A rise in the unemployment rate in December is unlikely to prompt the Reserve Bank of Australia (RBA) to cut the official cash rate next month, according to HSBC.
According to the Australian Bureau of Statistics (ABS), the unemployment rate edged upwards to 5.4 per cent.
“This was no great surprise given the slowdown in growth that occurred in the second half of last year, as a result of the European financial crisis,” HSBC chief economist Paul Bloxham said.
“Positively, however, the unemployment rate remained in the lower fives, lifting only slightly, to 5.4 per cent in the month. The trend measures - which cut through the month-to-month noise - also showed that employment continued to trend upwards at a modest pace.
“While a further rise in the unemployment rate could see the RBA cut rates further, we continue to expect the Australian unemployment rate to stay below 5.5 per cent in 2013.”
According to Mr Bloxham, the RBA's 50 basis point cut in Q4 2012 seem vindicated by weakening conditions in that quarter.
“More recent indicators have improved though,” he said. “China's growth has picked up, which has lifted commodity prices. Locally, the weekly consumer sentiment measure has bounced in early January.
“We still see the RBA on hold in February as it waits to see the impact of its previous rate cuts working through the economy.”
Unemployment rates for Western Australia rose 0.1 per cent to 4.4 per cent, while Queensland also rose 0.1 per cent to 6.3 per cent further cementing its place as the state with the highest unemployment.