September 19th 2024.
The latest data from the Australian Bureau of Statistics reveals that the unemployment rate in Australia has remained steady at 4.2 per cent for the month of August. This has left many wondering whether the Reserve Bank of Australia (RBA) will make a move to cut interest rates in their upcoming meeting next week.
According to the ABS, around 47,000 new jobs were created in August, despite the current state of the economy being relatively weak. This suggests that the labour market is still at historically tight levels, which is a positive sign. Kate Lamb, the head of labour statistics at the ABS, stated that there are still many people entering the workforce and finding employment, as employers have a high number of job vacancies to fill.
Lamb further added that while the employment and participation rates remain high, the unemployment and underemployment rates are still low compared to pre-pandemic levels. This indicates that the labour market is still relatively tight. These stable figures are not likely to sway the RBA's decision on interest rates in their upcoming meeting.
9News Finance Editor Chris Kohler also shared that the 4.2 per cent unemployment rate does not come as a surprise to the RBA and will not cause them to make any immediate changes. He explained that if there had been an increase in the unemployment rate to 4.3 per cent, as predicted by some economists, it may have prompted the RBA to consider a rate cut this year. However, with the current figures, it is unlikely that we will see any interest rate cuts in the near future.
The recent decision by the US Federal Reserve to cut rates by 50 basis points this morning to 4.8 per cent will not put pressure on the RBA to follow suit. Governor Michele Bullock had previously acknowledged that the two nations have different rate cycles at the moment. She also mentioned that a potential rise in the Australian dollar due to a higher American cash rate could be expected.
Bullock stated that if the US interest rates decline, as expected, it would provide more support to the Australian dollar, making the interest rates in both countries less disparate. She also addressed the criticism that the Australian interest rates should be closer to those in the US, explaining that the RBA's strategy is to bring down inflation without causing a recession or a spike in unemployment.
In conclusion, the stable unemployment rate and the recent decision by the US Federal Reserve are unlikely to influence the RBA's decision on interest rates next week. The RBA's focus is on maintaining a stable economy and reducing inflation while avoiding a recession.
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