Australia’s unemployment rate remaining steady at 4.1 per cent indicates that the labour market remains tight and the economy is operating near full capacity, according to BDO chief economist Anders Magnusson. This development diverges from the Reserve Bank of Australia’s (RBA) forecasts, potentially leading to earlier-than-anticipated interest rate rises.
Magnusson noted that while the current data reflects a strong labour market, it follows a period of gradual loosening. Over the recent past, job vacancies have decreased, the unemployment rate has been inching upwards, and the participation rate has seen some easing. However, the latest figures suggest this trend has stalled, with labour market conditions tightening once again, which poses a concern for the RBA.
According to Magnusson, a tight labour market elevates the risk of persistent wage and price pressures, particularly if households and businesses anticipate continued higher inflation. This scenario could complicate the RBA’s efforts to manage inflation and maintain economic stability, reinforcing the possibility of adjustments to monetary policy in the near future.
