SYDNEY: Australia’s economy surprisingly shed jobs in May although unemployment held steady as fewer people sought work, suggesting a slight loosening of the labour market and bolstering the case for the Reserve Bank of Australia (RBA) to reduce interest rates further.
Employment fell by 2,500, driven completely by part-time roles as full-time gained, against economists’ expectations for a 21,200 increase, data from the Australian Bureau of Statistics showed.
The jobless rate held at 4.1% as the participation rate edged down to 67%.
While unemployment remains low, it has steadily inched up this year to hold above 4%, having hit a low of 3.4% in the aftermath of the Covid-19 pandemic.
The currency and the yield on policy-sensitive three-year government bonds were little changed. Money market pricing implies an 80% chance the RBA will cut its key rate to 3.6% on July 8, from 3.85% now, and then follow that up with two more reductions.
Since the RBA’s May meeting, when it lowered borrowing costs for a second time this year and surprisingly adopted a dovish stance, data has suggested only tepid momentum in the economy.
Global uncertainty has further intensified with a surge in oil prices following Israel’s strike on Iran’s nuclear sites and Tehran’s retaliation.
The conflict in the Middle East is yet another headwind for nations already navigating higher US tariffs, a slowdown in China and fallout from the Ukraine-Russia war.
Treasurer Jim Chalmers this week described the global economy as a “pretty dangerous place,” adding that while Australia is well-placed to deal with the volatility, it “won’t be immune” from it.
Yesterday’s jobs report also showed: To date, low unemployment has been handy for Chalmers and Prime Minister Anthony Albanese as it restrains welfare costs and boosts the tax take at a time when fiscal pressures are mounting. — Bloomberg
