Australia unemployment falls to lowest since ‘74 in boost for PM
Australian unemployment fell to the lowest level in almost 50 years in April, delivering a fillip to Prime Minister Scott Morrison’s government as it enters the final days of campaigning for Saturday’s election.
Morrison will seek to extract maximum impact from the report as opinion polls this week showed his center-right government making up some ground on the opposition Labour party. The prime minister argues that with the economy motoring along strongly, voters in jobs, household wealth at a record high and offshore risks mounting, now is not the time for a change.
“We have an economic plan that is working,” Treasurer Josh Frydenberg tweeted after the release. “Unemployment is low and our economy is strong.”
Tightness in the labour market is a key reason why the Reserve Bank of Australia expects wages growth to accelerate to 3% this year from 2.4% now, allowing it to extend a rate hiking cycle that began this month.
Read more: Australia’s Tepid Wages Growth Validates RBA’s Cautious Stance
“Together with business surveys, this data shows that wage growth should accelerate in coming months and supports the case for the RBA to undertake a series of rate hikes to push the cash rate off crisis settings,”said Jo Masters, chief economist at Barrenjoey Markets Pty.
The RBA hiked by 25 basis points to 0.35% on May 3, its first increase in 11-1/2 years, and indicated further rises are in prospect. Financial market pricing points to an outsized 40-basis-point increase in June followed by hikes every month through December.
Should that come to pass, the cash rate would reach 2.7% by year-end, a heavy burden for heavily indebted households. However, economists expect the RBA to move cautiously with many predicting the terminal rate of under 2%.
What Bloomberg Economics says…
“Labor market dynamics are set to shift, with the resumption of international travel boosting supply of labor. This is likely to ease upward pressure on wages, and could prevent isolated pockets of strong wage growth from becoming broad-based. This would reduce the extent, and pace, of rate hikes by the Reserve Bank.”
— James McIntyre, economist
Opposition Labour party leader Anthony Albanese argues that times have never been tougher for Australian households, with inflation running at more than twice the pace of wages growth.
He is backing bigger pay rises for workers, pointing out the economy recorded the biggest fall in real wages in more than two decades in the first three months of the year.
“We have nearly 1 in 3 workers in insecure work. It’s hard to bargain for the pay increase when you don’t even know if you’ll get any hours tomorrow,” said Australian Council of Trade Unions Secretary Sally McManus.
“The low headline unemployment rate hides the record high number of Australians working multiple jobs, or unable to find enough hours to make ends meet.”
Today’s report also showed:
- Underemployment fell by 0.2 percentage point to 6.1%
- Full-time employment advanced by 92,400, while part-time declined by 88,400
- The unemployment rate for males fell by 0.2 point to 4%, its lowest level since October 2008. For females, it held at 3.7%, the lowest since May 1974
“Employment growth has slowed a touch over the past two months, which is to be expected as the labour market nears full capacity,” said Sean Langcake, head of Macroeconomic Forecasting for BIS Oxford Economics. BM