Unemployment in April rises to four-year high of 4.5 per cent, delaying another interest rate rise
The jobless level for April was the highest since November 2021 when Sydney and Melbourne were in COVID lockdown. Westpac chief economist Luci Ellis said a June rate hike was now off the table.
Australia’s unemployment rate has risen to a four-year high of 4.5 per cent and is now much worse than Treasury officials had feared little more than a week ago which could see the Reserve Bank delay its next interest rate rise.
The jobless level for April was above market expectations of a 4.3 per cent and marked the highest unemployment since November 2021 when Sydney and Melbourne were in COVID lockdown but is this time coinciding with high inflation.
Westpac chief economist Luci Ellis said a June 16 rate hike was now off the table following the uptick in unemployment, adding the Reserve Bank would wait and see before raising rates again in August and September to an 18-year high of 4.85 per cent.
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By continuing you agree to our Terms and Privacy Policy.“My take is June’s emphatically on pause now. It was already my base case but there’s no way they’re moving in June now,” she told The Nightly on Wednesday.
The proportion of people without work rose from March’s 4.3 per cent level following the Reserve Bank of Australia’s February and March rate hikes, before the latest May 5 increase that took the cash rate to a 15-month high of 4.35 per cent.
The latest jobless rate is worse than updated RBA forecasts, released a fortnight ago, predicting a 4.2 per cent unemployment rate by June this year and a 4.4 per cent level in June 2027.
Treasury was last week predicting a 4.25 per cent jobless rate by mid-year, reaching 4.5 per cent by the end of the next financial year.
“We expected the unemployment rate to tick up a bit,” Treasurer Jim Chalmers told reporters in Perth on Thursday.
Dr Ellis is predicting a 5 per cent unemployment rate in coming months, which would be above the 4.6 per cent level considered by the RBA to be full employment.
“It means that unemployment is higher than it needs to be and inflation is higher than the RBA wants but you’ve got to remember that this is an energy price shock that probably will not kind of propagate for as long as we saw in the ’70s,” she said.
“We’re expecting it to propagate for longer than the RBA expects but basically just for this year.”
Higher fuel prices were also putting up business input costs and affecting hiring, Moody’s Analytics head of Australian economics Sunny Nguyen said.
“That is exactly the footprint of a fuel-driven income squeeze working through household budgets—the first jobs to go are the ones that lean on discretionary spending,” she said.
“Three interest rate hikes and a bigger petrol bill are draining demand, and it is showing up in who’s hiring.”
The second full month of the Iran war was already threatening to create a situation of stagflation, with higher unemployment and inflation above the RBA’s 2-3 per cent target.
Inflation in March climbed to a near, three-year high of 4.6 per cent and any further increase in unemployment above April’s level would see Australia suffer from stagflation, where the RBA was simultaneously failing its dual mandates on the labour market and inflation.
“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,” EY chief economist Cherelle Murphy said.
“This labour market reading will give the Reserve Bank reason to pause in June though to see how the labour market is responding to rate hikes already in place and ongoing economic fragilities overseas.”
Just one of the RBA’s nine monetary policy board members this month voted against increasing interest rates by another 25 basis points.
But the number of people without work climbed by 33,000 in April to 692,500.
Since the start of the year, 63,600 people have lost their job as unemployment has climbed from a tight 4.1 per cent.
Tasmania now has Australia’s highest jobless rate of 5 per cent, having had Australia’s lowest jobless rate of 3.8 per cent a year earlier, and was even higher than Victoria’s 4.8 per cent level.
New South Wales had a jobless rate of 4.5 per cent, in line with the national average.
Mining-rich Western Australia has the lowest unemployment among the states of 4.1 per cent, which was marginally lower than Queensland and South Australia on 4.2 per cent.
