Rate hike fear grows as nation adds 76,000 jobs in June

Expectations of an interest rate rise have jumped after new figures show the country added more than 76,000 jobs through June even though signs grew that the overall employment market is weakening. A possible rate rise could come at the worst possible time for borrowers, with warnings petrol prices could push through $2 a litre after Iran-backed Yemeni rebels attacked oil tankers in the Red Sea and fears shipments of oil out of the Middle East will be effectively shut down. The effective blockade of the Strait of Hormuz, on top of fresh attacks on shipping in the Red Sea, has raised concerns of a spike in oil prices. The Australian Bureau of Statistics on Wednesday reported that in June the jobless rate was steady at 4.4 per cent seasonally adjusted, in line with most economists’ forecasts. The more steady trend measure of unemployment slightly increased and is now, to two decimal places, at its highest level since the depths of the pandemic. The under-employment rate also lifted to a two-year high, climbing to 6.5 per cent in a traditional sign that steam is coming out of the jobs market. But the bureau said 76,300 jobs were created last month, well above market expectations. The surge in jobs coincided with the period during which the bureau starts employing people for next month’s national census, with the proportion of people aged between 55 and 64 in a job reaching an all-time high. It was the largest one-month increase in jobs for at least a year. The stronger-than-expected employment numbers pushed the Australian dollar up beyond US70 cents on expectations the Reserve Bank – which meets next month – will have to consider a further lift in official interest rates. Ahead of the data, financial markets put the chance of a rate rise in August at one-in-five. After the figures, the chance lifted to one-in-three. Treasurer Jim Chalmers said the figures showed Australia had created more jobs under the current government than any major advanced economy. “More than 76,000 jobs were created in June, more than 1.3 million jobs have been created on our watch, participation is near a record high, and this Albanese Labor government has overseen the lowest average unemployment of any Australian government in the last half a century,” he said. But the numbers revealed a growing divergence between the nation’s two largest jobs markets and the state of their economies. NSW’s jobless rate fell by 0.3 percentage points to 4 per cent, the lowest level in the country. Of the 76,300 jobs created nationally, almost 42,000 were in NSW. Of the 252,000 jobs created across the country over the past 12 months, 111,800 have been in NSW. But in Victoria, unemployment rose 0.2 percentage points to 5.1 per cent – the nation’s highest rate. Just 36,800 jobs have been created in Victoria over the past year. Liberal Party deputy leader Jane Hume said the figures showed older Australians were being pushed into work to deal with cost-of-living pressures while younger people faced an unemployment rate above 10 per cent. “Young Australians are bearing the brunt of Labor’s economy, while more older Australians are staying in the workforce – not because they want to but because they cannot afford to retire,” she said. AMP deputy chief economist Diana Mousina, who expects the Reserve Bank to lift interest rates when it meets on August 10-11, said much hinged on next week’s monthly inflation report. If underlying inflation pushed higher than expected, the bank would likely take the cash rate to 4.6 per cent. “I think the RBA would view today’s jobs data as indicating that the labour market is still a bit tight – which means that wages growth will remain higher than is consistent with the 2-3 per cent inflation target,” she said. But Moody’s Analytics head of Australian economics, Sunny Nguyen, cautioned that the job figures showed that while more people were getting a job, fewer of them were getting the hours they wanted. “The pool of people who want more hours and cannot get them has been widening for three months, suggesting labour costs are not a big driver of domestic inflation,” he said. Adding to inflation is the price of oil. The escalating conflict in the Middle East is driving up Brent crude oil futures, which exceeded $US95 a barrel overnight, up from around $US72 at the start of the month. Back home, unleaded petrol started the week at around $1.70 in Sydney and Melbourne but had climbed to nearly $1.80 on Thursday. National Roads and Motorists Association spokesman Peter Khoury said the rise in oil prices mean unleaded petrol could hit $2 a litre, especially when the current 16-cent-a-litre cut in excise ends early next month. “On today’s trends, you will start to see unleaded prices nudging $2 a litre. But with a sudden change of conditions on the ground in Iran, and we could see price relief,” Khoury said.