(Bloomberg) -- Australia’s jobless rate unexpectedly climbed in August as the labor force swelled to a fresh record, setting the scene for another interest-rate cut by the central bank.
Key Insights:
- Australia’s central bank made back-to-back interest-rate cuts in June and July as it redoubled efforts to drive unemployment down toward 4.5%, its new estimate of the rate needed to revive inflation
- Reserve Bank Governor Philip Lowe has plenty of company: his developed-world counterparts have also had to wait for jobless rates to fall to exceptionally low levels to spur wage growth
- Lowe’s problem is that even as hiring has remained solid, the jobless rate has been little moved as the labor force continues to swell in response, absorbing all the new positions
- As a result, money markets are predicting the RBA will lower the current cash rate of 1% further in coming months; two of the nation’s most-watched economists, Westpac Banking Corp.’s Bill Evans and JPMorgan Chase & Co.’s Sally Auld, think Lowe will move next month and again in February
- Pushing Australia’s jobless rate down is likely to prove an uphill battle as debt-laden households are hunkering down while they grapple with stagnant incomes
- Still, signs of a revitalized property market in Sydney and Melbourne, together with rate and tax cuts, a weaker currency and rising mining and infrastructure investment will help the governor’s cause
Market Reaction
- The Aussie dollar fell to 67.93 U.S. cents at 11:50 a.m. in Sydney from 68.13 pre-data
To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net
To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Chris Bourke, Victoria Batchelor
©2019 Bloomberg L.P.
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