Australia's unemployment rate unexpectedly rose to a four-year high of 4.5% in September, up from 4.3% in August, according to data from the Australian Bureau of Statistics. The increase came as a surprise to economists and has shifted market expectations for a Reserve Bank rate cut.
Treasurer Jim Chalmers, attending a G20 summit in Washington DC, noted that the jobless rate remains low by historical standards, excluding the pandemic period. However, the rise is a concern for the government, which has touted a resilient labour market as a key economic achievement.
Financial markets now see a 64% chance of a rate cut at the RBA's November meeting, up from 36% before the data release. The chance of a cut by December jumped to near certainty. Some market participants even discussed the possibility of a double rate cut, though analysts consider that premature.
The RBA had forecast unemployment to peak at 4.3% this year and remain there through 2026. The higher-than-expected jobless rate, combined with still-elevated inflation, creates a dilemma for the central bank. The September quarter consumer price index report on 29 October will be crucial in determining the next move.
Economists warn that if private sector hiring does not pick up, unemployment could reach 4.8% early next year, eroding post-pandemic labour market gains. The government and RBA are closely watching the data to see if September's figures are a blip or the start of a trend.
