Unemployment holds at 3.9 per cent

RBA estimates have raised the level at which it believes full employment may drive up inflation.

RBA estimates have raised the level at which it believes full employment may drive up inflation. Photo: AAP

The unemployment rate was 3.9 per cent in April, unchanged from a downwardly revised result in March.

However, just 4000 people joined the workforce in April, well short of the 30,000 increase economists had been expecting.

The 3.9 per cent rate remains the lowest level for unemployment since August 1974 and when the survey was conducted quarterly.

Prime Minister Scott Morrison, campaigning in northern Tasmania on Thursday, said people being in jobs was the most important thing that an economy needed.

“If you don’t have a job, you don’t have choices,” he said in Launceston before the release of the figures.

Even so, businesses are struggling to find sufficient staff.

There has been a steady decline in the unemployment rate since hitting 7.4 per cent during the COVID-19 recession, in large part due to the lack of skilled migration as international borders were kept shut.

Australian Retailers Association CEO Paul Zahra said there were more than 29,000 job vacancies in the retail sector alone.

“Without the usual numbers of overseas workers and students, these gaps won’t be filled using traditional recruitment methods,” he said.

Mr Zahra supports calls for the gaps to be filled by pensioners and mature-aged workers and allow them to supplement their income by exempting them from the age pension income test.

Aside from staffing problems, retail businesses are also feeling the impact of ballooning inflation pressures.

“We’re also seeing many households start to tighten their budgets with interest rates now on the rise,” Mr Zahra said.

Even so, retailers enjoyed a solid sales period during April, buoyed by the Easter holidays and the further easing of COVID-19 restrictions.

According to the Mastercard SpendingPulse, which measures in-store and online retail sales across all forms of payment, retail sales rose 9.9 per cent in April compared to a year earlier, led by a 20.3 per cent jump in electronics sales.

The fall in the unemployment rate below 4 per cent will fuel expectations of a further rise in the cash rate when the Reserve Bank of Australia board meets in June.

However, Wednesday’s sluggish wages figures suggest the RBA won’t lift the cash rate by any more than 25 basis points. That would match its first increase in a decade earlier this month, as it fights ballooning inflation.

The minutes of the May RBA board meeting released on Tuesday showed there had been some discussion on raising the cash rate by a larger than usual 40 basis points.

But with wages growing by just 0.7 per cent in the March quarter to an annual rate of 2.4 per cent – less than half the rate of inflation at 5.1 per cent – economists see little urgency for a big hike at this stage.

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