‘Clearly easing’ labour market could spur November rate cut, economists say

Last Thursday (16 October), data from the Australian Bureau of Statistics (ABS) revealed that the unemployment rate rose to 4.5 per cent in September, its highest seasonally adjusted rate since November 2021.

The higher-than-expected unemployment rate has prompted some economists to solidify expectations of another rate cut in November, although quarterly inflation figures are set to influence the outlook.

AMP economists Shane Oliver, Diana Mousina and My Bui continued to foresee an interest rate cut in November, followed by another in February 2026.

“Recent improvement in hard Australian economic data in Australia means that the RBA has sounded rather hawkish in communications,” the AMP economists wrote in a recent economic update.

“However, since the last meeting, we have had a set of weaker prints in consumer confidence and purchasing intentions, weak building approvals data, in addition to today’s worse-than-expected employment report.”

RBA forecasts predicted that the unemployment rate would remain at 4.3 per cent over the medium term. In its September statement on monetary policy, the central bank board noted that “labour market conditions have been broadly steady in recent months and remain a little tight.”

AMP economists said that the unexpected rise to 4.5 per cent showed that labour market conditions were “clearly easing,” and not just “a little tight,” as the RBA had assessed.

In an economic update, accounting firm William Buck said that the higher-than-expected unemployment rate had continued to “leave the door open” for a November rate cut.

However, it noted the RBA’s decision would likely be dependent on the quarterly inflation read, due for release at the end of October.

“Today's data is one shoe down with another to come – the quarterly inflation data due on 29 October. A high result could delay the timing and make the November board decision a closer call,” it said.

William Buck noted that the data indicated a broad slowdown in the employment market.

“Whichever way we cut the data, there's a clear slowing underway. Employment growth was 1.3 per cent in the twelve months to September, the softest result since March 2021,” its statement read.

“Moreover, in the twelve months to September, a net total of 190,500 jobs were created, well down from the 426,800 recorded just nine months earlier in January.”

In its September meeting, the RBA board reiterated its cautious and gradual approach to monetary easing, given the balanced risks to Australia’s economy.

“[Members] agreed that the flow of information since the previous meeting, the forecasts from August and their judgement about the extent of policy restrictiveness collectively implied that there was no need for an immediate reduction in the cash rate target,” RBA meeting minutes read.

“Looking ahead, members noted that it was appropriate for the Board’s decisions to remain cautious and data dependent.”