Australia's unemployment rate has jumped to 4.5% in April, reaching its highest level in about four and a half years, amid fears that rising interest rates and the global oil crisis will smash economic growth. The surprise rise in unemployment will provide the Reserve Bank of Australia (RBA) with more reason to hold off on a fourth interest rate hike at its next meeting in June, as financial markets slashed the chance of more interest rate rises this year.
Key Employment Figures
The number of employed people unexpectedly fell by 18,600 in April – the first decline this year – dragging the jobless rate up from 4.3%, according to the Australian Bureau of Statistics. The chief economist at Betashares, David Bassanese, said there were “tentative signs suggesting the labour market is buckling”.
“Of course, whether the RBA raises rates again depends on inflation outcomes and whether the labour market weakness evident in April was merely a quirky one-off or part of a softening trend,” Bassanese added.
Market Reactions
The chance of a rate hike at the next meeting on 7 June dropped to just 3%, down from 13% before the release of the employment figures, according to financial market pricing provided by Westpac. Traders also slashed the probability of an interest rate rise by 12 August to 40%, from over 70%.
Taylor Nugent, a NAB senior economist, said he still anticipated another rate hike, but that the timing had been pushed back from June to August. “There is now less urgency for the RBA board to lean more firmly against inflation risks,” Nugent noted.
Historical Context
The jobless measure remains below pre-pandemic levels of more than 5%, but has been drifting higher since a near 50-year low of 3.4% in late 2022. Last week’s budget forecast that unemployment would peak at 4.5% by the middle of this year, although Treasury warned that it could reach 5% in a scenario where a more severe Middle East crisis pushes oil prices towards $US200 a barrel.
Economic Impact
Ryan Wells, an economist at Westpac, said the lift in the unemployment rate could be an early sign of the impending economic shock associated with the US-Israel war on Iran and this year’s three interest rate rises. “It [the shock] will still take time to fully work its way through household spending, into profit margins, to eventually impact decisions around investment and staffing further down the line,” Wells said.
The ABS data also showed the first drop in female employment since August 2025, as a higher than usual number of Australians remained unemployed in April. The Australian share market extended early gains on the release of the data as investors factored in a smaller chance of future interest rate hikes. The benchmark S&P/ASX 200 index ended the day 1.5% higher, recording its best session in six weeks.
