RBA Interest Rate Hike Looms as Unemployment Rate Rises

The Australian economy's jobless rate has continued to rise, but not in a way that helps mortgage holders. According to data from the Australian Bureau of Statistics, the unemployment rate for August was 4.6 per cent, slightly higher than July's 4.5 per cent.

This increase may seem counterintuitive, given that more Australians found work in August, with employment climbing by 39,500 jobs following a fall of 15,800 workers in July. However, the participation rate, which measures those in the workforce as well as Australians actively looking for a job, also rose by 0.2 percentage points to 67.1 per cent.

This rise in the participation rate contributed to the increase in unemployment, with more people entering the workforce and looking for jobs. According to Betashares chief economist David Bassanese, this data is the final nail in the coffin for a rate hike next week.

Bassanese predicts that the RBA will raise interest rates 0.25 per cent next week to 4.6 per cent, with an even-odds chance of a follow-up hike on Melbourne Cup Day in early November. This would be the fourth interest rate hike this year, taking the cash rate to its highest level since November 2011.

RBA governor Michele Bullock has stated that she is looking at a figure between 4.5 and 5 per cent, which would take enough heat out of the labour market to ease pressure on inflation.