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

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


Important information

This communication is provided by MLC Investments Limited (ABN 30 002 641 661, AFSL 230705) (“MLC”), a member of the National Australia Bank Limited (ABN 12 004 044 937, AFSL 230686) group of companies (“NAB Group”), 105–153 Miller Street, North Sydney 2060. An investment with MLC does not represent a deposit or liability of, and is not guaranteed by, the NAB Group. The information in this communication may constitute general advice. It has been prepared without taking account of individual objectives, financial situation or needs and because of that you should, before acting on the advice, consider the appropriateness of the advice having regard to your personal objectives, financial situation and needs. MLC believes that the information contained in this communication is correct and that any estimates, opinions, conclusions or recommendations are reasonably held or made as at the time of compilation. However, no warranty is made as to the accuracy or reliability of this information (which may change without notice). MLC relies on third parties to provide certain information and is not responsible for its accuracy, nor is MLC liable for any loss arising from a person relying on information provided by third parties. Past performance is not a reliable indicator of future performance. This information is directed to and prepared for Australian residents only. MLC may use the services of NAB Group companies where it makes good business sense to do so and will benefit customers. Amounts paid for these services are always negotiated on an arm’s length basis.

This entry was posted in MLC Market Updates. Bookmark the permalink.