Australia’s unemployment rate has risen to its highest level since the COVID-19 pandemic.
New figures from the Australian Bureau of Statistics show the unemployment rate rose to 4.6 per cent in August, up from 4.5 per cent in July, after economists had expected it to remain unchanged.
The increase came as the number of unemployed people rose by about 28,200 to 722,900.
While full-time employment fell by about 6,000, this was more than offset by a rise of about 46,000 in part-time employment. Overall, employment increased by 39,500 people during the month.
ABS head of labour statistics Sean Crick said the increase in unemployment was partly driven by more people entering the labour force and looking for work.
“This month there was 39,000 more people in employment, and 28,000 more people in unemployment,” ABS head of labour statistics Sean Crick said.
“This August we recorded a higher proportion of people who were previously not in the labour force moving to being unemployed, compared to recent years.
“The growth in the size of the labour force resulted in the participation rate increasing by 0.2 percentage points to 67.1 per cent.”
The figures come just days before the Reserve Bank of Australia’s next interest rate decision on September 29.
The RBA has raised interest rates three times this year and left the cash rate unchanged at 4.35 per cent at its August meeting. It has previously indicated that the economy needs to slow and unemployment is expected to rise gradually as higher interest rates take effect.
Governor Michele Bullock said earlier this week that unemployment would need to rise to help ease pressure on inflation.
“I think between 4.5 and 5 [per cent] will probably take enough heat out of the labor market that it’ll ease pressure on inflation,” she said on Tuesday.
“But the whole point about inflation being too high at the moment is it’s reflecting the fact that the demand side of the economy is outstripping the ability of the economy to supply the goods and services.
“One evidence of that is that the labor market looks tight.”
Major banks and financial markets are expecting the RBA to raise the cash rate by 25 basis points at next week’s meeting, although the latest unemployment figures add to evidence that the labour market is beginning to soften.
“Look, this is heading in the right direction if you want interest rates to stay lower,” Nine political editor Charles Croucher said.
“I don’t think it’s gone up enough to cause a pause that would leave rates on hold.
“So what we will still likely see, and what the markets believe, is that interest rates will go up next Tuesday.
“That might be it, though.
“If the unemployment keeps ticking higher, that’s a sign the economy is slower.
“And that might mean that that’s enough for Michele Bullock and the Reserve Bank team to say ‘that’ll do us’ for interest rate rises.”
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