The Australian economy shed 6.6k jobs in March, contrasting sharply with the significant 116.5k job increase in February. Unemployment ticked up to 3.8% from the previous 3.7%, as the participation rate slightly declined to 66.6% from 66.7%.

The underutilisation rate, encompassing both unemployment and underemployment, held steady at 10.3%. This figure represents a modest 0.5 percentage point rise from March 2023, yet it stands 3.6 percentage points below the March 2020 level.

The Australian Bureau of Statistics (ABS) noted that “the flows into employment had returned to a more usual pattern,” referring to the seasonal holiday distortions that have hampered the ABS’s labour force data in recent months.

Labour market tightness and RBA rate speculation

Although today’s figures are unlikely to influence the upcoming RBA meeting—where it’s widely anticipated that rates will be maintained—the persistently tight labour market may cause reconsideration among those advocating for RBA rate cuts before the latter half of the year.

The market will seek further insights into the economy’s trajectory and the path of RBA interest rates from the following key data ahead of the next RBA meeting on May 7th.

• Q1 inflation (Wednesday, the 24th of April
• Retail sales (Tuesday, the 30th of April)

We reiterate our call for the RBA to cut rates by 25 basis points (bp) in August before a second cut in November, which will see the cash rate end the year at 3.85%. However, we may push back the expected timing of rate cuts if next week’s Q1 inflation data is hotter than expected.

Australian unemployment rate