He said inflation was already running high,demand pressures in the economy were yet to abate,there was a growing risk that Australians would become accustomed to growing prices,the sensitivity of households to rate rises was overstated and the RBA could not let inflation become entrenched.
“We continue to look for the cash rate to rise by 75 basis points in August,and for the cash rate to reach 3.1 per cent by the end of the year,” he said.
Another 0.75 percentage point increase on an $800,000 mortgage would lift monthly repayments by $349. That would be on top of the $543 worth of extra repayments since the RBA started lifting rates in May.
The ABS said 88,400 jobs were created during June,with 52,900 people taking up full-time employment and 35,300 gaining part-time work. A boost in youth employment,which rose by 23,000,helped drive the unemployment rate down.
The number of people formally unemployed fell by 54,300. There are now 493,000 people officially unemployed,the lowest number since October 2008.
The jobless rate is 1.7 percentage points lower than in March 2020,ahead of the pandemic recession.
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Commonwealth Bank economist Stephen Wu said while the labour market was tight,one uncertainty in coming months was the extent to which skilled migration returns,adding to the supply of workers.
“Given where we are in the tightening cycle,we expect the unemployment rate to have effectively reached its trough in the cycle,” he said.
Capital Economics senior economist Marcel Thieliant said the jobless rate could soon fall to 3 per cent. He said the figures would also force the Reserve Bank to move more aggressively.
“The sharp fall in the unemployment rate in June is consistent with our view that the Reserve Bank of Australia will need to tighten monetary policy more aggressively than most anticipate,” he said.
The participation rate rose by 0.1 percentage points to 66.8 per cent and is nearly a full percentage point higher than at the start of the pandemic in March 2020. Hours worked decreased by 400,000 hours over June,with nearly 777,000 people working fewer hours due to illness over the month.
Sean Langcake,head of macroeconomic forecasting for BIS Oxford Economics,said businesses may be hiring more people to take on work as large numbers of staff take sick leave due to COVID.
“The labour market is now tighter than the RBA expected at any point in 2022,” he said.
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Male unemployment is now at 3.5 per cent,its lowest since May 1976,while among women it is at a 3.4 per cent,its lowest level since February 1974. The unemployment rate among men in Victoria is 2.9 per cent,the lowest rate in the country.
NSW and Victoria both hit record-low unemployment rates in June. In NSW the unemployment rate fell 0.7 percentage points to 3.3 per cent,and in Victoria,it dropped 0.5 percentage points to 3.2 per cent.
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