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RBA’s employment intention having opposite effect
Slashing the official cash rate has not had the desired impact on Australian unemployment levels, with new figures showing the unemployment rate has actually increased over the past month.
RBA’s employment intention having opposite effect
Slashing the official cash rate has not had the desired impact on Australian unemployment levels, with new figures showing the unemployment rate has actually increased over the past month.
Previously providing justification for the rate reductions, RBA governor Philip Lowe had said that the lowering of the cash rate would reduce unemployment and in effect lead to an increase in consumer spending, in turn helping the central bank achieve its inflation target.
However, new figures from the Australian Bureau of Statistics (ABS) show an upward trend for the unemployment rate in July 2019 to 5.3 per cent, from 5.2 per cent in June.
ABS chief economist Bruce Hockman said the unemployment rate was “the same level as this time last year”.
In his speech to the Senate, Mr Lowe had outlined that higher participation levels were a factor which helped explain why unemployment hasn’t fallen.
Despite the upwards move, Mr Lowe said he still expects the unemployment rate to fall slowly more in the long term.
“Looking forward, while some slowing in employment growth is expected, the central scenario is for the unemployment rate to move lower to reach 5 per cent again in 2021,” he said.
The governor has also called out that the Australian economy has “spare capacity”.
“If things evolve in line with this central scenario, it is probable that we will still have spare capacity in the labour market for a while yet, especially taking into account underemployment.”
Seasonally adjusted figures show the rate of unemployment remains steady at 5.2 per cent in July while underemployment rate increased by 0.2 of a percentage point to 8.4 per cent.
The official figures from the ABS also outlined that the seasonally adjusted participation rate increased by 41,100 persons and has lifted the overall participation rate to 66.1 per cent.
The net movement of employed in both trend and seasonally adjusted terms is underpinned by around 300,000 people entering and leaving employment in the month.
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