Australian Jobless Rate Hits Five-Year High as RBA Prepares for Another Rate Hike

Australia's unemployment rate unexpectedly rose to a five-year high in August, according to data from the Australian Bureau of Statistics. The jobless rate increased to 4.6%, above market forecasts for a steady 4.5%. This is the highest level since late 2021.

The participation rate climbed to 67.1%, up 0.2 percentage point, as the labour force rose 67,700, up 2.1% from a year earlier. However, employment growth failed to keep pace with the influx of people into the labour force in August, easing some of the tightness in the labour market.

The Reserve Bank of Australia is still expected to raise interest rates next Tuesday to 4.6%, despite the mixed report. Markets imply a 95% probability of an imminent rate hike to combat inflation, which remains above the RBA's target range of 2% to 3%. Core inflation is running at 3.6%, while oil prices have surged above $100 a barrel.

Oxford Economics Australia economist Oscar Guth said employment growth failed to keep pace with the influx of people into the labour force in August, easing some of the tightness in the labour market. He expected the RBA to hike next Tuesday.