RBA Warns Jobs Surge May Lift Interest Rates Again

The Reserve Bank of Australia's governor Michele Bullock has warned that a strong jobs market could push interest rates higher. In her final public appearance before the September 28-29 interest rate meeting, Bullock said a labour market 'tighter than we think' may lead to another rate hike.

Markets are expecting around 15,000 Australians to have joined the workforce in August, which would keep the unemployment rate steady at 4.5 per cent. However, if the numbers come in hotter than expected, it could give the Reserve Bank the green light to lift interest rates again.

Bond markets are fully priced in for a rate hike next Tuesday, with about a 45 per cent chance of a second rate hike in December and a 17 per cent chance of a third rate hike by May 2027. The cash rate would reach its highest level since 2011 if the bond market is correct.

Bullock stressed that there's no hard and fast rule locking in a specific number for unemployment, saying 'it's not that I can say I will only tolerate an unemployment rate of, say, 4.5 per cent at the moment. At the moment, we think that's a bit tight.'

She also ruled out making any interest rate decision that could help or hurt the housing market, saying 'we don't target housing prices'.