Australian Employment Surpasses Expectations

By Stella Qiu

SYDNEY (Reuters) – Australian employment surged past forecasts in December, though the jobless rate ticked higher as more people sought work. This combination signals a robust labour market and keeps alive the possibility of a near-term rate cut.

Driven by an increase in part-time roles, net employment jumped by 56,300 in December compared to November’s downwardly revised increase of 28,200, according to figures from the Australian Bureau of Statistics released on Thursday. This December increase significantly exceeded the market consensus of 15,000.

Annual job growth accelerated to 3.1%, more than double the historical average. The labour force also expanded at a similar pace.

The jobless rate rose to 4.0% from 3.9%, aligning with expectations, while the participation rate edged up to a record high of 67.1% from 67.0%.

“Overall, it’s fairly messy, but you would characterize the labour market as remaining pretty strong… It still conveys that the labour market remains fairly tight,” said Shane Oliver, chief economist at AMP.

Slowing wage growth suggests that the labour market is not driving inflationary pressures.

“It puts the Reserve Bank in a difficult position… The rate call for February will depend on the December quarter inflation numbers when they are released,” Oliver added.

The RBA anticipates underlying inflation in the fourth quarter will be 0.7%. Anything lower would complicate the RBA’s decision to avoid cutting rates next month.

Market reactions to the employment data were subdued. The Australian dollar rose 0.1% to $0.6230, while three-year bond futures trimmed earlier gains but remained up by 8 ticks at 96.06 due to tame inflation figures from Britain and the U.S.

Swaps indicate a 68% probability that the RBA will lower rates on Feb. 18, following the quarterly inflation report and a retail sales reading expected to show a decline in December sales after a strong previous month.

The RBA has maintained its policy for a year, determining that the current cash rate of 4.35%—up from 0.1% during the pandemic—is restrictive enough to control inflation while preserving employment gains.

The central bank unexpectedly became dovish last month, as economic growth has remained weak. Consumer spending has been lackluster, despite government tax cuts.

Thursday’s data indicated that part-time jobs surged by 80,000 in December, with hours worked rising by 0.5%.

“There is no evidence of labour market slack, and the labour market alone does not justify a near-term rate reduction by the RBA,” remarked Faraz Syed, an economist at Citi.

“We maintain our forecast for the first rate cut in May 2025, but note that lower CPI risks could prompt the RBA to bring rate cuts forward.”