Unemployment in Australia holds steady, putting the possibility of near-term interest rate hikes back on the table.
The Australian Bureau of Statistics (ABS) released its latest jobs report on Thursday, revealing that unemployment Down Under was 4.4% for June, the same as May, on a seasonally-adjusted basis.
The participation rate edged up to 67% in June, up from 66.7% the month prior.
By state, New South Wales had the lowest unemployment rates at 4.0%, followed by Western Australia at 4.2%. Queensland and South Australia both had unemployment rates of 4.3%. Meanwhile, Victoria had the highest unemployment rate at 5.1%, followed by Tasmania at 4.9%.
Despite the relatively low unemployment rate, market players argue there is still a chance the Reserve Bank of Australia (RBA) could raise rates again at its August meeting.
"Today's data is unlikely to rule out the possibility of a further increase in interest rates if inflation risks remain elevated," Aaron Luk and Jasmine Zheng, economists at ANZ, said in a joint note. "At this stage, we assess the conditions to be broadly steady, and from the RBA’s perspective, the labour market is unlikely to be a source of concern that would prevent additional policy tightening.
"However, given the broader range of indicators it tracks, we expect the bank will continue to characterise the labour market as a little tight at its August meeting,"the economists continued. "While we expect the cash rate to have peaked, we do not rule out ongoing price pressures to push the RBA into a rate hike in November, assuming the August meeting sees no rate change from the board."
The latest consumer price index (CPI) revealed that inflation is still above the RBA's target inflationary range of 2% to 3%. The central bank has repeatedly signalled it will not begin easing monetary policy until inflation is back within the target band.
Headline CPI rose 4% in the year leading up to May, easing slightly from 4.2%, the month before, while trimmed mean inflation increased to 3.6%, up from 3.4% in the 12 months to April.
The June CPI print will be released later this month, before the RBA's August 10 and 11th meeting.
Australia's central bank delivered three back-to-back interest rate hikes earlier this year, bringing the official cash rate (OCR) to 4.35%. However, policymakers left rates unchanged in June, saying they wanted additional time to gauge how previous increases were affecting economic activity before deciding on their next move.
Mortgage holders and investors have been watching the space closely as they grapple with higher borrowing costs, increased costs of living, a persistent housing shortage and the new federal budget.
Yet, Amol Agrawal, finance broker and founder of Western Australia's Juice Finance, pointed out that the labour market is just one of several data points the RBA considers.
"There are lots of metrics which are behind interest rates," Agrawal told Australian Broker. "It's not just unemployment. It's not just property prices; it's not just inflation. There are lots of metrics that impact if the rates are going to go up."
