The graph of the unemployment rate in Australia has taken a step higher, which has affected the labor market adversely. This mounting unemployment has boosted the chances of an interest-rate cut. As per the statistics bureau reports, the unemployment rate, which stayed at 5.1% in March, has reached 5.2% in April.
Global market strategist Kerry Craig from JPMorgan Asset Management said that it is important to have a steady job growth to push the unemployment aside. Earlier this month, Philip Lowe, the Reserve Bank Chief, said that only a tight labor market could resist him from cutting the interest rate. However, traders have already assumed that there are chances of a minimum of 50% interest rate cut in June and the reduction will hit the cash rate as low as 1%.
If reports are to be believed, then employment rates were getting better in April. However, most of it was part-time roles which affected the labor market. The Australian economy has been affected and brought down by the fall in the property prices. Because of the increase in commodity price, the exports have boomed while most of the business investments and outside jobs remained reasonable. The government of Australia supports the investments in infrastructure and other programs which included a disability program which helped in hiring more people.
As per data, the most popular state New South Wales showed an improvement in the employment rate by filling 25100 positions. At the same time, Victoria, which enjoys the same economy and population, showed a reduction of 7600 positions. The Economists Of Australia says that if the rate of unemployment and the reduction in the inflation rate indicates that the Reserve Bank will cut interest rate in June. Since the trade war between the U.S and China has not seen any progress yet, the Reserve Bank will not be cutting the rate now as China is Australia’s largest trading partner and has a great investment in Australian mining.
Craig earlier said that the communication would be the real challenge for RBA. If they continue to speak about job growth and at the same time mentions unemployment, the market will only show a fall in the economic activity, rather taking steps to increase the economic conditions.