National unemployment figures dropped below 5 per cent in June despite lockdowns in the two largest capital cities, fuelling speculation the RBA may move on interest rates sooner than expected.
Data released by the Australian Bureau of Statistics on Thursday revealed the unemployment rate had dropped by 0.2 per cent in June to 4.9 per cent, with the economy adding 29,100 jobs over the month.
However underemployment rose 0.5 per cent to 7.9 per cent over the period, as workers had their hours cut due to lockdowns in early June in Melbourne and late June in Sydney.
The new figures mark the eighth consecutive month in which the unemployment rate has fallen, but economists are fearful that a sustained lockdown in Sydney in particular could set back Australia’s recovery from the COVID crisis.
Commenting on the data, VanEck Australia head of investments and capital markets Russel Chesler said with unemployment now heading toward a historic low, it was looking increasingly likely that the RBA could raise interest rates in 2022.
“June saw the eighth consecutive monthly fall in the unemployment rate to its lowest since December 2010. With indefinitely closed Australian borders and skills shortages mounting, we could see the unemployment rate fall towards its historic low around 4 per cent, notwithstanding the continued lockdown in Sydney and potentially other capital cities,” Mr Chesler said.
“This will put upward pressure on wages costs and potentially push inflation closer to the RBA’s 2 per cent to 3 per cent target band in 2022.”
Mr Chesler said the prolonged Sydney lockdown may have a short-term effect, but it would not detract from the longer-term inflationary environment Australia and other global economies found themselves in.
“Around the globe, inflationary pressures are building, and we have seen this week in the US, where the CPI rose last month at the fastest pace since August 2008, up 5.4 per cent from the previous year, and also in the UK where June inflation jumped ahead of consensus forecasts,” he said.
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