The Australia labour market remains in solid shape with the unemployment rate falling slightly to 4.2 per cent in July, according to data released by the Australian Bureau of Statistics.
Employment rose by 25,000 people and the number of unemployed decreased by 10,000 people, the ABS data revealed.
This saw the unemployment rate fall 0.1 percentage points to 4.2 per cent in July.
Growth in employment was driven by full-time employment, which was up by 60,000 people, with a 36,000-person fall in part-time employment partly offsetting this rise.
CBA economist Harry Ottley said the July labour force data was broadly in line with expectations and suggests that the labour market is evolving as the RBA expects.
The Reserve Bank has forecast a peak unemployment rate of 4.3 per cent by year-end and for this rate to be maintained over the forecast horizon.
“Their forecasts for the unemployment rate have barely budged in the three rounds of refreshed forecasts so far in 2025,” he said. “Today’s print provides nothing to cause a rethink on this front.”
The gradual rate at which the labour market has loosened this year means the RBA is unlikely to shift its views on the outlook for monetary policy, according to the bank.
“We see a September cut as unlikely given the RBA’s implied preference for a quarterly cadence. It would take a material weakening in the data to bring it into play,” Ottley said.
“We continue to expect a 25 basis point cut in November, taking the cash rate to a terminal rate of 3.35 per cent.”
AMP deputy chief economist Diana Mousina agreed that while the unemployment rate is likely to head a little higher to 4.5 per cent, there is no rush for the RBA to make further cuts.
“We see another 25 basis point rate cut occurring in November, February 2025 and May 2025 which would see the cash rate end at 2.85 per cent and this is more or less as financial markets are also expecting,” said Mousina.
“The labour market data is basically running in line with the Reserve Bank’s forecasts. While the unemployment rate is low, the trend up in unemployment is in line with soft GDP growth over the last 12–18 months and supports the rate cuts that we have had this year.”
She also noted that inflation data is likely to remain in the RBA’s 2–3 per cent target band in the near future.
“This supports the need for more rate cuts but clearly the economy is not cratering so the RBA can wait to cut rates again,” she said.
Krishna Bhimavarapu, APAC Economist at State Street Investment Management, also believes the latest data supports continued monetary easy by the RBA.
“We project the cash rate to reach 3.10 per cent by December, though our confidence in this forecast has softened since July,” Bhimavarapu said.
The July data reflects the continued stability in the labour market and supports the RBA’s cautious approach on monetary easing, the investment manager said.
