Australia’s unemployment rate plummeted to 3.5% in June, the lowest rate in 48 years.
On Thursday the Australian Bureau of Statistics revealed 88,000 more people were employed in June and unemployment fell by 54,000, pushing the unemployment rate down by 0.4%.
Economists say the result shows the underlying momentum of the Australian economy that has driven a series of interest rate hikes from in May, June and July, as inflation soars and is tipped to reach 7% by year’s end.
The unemployment figure – lower than economists had tipped, at 3.8% – will likely add to pressure on the Reserve Bank to continue interest rate rises in 2022.
The ABS head of labour data, Bjorn Jarvis, said: “this is the lowest unemployment rate since August 1974, when it was 2.7% and the survey was quarterly”.
“The large fall in the unemployment rate this month reflects more people than usual entering employment and also lower than usual numbers of employed people becoming unemployed.
“Together, these flows reflect an increasingly tight labour market, with high demand for engaging and retaining workers, as well as ongoing labour shortages.”
“The growth continues to be noticeably stronger than before the (coronavirus) pandemic when the trend was around 20,000 people each month,” Jarvis said
There were just 494,000 people unemployed – and 480,000 job vacancies.
Independent economist, Saul Eslake, said that Australia is “at full employment with unemployment down to 3.5%” and experiencing an “inflation problem”.
Eslake said the result helps explain why the Reserve Bank is raising the cash rate “so aggressively”. “It’s a sign of how strong the tail winds are that that the RBA is trying to combat.”
In July the RBA lifted the cash rate from 0.85% to 1.35%, with a further 0.5% rise expected in August and further small rises to potentially follow.