Unemployment Hits A Record Low Of 3.6% – Find Out How It Affects Your Personal Finance

Must Read

In a delicate dance between economic growth and rising unemployment, the looming spectre of interest rate hikes casts a shadow of uncertainty over the financial landscape, leaving job-seekers and mortgage holders on the edge of their seats.

Alan Oster, the chief economist of NAB, issued a grave warning, stating that further interest rate increases will trigger a significant rise in unemployment, reminiscent of the dire conditions witnessed in the early 1990s.

Unemployment Surge Imminent Due to Interest Rate Hikes

Oster’s forecast indicates that the RBA, which has hinted at potential rate hikes, will raise the rates to 4.6% by the end of August. Presently, the cash rate stands at 4.1% following the RBA’s decision to increase it by another 25 basis points in June. 

Oster cautions that up to 200,000 individuals may face job losses in the coming 18 months as the repercussions of a year of consecutive rate increases start affecting households.

“While the economy exhibited resilience throughout 2022, there are growing indications that interest rates are beginning to take effect, resulting in a slowdown in nominal (and real) spending growth, ongoing implications for housing construction, and diminishing expectations for capital expenditure,” he stated.

“Pushing rates to 4.6% will exert a heavier toll on growth, prompting us to revise our growth projections 2023 to a mere 0.5% and adjust our expectations for 2024 to approximately 0.9%. Consequently, unemployment will rise more rapidly, reaching 5% by the end of 2024.”

Another Rate Increase Now Deemed ‘Probable’

In a development that brings mixed tidings for job-seekers and mortgage-holders alike, the unemployment rate has defied expectations by decreasing by 0.1% to 3.6% in May, according to the latest figures from the ABS.

This signifies an employment surge of approximately 76,000 individuals in May, with the number of unemployed decreasing by 17,000. As of May, employed Australians reached a record high of 14 million. 

To contextualise this, nearly 13 million individuals were used in Australia before the pandemic.

“Looking at the past two months, the average monthly increase in employment stands at around 36,000 individuals,” commented Bjorn Jarvis, the ABS head of labour statistics. 

“This aligns with the average of 39,000 people per month over the past year.”

The RBA will closely monitor the employment data, as RBA governor Philip Lowe has acknowledged that low unemployment figures played a role in the Board’s decision to raise rates.

Economists anticipate further rate hikes, possibly two more, before the central bank eventually pauses.

“The labour market remains exceedingly tight, which will contribute to stronger wage growth throughout 2023, exacerbating the upcoming increase in award wages,” stated Sean Langcake from Oxford Economics Australia.

“We expect to witness two additional rate hikes before the RBA takes an extended break.”

Meanwhile, current market trends suggest a roughly 50-50 probability of rate increases occurring at the July RBA meeting.

- Advertisement -spot_img
Latest News
- Advertisement -spot_img

More Articles Like This

- Advertisement -spot_img