Strong May unemployment figures bring forward likelihood of RBA rate cut

18 June 2021

A better-than-expected unemployment result in May has brought forward the expectation of interest rate rise.

The jobless rate in Australia has dropped to 5.1 per cent, which is the lowest it’s been since the pandemic struck.

The solid figures are a welcome relief now that the JobKeeper payments, which were obviously designed to limit the damage of COVID on jobs, have ended.

In May, there were 97,500 new full-time jobs and 17,700 new part-time jobs.

Treasurer Josh Frydenberg was quick to trumpet the figures after his government’s JobKeeper and JobSeeker schemes.

“After the first recession in nearly 30 years, the Australian economy is roaring back, bigger, stronger, and leading the world,” he told Australian Financial Review.

Futures markets have shortened their expectations of an RBA rate rise in the wake of the new unemployment figures.

ANZ head of Australian economics David Plank spoke to AFR.

“If the likelihood of a move in 2024 is increasing, then a move earlier is also more possible,” he said.

“So we do think the shift in Lowe’s wording around forward guidance is deliberate.”

Mr Plank is referring to a change in RBA governor Philip Lowe’s language regarding rate increases this week, shifting from “unlikely until 2024 at the earliest” to “still some way off”.

The recent two-week lockdown in Victoria has not been included in the latest figures and that’s expected to show up and strike a blow to the June unemployment numbers.


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