Strong Workforce means No Rate Relief

The latest labour force data from the Australian Bureau of Statistics (ABS) has cast doubt on the prospect of a consecutive interest rate cut, with the resilience of the job market keeping pressure on the Reserve Bank of Australia (RBA).

Despite unemployment edging up to 4.1 per cent, the participation rate hit a record high of 67.3 per cent, reflecting strong workforce engagement—an indicator the central bank will be closely monitoring. These figures reinforce the RBA’s cautious stance, as a still-tight labour market reduces the urgency for further monetary easing.

Strong full-time employment growth, record-high employment-to-population ratios, and elevated participation suggest demand pressures may persist. While the RBA had already signalled in Tuesday’s decision that another rate cut was not imminent, today’s data strengthens its case for holding steady. A resilient jobs market, even with a slight rise in unemployment, indicates household incomes remain stable, which risks prolonging inflationary pressures and delaying any policy easing.

Meanwhile, wage growth is showing signs of moderation, with the latest ABS Wage Price Index (WPI) data revealing the lowest annual increase since September 2022. Wages rose 0.7% for the quarter and 3.3% annually, reflecting businesses' growing reluctance to offer substantial pay rises. However, a tight labour market continues to support steady incomes across a broad share of the population, sustaining consumer demand and limiting the RBA’s ability to justify rate cuts in the near term.