Australia's unemployment rate unexpectedly rose to a four-year high, making it likely that the Reserve Bank of Australia will cut interest rates in August.

Due to almost stagnant recruitment, Australia's unemployment rate unexpectedly climbed to a four-year high in June, indicating that the labor market is loosening, providing more basis for the Reserve Bank of Australia to lower interest rates next month. Data released by the Australian Bureau of Statistics on Thursday showed the unemployment rate rising to 4.3%, the highest level since November 2021, exceeding market expectations of remaining at 4.1%. Employment increased by 2,000 positions, entirely driven by part-time positions, while economists had previously expected an increase of 20,000 positions. The yield on Australia's three-year government bonds, sensitive to policy changes, dropped by nearly 10 basis points, while the stock market rose. The money market has fully digested expectations that the Reserve Bank of Australia will cut interest rates in August and again later, with the likelihood of another rate cut exceeding 50%. These data are crucial for RBA policymakers as the resilience of the labor market and concerns about rising prices are key reasons for their patience during this easing cycle. The RBA has already cut rates twice since the beginning of the year, and the decision last week to keep rates unchanged surprised the market. Weak employment data in May and June may indicate a shift in the situation. Alex Loo, macro strategist at Toronto-Dominion Bank, said, "Consecutive weak employment data and the unemployment rate jumping to 4.3% are likely to make the RBA uncomfortable. Investors may now think the RBA could choose to cut rates in August and September." Andrew Boak, chief economist at Goldman Sachs Australia, said, "These data support our view that the Australian labor market is no longer tight and should not be an obstacle to further rate cuts." Australia's economic growth remains lackluster, with low consumer confidence and subdued household consumption. As the August 1 tariff deadline set by US President Donald Trump approaches, global uncertainty has increased. Economists say trade uncertainty is affecting business investment decisions and prompting companies to reassess hiring plans. While Australia faces only a 10% benchmark tariff rate, as an export-dependent economy, its economic condition is highly dependent on its trading partners. Brendan Rynne, chief economist at KPMG, said, "Today's data further confirms the continued softness faced by the Australian private sector. Based on this data alone, the RBA should lower the cash rate at the next meeting."