Labour market weakens after months of growth, fuelling case for rate cut
The Reserve Bank of Australia (RBA) may face increasing pressure to lower interest rates in the coming months, following fresh labour market data and ongoing concerns about the economy’s resilience.
The Australian Bureau of Statistics on Thursday reported that employment fell by 2,500 positions in May, despite the unemployment rate holding steady at 4.1%. While the jobless rate remains below the RBA’s forecast of 4.3% for 2024, the dip in total employment has sparked speculation that the central bank could act sooner than expected.
KPMG chief economist Brendan Rynne told Yahoo Finance that the latest figures may give the RBA additional reason to move in July. “The RBA has just been handed a bigger mandate to cut interest rates next month,” he said.
RBA urged to cut interest rates in weeks as unemployment 'blow out' fears escalate https://t.co/8TDpMPgOtG
— Yahoo Finance Australia (@YahooFinanceAU) June 19, 2025
Rynne warned that slowing public sector activity could leave the private sector exposed, increasing the risk of higher unemployment. “We could see a material spike in unemployment figures in the future,” he said, adding that the RBA should act early by lowering the cash rate further.
The central bank began easing policy in February after concluding its most aggressive tightening cycle in four decades. However, uncertainty remains about the timing and size of future cuts.
Major lenders are divided on the outlook. CommBank expects two more cuts before year-end, while NAB has taken a more aggressive stance, forecasting four more rate reductions before the end of the year additional easing. ANZ remains more cautious in its projections, predicting just one more RBA rate cut this year.
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