Australia’s unemployment rate held steady at 4.3 per cent in March, reinforcing the Reserve Bank’s inflation dilemma as economists warned the labour market remains too resilient to rule out further rate hikes.
Australian Bureau of Statistics data showed seasonally adjusted employment rose by 18,000 in March, while the number of unemployed people fell by 4,000, with full-time jobs again doing the heavy lifting.
“The number of employed people rose by 18,000 and the number of unemployed people fell by 4,000 in March,” said Sean Crick, ABS head of labour statistics.
“The unemployment rate remained steady at 4.3 per cent, whilst the participation rate fell by 0.1 percentage points to 66.8 per cent.
“Growth in employment was driven by full-time workers, which rose by 53,000 people in March. This was partly offset by a fall in part-time employment of 35,000 people.”
Full-time employment increased for both men and women, rising by 29,000 and 24,000 respectively, while part-time employment declined across both groups, with male part-time employment down 19,000 and female part-time employment down 16,000.
The labour market also recorded stronger hours worked during the month, with total hours rising by 0.5 per cent, adding to the picture of an economy that is yet to show the kind of cooling the RBA may want to see.
“This month people worked 9.2 million more hours, with full-time hours increasing by 7.1 million and part-time hours increasing by 2.1 million hours,” Crick said.
The ABS said the 0.4 per cent increase in full-time hours worked was broadly in line with the 0.5 per cent rise in full-time employment.
Part-time hours worked, however, rose 0.6 per cent despite a 0.7 per cent decline in part-time employment, suggesting part-time workers on average worked longer hours during the month.
“This meant that on average, a person working part-time worked 1.4 per cent more hours in March than they did in February,” Crick said.
On a trend basis, the unemployment rate also remained at 4.3 per cent in March, while both employment and hours worked rose by 0.2 per cent over the month.
“Both trend employment and hours worked grew by 0.2 per cent in March. Annually, the number of hours worked grew faster at 2.0 per cent, than employment, which grew at 1.4 per cent,” Crick said.
VanEck head of investment and capital markets Russel Chesler said the figures extended “what has been a remarkably resilient period of the Australian labour market”, even as the broader economy absorbs the fallout from war in the Middle East and surging oil prices.
“The labour market remained resilient in March despite the war in the Middle East and surging oil prices. While unemployment has moved modestly over recent years, it has remained within a relatively tight band and continues to sit at historically low levels.
“To put that in perspective, the unemployment rate was 6.2 per cent a decade ago, so while there are signs conditions may become more challenging, the labour market is still starting from a position of strength,” Chesler said.
Chesler noted ANZ job ads fell by 3.1 per cent over March but remained above pre-COVID levels, suggesting cracks may be forming even if headline employment is still holding up.
“April employment numbers could present a very different picture as the impact of higher oil prices begins to flow through the economy. We have already seen both Qantas and Virgin reduce flight capacity and if this trend persists, it is likely to lead to cost cutting measures and potential job losses,” he added.
According to VanEck, fuel-heavy industries are most exposed to rising costs, with construction seen as particularly vulnerable given its heavy diesel use and already high insolvency rates. Farming, transport, logistics, manufacturing, suppliers and regional businesses also face mounting pressure as fuel and freight costs rise.
Global X ETFs senior product and investment strategist Marc Jocum said the latest data showed the labour market was still defying expectations, even as underlying risks begin to build.
“What was once the hero of Australia’s post-pandemic recovery continues to hold firm for now.”
“For much of the past two years, Australia has boasted one of the lowest unemployment rates in the OECD, hovering in the low 4 per cent range. While this latest print reinforces that resilience, there are still growing signs beneath the surface that conditions may begin to soften.”
The result also keeps the labour market front and centre for the RBA, with markets still pricing up to three rate hikes in 2026, taking the cash rate as high as 4.9 per cent.
While Chesler said that path may be “overly aggressive” in VanEck’s view, he warned the central bank remains stuck between inflation risks and weakening household demand.
“The RBA faces a difficult balancing act, containing inflation without placing excessive strain on an already stretched consumer and tipping the economy into recession,” he added. “The March CPI release, due at the end of April ahead of the May RBA meeting, will be a key determinant of the policy outlook. If recent trends in the US are any indication, inflation could rise from 3.7 per cent into the mid-4 per cent range.”
“We may be entering a stagflation market characterised by slowing lower growth and persistent inflation. Seeking companies with pricing power, those that can pass on higher costs to consumers and protect margins, is crucial to navigating the RBA hiking cycle. Companies that we like include Telstra which has strong pricing power and Transurban whose toll road income is linked to inflation.”
Jocum said the central bank was now playing “a high-stakes game of economic Jenga”, deliberately allowing labour market conditions to loosen if that is what it takes to suppress inflation.
“In many ways, it’s also lightening the ship, willing to throw some crew overboard to keep the broader economy afloat.
“This reflects a clear shift in priorities – the RBA appears more concerned with upside inflation risks than downside growth risks, leaning firmly into the inflation side of its dual mandate. Deputy RBA Governor Andrew Hauser’s warning that the current environment is a central bank nightmare and that rates may not yet be restrictive enough reinforces that stance.
“It’s the classic Phillips curve economics in real time – a delicate balancing act where easing price pressures increasingly comes at the cost of a softer labour market,” Jocum said.
State Street Investment Management APAC economist Krishna Bhimavarapu said the March labour market result would do little to ease pressure on the central bank.
“The labour market remaining strong in March is as unsettling as it is worrying. Impressive for its resilience, unsettling because it strengthens the case for further rate hikes.”
“Meaningful concerns over demand destruction would require the unemployment rate moving closer to 5 per cent, so the RBA has bandwidth for more hikes. We continue seeing scope for at least two more this year.”
