The Reserve Bank’s aggressive increase in interest rates is hitting the jobs market faster than expected with more than 60,000 jobs disappearing from Victoria and NSW in just two months, amid warnings from Treasurer Jim Chalmers of a difficult year ahead.

The unemployment rate rose 0.2 percentage points to 3.7 per cent, figures from the Australian Bureau of Statistics show, the second consecutive monthly fall in seasonally adjusted employment.

Treasurer Jim Chalmers said unemployment is expected to rise further.Credit:Alex Ellinghausen

Treasurer Jim Chalmers said the lift in unemployment was an expected consequence of the global economic turmoil and rising interest rates.

“As we enter what we expect will be a really difficult year for the economy and for our people, clearly, the prospects for a slowing economy and higher inflation than we’d like for longer than we’d like, obviously, that’s a concern,” he said.

“We have been expecting an uptick in the unemployment rate as the economy slows a bit, as the obvious consequence of a slowing global economy mixed with the impact of interest rate rises here in our own economy.”

The Reserve Bank has raised interest rates to 3.35 per cent over nine consecutive meetings in its fight against high inflation, which reached a 32-year high of 7.8 per cent in December.

RBA governor Philip Lowe will face parliament’s economics committee for another three hours of grilling on Friday, after the central bank last week signalled there would be more interest rate rises in coming months as it works to ensure inflation does not stay high for too long.

Chalmers said both Treasury and the RBA expected unemployment to rise from near 50-year lows as the economy slows, but the jobless rate still remained low by historical standards.

Opposition employment spokeswoman Michaelia Cash said Thursday’s jobs figures were not a good sign for the country.

“What we saw today is the economy actually shed in excess of 43,000 full-time jobs. That is not job security for those who’ve lost their jobs in January,” she said.

There are broader signs the economy is slowing.

Data from the Housing Industry Association, released on Thursday, highlighted the impact of higher interest rates on the property market.

It reported that new home sales fell another 12.8 per cent in January, to be down 46.7 per cent over the past year.

The hardest hit state has been NSW where sales in the three months to January were 73.1 per cent lower than for the same period last year. In Victoria, they are down by 41.6 per cent while in Queensland they are down by 53.9 per cent.

“There is no indication that the market has reached the bottom of this cycle with sales falling in all states. A further increase in the cash rate in February is likely to see sales fall further,” HIA chief economist Tim Reardon said.

Earlier this month, retail sales figures pointed to a slowdown in consumer spending. The volume of retail sales through the final three months of 2022 fell by 0.2 per cent.

Key measures of consumer sentiment released this week by both ANZ-Roy Morgan and Westpac showed confidence levels among households normally associated with recession. Confidence fell sharply after the Reserve Bank’s most recent rate rise and there are signs it will lift rates further.

AMP Capital economist Diana Mousina said the RBA’s views on the economy would be challenged by the jobs rate and what it is showing about the economy. She said the bank may have to re-think its plans for a much higher cash rate.

“If the next set of retail sales figures shows another weak outcome, there will be a case for the central bank to pause and wait to see the impacts of rate hikes to date,” she said.

Callam Pickering, Asia-Pacific economist at global job site Indeed, said there has been a subtle shift in the recent flow of economic data.

“Two consecutive falls in employment doesn’t happen very often and when combined with the recent fall in job vacancies and the sharp decline in retail spending, suggests that the economy has entered a different phase,” he said.

“The Reserve Bank will be keenly watching these metrics to assess the impact that rate hikes have had on economic conditions.”

Cut through the noise of federal politics with news, views and expert analysis from Jacqueline Maley. Subscribers can sign up to our weekly Inside Politics newsletter here.

Most Viewed in Politics

From our partners

Source: Read Full Article