Chart of the week: Australia’s labour market may be running out of positives

March 25, 2019

22 March 2019

Bob Cunneen, Senior Economist and Portfolio Specialist

                          Australia’s employment vs population growth

                             Source: Australian Bureau of Statistics.

Australia’s labour market has been remarkably positive in generating employment over recent years. Employment growth has been strong with annual growth running at 2.3% in the year to February 2019 (blue line). Encouragingly, employment growth is above our annual population growth which has been running at 1.6% (red line). This has allowed Australia’s unemployment rate to fall to 4.9% which is the lowest rate since 2011.

Yet behind this positive labour data, there are some concerning signs. The leading indicators for the labour market such as business surveys and job advertisements suggest that employment opportunities are fading. Weaker residential building approvals and falling car sales also point to a softer labour market. Financial conditions now appear to be a headwind to future jobs growth with credit growth slowing and small business surveys showing that it is tougher to access finance.

Hence there is considerable pressure on both the Federal Government and Reserve Bank of Australia (RBA) to consider stimulus measures over coming months. The Federal Budget on 2 April could provide an opportunity to bring forward infrastructure spending and even income tax cuts to support jobs growth. While the RBA considers the current cash interest rate at 1.5% is low, there is scope to cut interest rates if needed.  Without these possible stimulus measures, Australia’s labour market is at risk of running out of positives.

Source : Nab assestmanagement March 2019

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