Proving just how volatile the Australian labour market is, the unemployment rate has increased to 5.6 per cent after a strong couple of months.
According to recent data from the Australian Bureau of Statistics (ABS), the number of unemployed persons in Australia grew from 661,000 in February to 686,900 in March – lifting the unemployment rate from 5.4 per cent to 5.6 per cent.
The growth in unemployment follows a strong result in February, when unemployment fell by 74,000 jobs.
While this growth in unemployment could give the Reserve Bank of Australia (RBA) cause to cut the official cash rate when the board meets next month, HSBC chief economist Paul Bloxham remains adamant that the RBA’s ‘easing phase’ is now over.
“The unemployment data leaves the RBA with scope to cut rates if they need to, but the question is: will they need to?” Mr Bloxham said.
“Other indicators suggest that the rate cuts they have already delivered are having many of the desired effects. Retail sales rose strongly in January and February. Consumer sentiment rose sharply in February and March and, although it retracted a little in April, it is still above average.
“Housing prices have been rising solidly in recent months [and] the housing construction upturn has continued.
“The labour market also typically lags the economic cycle, so yesterday’s data are likely to reflect the slowdown in growth that occurred in the second half of 2012.
“Nonetheless, a loose labour market does provide the RBA with scope to ease further if it needs to, but we don't think they will need to. We expect some tightening of the labour market in coming months as the interest-rate sensitive sectors gain pace.
“We remain of the view that the RBA’s easing phase is done.”