The latest Australian Bureau of Statistics figures revealed a jump in unemployment to 5.3 per cent in August, up from 5.2 per cent in July. While over 34,000 jobs were added to the economy over the month, this was offset by a rise in the workforce participation rate to 66.2 per cent.
The new figures represent the highest unemployment rate in the nation since July 2018, and place Australia just outside the top 10 highest unemployment rates globally.
As a result, economists and fund managers are revising their forecasts and many now expect a further interest rate cut at the RBA’s next board meeting.
In a Twitter post on Thursday, AMP Capital chief economist Shane Oliver said the central bank would not be happy with the outlook for wage growth off the back of the latest figures, with jobs growth centred around part-time roles and underemployment having also risen by 0.2 of a percentage point.
“[It’s] hard to see wages picking up with this,” Mr Oliver said. “[This] leaves the RBA on track to cut to 0.5 [of a percentage point] by year-end, with [a] high chance the next move is next month.”
Daintree Capital director Justin Tyler agreed that following falls in business confidence and a softening labour market, the central bank had further to go when it came to loosening monetary policy.
“We remain of the view that the RBA will cut rates at least to 0.75 per cent before the current rate cycle finds a floor,” Mr Tyler said.
Westpac chief economist Bill Evans and Commonwealth Bank senior economist Gareth Aird had also updated their interest rate forecast, expecting the RBA to cut rates again in October.
Maybe we should just jump straight to zero and see if that has any impact. A 25 point cut has little or no impact at all and if everyone thinks we are heading for zero next year lets jump the gun and get going early. Just a thought. The slow pain of small cuts having little impact except for those dependent on interest income. A zero rate should also kick the banks into some serious reviews.