Australia's unemployment rate climbed to 4.5 percent in July, above the market consensus of 4.4 percent and marking the highest post-COVID level on a trend basis. The increase from 4.4 percent in June reflects a loosening labor market: total employment fell by 15,800, driven by part-time job losses, while the jobless count rose by 4,200.
The data materially reduces odds of another RBA hike. Markets now price the central bank's September policy decision as a hold, with the unemployment miss combining with recent softness in inflation and house price growth to build a clear dovish case.
David Bassanese, chief economist at BetaShares, said the higher jobless rate makes another hike unlikely, pointing to RBA expectations of gradual economic deceleration. He noted the confluence of signals—declining employment, slowing housing, and below-forecast inflation in the June quarter—supports a pause at the September meeting.
For fixed-income investors, the labor market deterioration removes the tail risk of extended tightening. The flattened probability of further rate hikes takes pressure off the short end of the yield curve and extends the duration runway for longer-dated bonds. The RBA's pivot from tightening to hold is now the consensus base case.
