RBA interest rates: Unemployment rate steady at 4.3 per cent despite dip in jobs growth

Australia’s jobless rate remained steady at 4.3 per cent in November despite a wave of workers exiting the market, in new figures unlikely to spark alarm for the Reserve Bank.

It’s the fifth time in six months the unemployment rate has posted that number, according to the Australian Bureau of Statistics — a sign hiring is still tight.

Yet there was a sizeable drop in employment of 21,000 roles, in contrast to the bumper month predicted by analysts.

That fall came as fewer Australians were looking for work and participation in the labour market eased further from record highs earlier this year.

Thursday’s numbers had “a little bit for everyone”, AMP’s My Bui said.

She expected interest rates to remain on hold through 2026, which was “further supported by today’s data”.

“While there has been a strengthening trend in domestic demand and some capacity constraints in certain industries, we think that a rate hike would hurt the economy, given the rising trend in unemployment, slowing jobs growth, and falling job vacancies,” Ms Bui said.

“We also see the recovery in the consumer sector remaining fragile, given that households have been very sensitive to promotions and rate narratives.”

Commonwealth Bank’s Harry Ottley downplayed the jobs drop and said volatility “can produce strange results”.

“The labour market has been very gradually loosening through 2025,” he said.

“But the RBA still views the labour market in totality as a bit too tight to bring inflation back to target.

“Looking through some of the noise, there is nothing in today’s release to dissuade them from this view.”

Also judging the figures as “relatively robust” was EY senior economist Paula Gadsby.

“When combined with lagging productivity, which has kept growth in unit labour costs high, and capacity utilisation at its highest in 18 months, the risks to inflation are obvious,” she said.

“Our view is that if there is a continuation of the recent pick-up in inflation and labour market conditions remain tight, interest rates will have to be lifted in the first half of 2026.”

The strong jobs market was among the reasons the RBA board held the cash rate at 3.6 per cent on Tuesday and knocked down hopes of any cuts next year.

Reserve Bank boss Michele Bullock said the jobs market was moving as expected and remained “tight”.

She wants to talk up the threat of interest rate hikes to cool spending and stop prices surging further after recent data showed core inflation was 3.3 per cent in the year to October.

“We’re still trying to get inflation down at the same time as we keep the unemployment rate as low as possible because people having jobs is really, really important,” Ms Bullock said.

“Ultimately if we don’t get inflation back down to target and inflation expectations start to rise then that won’t be good for unemployment because we will have to raise interest rates quite a lot more and we will have to hurt the economy a lot more.”

Meanwhile, the US Federal Reserve cut its key rate by 25 points to between a 3.5 per cent and 3.75 per cent band. Fed chair Jerome Powell played down inflation pressure as an effect from President Donald Trump’s trade war.

Getting to business

There’s an encouraging sign Treasurer Jim Chalmers’ hope to shift the economy away from government spending as the dominant driver of economic activity is picking up pace.

The Federal Government’s mid-year Budget update, due next week, will forecast a 3 per cent lift in business investment this financial year, double the pre-election projection.

Recent ABS numbers showed private capital spending lifted 6.4 per cent in the September quarter thanks partly to a data centre boom.

Private investment was also a major contributor to overall economic growth for the period, and will lift the country’s productive capacity and help ease inflation.

It follows government spending recently hitting multi-decade highs as a share of the economy — sparking greater competition for workers and equipment for companies, and adding to price pressure.

Dr Chalmers said business investment was “burgeoning” and will pick up further thanks to spending on new technology and renewable energy.

“(The budget update) will show that the private sector recovery that we’ve been planning for and preparing for is really taking shape,” he said.

“Whether it’s reducing red tape where we responsibly can, our efforts to attract and deploy more capital, or by making the most of artificial intelligence and the energy transformation, boosting business investment is a deliberate feature of our economic strategy.”

Among the reasons identified by the Treasury for the improvement were lower financing costs after interest rates dropped, rising private demand and higher capacity utilisation.

Ms Bullock also highlighted the impact of higher capital spending on the RBA’s hawkish interest rate outlook on Tuesday.

“Growth in private demand was a bit stronger than expected, largely driven by business investment,” she said.