- Capital Economics
Australia's unemployment rate unexpectedly dropped in February as fewer people looked for work, suggesting the Reserve Bank of Australia is likely to maintain interest rates on hold as it assess the strength of the labour market. The nation's jobless rate declined to 5.8% last month, despite only 300 jobs were created, according to the Australian Bureau of Statistics. Some 15,900 full-time positions were added in February, while part-time positions declined by 15,600, and the number of people deemed unemployed decreased by 27,300. Participation rate declined to 64.9%, down from 65.2% in the preceding month.
In the central bank's February Statement on Monetary Policy the RBA predicted that the unemployment rate would slide from its December level of 5.8%, with robust growth in service sector jobs expected to offset the decline in mining work. However, since December, employment growth has not just slowed, but it has continued to decline. If employment continues to fall, it is likely the central bank will feel the need to support aggregate demand further by slashing the official cash rate from the current level of 2.0%. In a speech last week RBA Deputy Governor Philip Lowe said that monetary policy settings would depend on whether aggregate supply in the economy was sufficient to meet growth in the supply of labour.
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