NAB pushes rate hike forecast back after unemployment spike, others downplay result
Make us a preferred source
Make us a preferred source on Google
The news: NAB has pushed its interest rate expectations out from July to August following an unemployment print that was higher than the bank expected, but many other economists have played down its significance.
The context: NAB had expected the unemployment rate to come in at 4.3%, with senior economist Taylor Nugent stating that “this is a soft print, and one that challenges the RBA’s [statement of monetary policy] judgement of labour market resilience”.
“We have noted some tension between the [statement of monetary policy] that the labour market would remain tight this year and RBA Board’s framing of competing concerns on both sides of the mandate,” Nugent said in a note.
However, ANZ chief economist Adam Boyton said the “numbers support our expectation that the RBA Board will ‘pause’ at the June meeting”.
“We suspect that the RBA will still choose to assess the labour market as ‘tight’ in the June post-meeting statement,” Boyton said.
“The 4.5% unemployment rate and the trend decline evident in the employment to population ratio over the past year … does suggest, though, that the time is approaching when the RBA will need to describe the labour market as ‘balanced’.”
Meanwhile, Commonwealth Bank senior economist Trent Saunders said “it is too early to tell how much of the rise in the unemployment rate reflects noise or a more fundamental shift in underlying momentum. But today’s data is a reminder that conditions are no longer tightening”.
Moody’s Analytics head of Australia economics Sunny Nguyen said “the drop in employment was led by women and the young, the groups that tend to feel a slowdown first. We read this as monetary tightening finally biting and an early confirmation that the hiking cycle is at or near its end”.
Although, Nguyen noted that “the August meeting will be lively again if there is second-round pass-through of high oil prices to core inflation or another leg up in inflation expectations”.
EY chief economist Cherelle Murphy said that “given our expectations of ongoing high inflation, we expect the Reserve Bank will need to tighten monetary policy further, while remaining alert to the downside risks associated with the Middle East conflict and the impacts of uncertainty on consumption and business investment”.
Unemployment rate lifts to 4.5% in April
The news: The unemployment rate increased to 4.5% in April, higher than average forecasts and the previous month’s figure of 4.3%, according to the latest data from the Australian Bureau of Statistics.
However, in trend terms, the unemployment rate remained at 4.3%.
The numbers: The total number of employed people fell by 19,000 in April while the number of unemployed people rose by 33,000.
The number of people in full-time employment fell by 11,000 while the number of people in part-time employment fell by 8,000 people respectively.
The overall fall was driven by the first decline in female employment since August 2025, with full-time numbers down 19,000 and part-time down 13,000.
Meanwhile, male employment lifted 8,000 for full-time and 5,000 for part-time.
The context: The April data follows two interest rate hikes by the Reserve Bank of Australia in February and March. At the time, the monetary policy board flagged that the labour market remained tighter than preferred.
Following the most recent rate hike decision in May, RBA governor Michele Bullock maintained that sentiment and said she expects “people will try to make up their wages, real wages, the hit they’ve taken from inflation by asking for higher wages”, which could add to inflationary pressure depending on the magnitude.
“The extent to which they can achieve them depends on the tightness of the labour market. So, it depends on how much bargaining power they have and to the extent that we think the labour market is still a bit tight, there probably will be some success there,” Bullock said on 5 May.
What they said: “Compared to what we usually see in April, more people remained unemployed this month,” ABS head of labour statistics Sean Crick said.
The sources: ABS media release, ABS data
