

The underemployment rate also dropped to 5.9 per cent, the report found.

“We continue to expect the RBA to maintain its 25bp pace for hiking, given the global growth risks and potential risks to household consumption from a housing-related wealth effect and higher interest rates,” Barclays’ report said.

“We expect the RBA to raise rates one final time this year, in December, taking the cash rate to 3.10%. The minutes of the November meeting suggest that the board may consider keeping rates unchanged for a period to assess economic data.”

“However, we think a pause in December is less likely, especially with a strong labour and wage reports; we expect the RBA to pause in February, as by then, the global outlook will likely further deteriorate.”

The report also revealed wages have risen at the fastest rate in 10 years but was mainly focused on rapid growth in private wages and jobs paid under individual arrangements.