RBA rate cuts ‘may have to wait’: March employment data smashes expectations

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on April 18, 2019
RBA rate cuts ‘may have to wait’: March employment data smashes expectations

Photo by Jilbert Ebrahimi on Unsplash

Despite Australia’s unemployment rate rising 0.1% points to 5%, employment growth in March was relatively strong, surprising many economists.

According to the Australian Bureau of Statistics’ (ABS) labour force data, national employment grew by 25,700, almost double the market forecasts of around 15,000.

This brought the total number of employed Australians to over 12,791,000, driven mostly by a rise in full-time jobs.

Full-time employment rose by 48,300 to just under 8,800,000 workers, offsetting a 22,600 fall in part-time employment to 3,993,200 people.

Given the Reserve Bank of Australia (RBA) has made it clear it will consider cutting the cash rate from its long-standing rate of 1.50% if Australia’s employment data begins to slip, today’s release suggests rate cuts may not be as imminent as some have forecast.

APAC economist at global job site Indeed, Callam Pickering, said the latest employment figures will be viewed positively by policymakers, particularly the RBA.

“A solid set of employment figures, dominated by full-time roles, suggests that households and businesses may have to wait a little longer for rate cuts,” Mr Pickering said.

Some economists, such as those at NAB, have forecast that the RBA could cut the cash rate as early as July this year.

Others, such as those at Westpac, have forecast that the first rate cut will come in August.

Westpac Senior Economist Justin Smirk said the positive update suggests the non-cyclical side of the economy (such as public administration, education and health care) is providing ongoing support for employment gains.

“We suspect the ongoing rollout of the NDIS is supporting gains in not just health professionals but also in white collar professionals,” Mr Smirk said.

But Mr Smirk said NSW experienced a greater degree of employment weakness than other states, particularly in cyclical industries.

“The state that is on the forefront of the downturn in dwelling investment, NSW, has seen trend in employment gains slow from 50.5 thousand per month in January to 13.7 thousand per month in March,” he said.

“We are closely watching the impact that the downturn on construction, and the impact of falling house prices will have on consumption, will have on the cyclical employment in that state.”

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Dominic Beattie is the Editor of Savings.com.au. He has been publishing articles on finance, business and economics since 2015, having previously worked at financial research firm and comparison site Canstar before helping to launch Savings.com.au in November 2018. Dominic's commentary has featured in various news outlets, including: Channel 7 News, News.com.au, Yahoo Finance Australia, Domain, Realestate.com.au, Daily Mail and Radio 2NURFM.

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