Janus Henderson fixed interest strategist Emma Lawson anticipates a softening in Australia’s labour market. Public sector job growth is waning, and the private sector remains hesitant to increase hiring. Lawson’s analysis comes after the Reserve Bank of Australia (RBA) surprised markets by pausing interest rate hikes in July. Janus Henderson is a global asset manager dedicated to helping investors achieve long-term financial goals. The company offers a diverse range of investment solutions for institutions, intermediaries, and individual investors.
Lawson noted that Australia’s unemployment rate has already climbed to 4.3 per cent, the highest level since 2021. She expects this figure to continue to rise as hiring slows in key sectors such as healthcare and education. Private sector employment growth has also been sluggish, increasing by just 0.9 per cent year-on-year, with forward indicators suggesting continued weakness.
The post-pandemic surge in immigration had previously inflated the labour supply. However, with immigration inflows now stabilising, less job creation is required to maintain a steady unemployment rate. Lawson believes this will moderate the increase in the jobless rate, although it will not prevent it entirely.
Despite the RBA’s expectation of unemployment peaking at 4.3 per cent, Lawson anticipates a slightly higher peak. She suggests this increase will be sufficient to justify a return to more neutral cash rate levels. Janus Henderson still anticipates a total of 1 percentage point of easing, which would bring the cash rate down to 2.85 per cent. The firm acknowledges that risks are tilted toward even deeper cuts if economic conditions deteriorate further.
