The latest round of lockdowns and restrictions imposed in Australia have brought down employment for a second straight month during September as businesses laid off workers and cut down their work hours. Data released by the ABS earlier in the day reveals a drop in employment by 138,000, almost in line with economists’ expectations for a fall by 137,500 but better than the 146,100 reduction seen during August.

Unemployment Rate Better Than Forecast

Although the unemployment rate did register a slight uptick, it came in better than forecast as the number of people looking for work fell. The jobless rate rose slightly from 4.5% in August to 4.6% in September; however, it was better than economists’ forecast for a rise to 4.8% instead.

The RBA has warned that unemployment rate could rise to 5% by the end of the year, although an improvement in economic activity once lockdowns end could drive it lower quickly. However, it has stated that the figure needs to come under 4% to indicate labor market recovery and power an uptick in wages and inflation.

Restrictions are being eased across Sydney and could soon be eased across Melbourne and Canberra as well. Analysts expect the reopening of the economy to drive a rebound in the labor market after the slump, powered by a rapid rollout of COVID-19 vaccines.

Low Inflation in Australia – Will RBA Hike Rates?

Unlike several other countries around the world, inflation levels remain low in Australia despite the rapid economic recovery as annual increases in wages remain extremely low. The RBA has maintained that annual pay rise should exceed 3% for the inflation to come within its target of 2-3%.

Despite the weak inflation conditions, economists expect the RBA to consider a rate hike by next year. However, the central bank continues to insist that it has no plans to increase interest rates at least until 2024.