By Stella Qiu
SYDNEY, July 23 (Reuters) – Australian employment surged past all expectations in June, data showed on Thursday, in a sign of economic resilience that had markets wagering another hike in interest rates would be needed to restrain inflation.
The upbeat data sent the Australian dollar up 0.3% to $0.7020 while three-year government bond futures fell 5 ticks to 95.4, the lowest since early June. Markets narrowed the odds of a fourth rate rise in August to 33%, with a move by the year end priced at 97%, up from 78% before.
“Australia’s labour market is determined not to give the RBA the breathing room it needs,” said Cameron McCormack, VanEck senior portfolio manager, adding that it firms the prospects of another rate rise this year.
“With the economy close to full employment, the RBA has greater freedom to focus squarely on inflation without a cooling in the labour market.”
Figures from the Australian Bureau of Statistics showed net employment shot up 76,300 in June from May, the largest increase since April last year. That came in well above forecasts of a 15,300 gain and helped lift the annual pace in job gains to 1.7% from 1%.
The jobless rate stayed at 4.4% as expected thanks to a rise in the participation rate to a one-year high of 67.0%. The ABS noted more older people were joining the labour force, with most job gains driven by part-time work.
Hours worked edged up 0.2%, after sliding in May, but underemployment, a measure of slack in the labour market, trended higher to 6.5%, the highest since August 2024.
HIGHER OIL PRICES FUEL INFLATION RISKS
The Reserve Bank of Australia has raised interest rates three times this year to 4.35% to fight inflation, fully reversing the amount of policy easing made in 2025. It also warned policy tightening might not be over as higher energy prices fed through the economy.
Consumer inflation accelerated to an annual rate of 4% in May, with an underlying measure pushing higher to 3.6%, well above a target band of 2% to 3%.
The recent re-escalation of the conflict in the Gulf is pushing oil prices higher again, and threatening to keep inflation elevated for longer. Brent crude futures stormed back above $95 a barrel, with markets abandoning bets for policy easing in the second half of next year.
“The robust June report follows last month’s strong rebound and aligns with the RBA’s view that labour market conditions remain resilient,” said Tony Sycamore, an analyst at IG.
“The RBA’s key concern will be that this tightness feeds into wage growth and, more broadly, into inflation in an economy where price pressures are already uncomfortably high – especially with crude oil up 26% this month.”
(Reporting by Stella Qiu and Wayne Cole; Editing by Jacqueline Wong and Shri Navaratnam)
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