Unemployment falls below 5 per cent for the first time in a decade

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Unemployment falls below 5 per cent for the first time in a decade – stirring fears of an early interest rate rise

  • Unemployment in June fell to 4.9 per cent- the lowest level since June 2011
  • This occurred as 29,100 new employment positions were created in a month
  • Reserve Bank of Australia wants jobless rate under 5 per cent before rates raised 

Australia’s unemployment rate has fallen below 5 per cent for the first time in a decade.

The jobless level fell from 5.1 per cent to 4.9 per cent in June, a level unseen since June 2011 as 29,100 new positions were created last month, the Australian Bureau of Statistics has revealed.

The number of full-time jobs rose by 51,600 to 9.016million as part-time employment fell by 22,50 to 4.137million.

Last month, a record 13.154million Australians were employed, with the figures taken during the first fortnight of June before greater Sydney was plunged into lockdown.

Australia’s unemployment rate has fallen below 5 per cent for the first time in a decade. The jobless level fell from 5.1 per cent to 4.9 per cent in June, a level unseen since June 2011 as 29,100 new positions were created last month, the Australian Bureau of Statistics has revealed. Pictured is a store worker at Bankstown in Sydney’s south-west

The Reserve Bank of Australia wants unemployment to fall below 5 per cent before it considers raising interest rates from a record-low of 0.1 per cent.

Governor Philip Lowe has previously said the cash rate would not increase until 2024 ‘at the earliest’ but a lower jobless rate could see monetary policy tightened before that date if it led to wage inflation sooner.  

The closure of Australia’s border to foreigners means employers have to employ locals instead of relying on skilled migrants as they did before the pandemic. 

CommSec chief economist Craig James said uncertainly about the Delta strain of Covid made any celebration about lower unemployment a little premature. 

‘While today’s data continues to encourage, even cooling the champagne is some way off,’ he said.

‘The Delta strain of the Covid-19 virus is spreading rampantly across the globe with case numbers in some countries – especially across Asia – at new record highs.’

The Reserve Bank of Australia wants unemployment to fall below 5 per cent before it considers raising interest rates from a record-low of 0.1 per cent. Pictured is a shopkeeper at Fairfield in Sydney's south-west

The Reserve Bank of Australia wants unemployment to fall below 5 per cent before it considers raising interest rates from a record-low of 0.1 per cent. Pictured is a shopkeeper at Fairfield in Sydney's south-west

The Reserve Bank of Australia wants unemployment to fall below 5 per cent before it considers raising interest rates from a record-low of 0.1 per cent. Pictured is a shopkeeper at Fairfield in Sydney’s south-west

With New South Wales recording 65 new cases overnight, Mr James said the federal government and the Reserve Bank would be focused, in the short-term, on stimulating the economy.  

‘Governments and central banks have to remain fixated on providing as much stimulus as possible for some time, and the good news is that is the stated position of policymakers,’ he said.

EY chief economist Jo Masters said an extension of Sydney’s lockdown until at least July 30 would temporarily push up unemployment in the next set of labour market data.

‘The broader, and longer, lockdown in Greater Sydney is a significant bump in the economic recovery path and next month’s jobs data is likely to reflect this and push out the timing of achieving full employment,’ she said.

With New South Wales recording 65 new cases overnight, CommSec chief economist Craig James said the federal government and the Reserve Bank would be focused, in the short-term, on stimulating the economy. Pictured is a store at Bankstown

With New South Wales recording 65 new cases overnight, CommSec chief economist Craig James said the federal government and the Reserve Bank would be focused, in the short-term, on stimulating the economy. Pictured is a store at Bankstown

With New South Wales recording 65 new cases overnight, CommSec chief economist Craig James said the federal government and the Reserve Bank would be focused, in the short-term, on stimulating the economy. Pictured is a store at Bankstown

‘However, experience shows that economies do rebound as restrictions lift and confidence that this will again occur was boosted by the support package announced earlier this week.’

Economists have traditionally regarded a jobless rate before 5 per cent as the ‘non-accelerating inflationary rate of unemployment’ whereby a level below that pushes up wages.

But in the year to March, wages grew by just 1.5 per cent and have been below the long-term average of 3 per cent since mid-2013. 

Treasury’s May Budget papers forecast the unemployment rate dropping to 4.5 per cent by 2023, a level unseen in Australia since 2008 during the Global Financial Crisis.

Australian job vacancies are already at the highest level in more than 12 years and once vaccination rates increase, unemployment could fall at a faster pace than anticipated. 

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