Teetering jobs market may tempt RBA to cut rates this month

Borrowers hanging out for another interest rate cut will be eagerly seeing which side of the fence the central bank leans towards.

The two most influential economic indicators the Reserve Bank of Australia (RBA) looks at when deciding on its official cash rate moves are inflation and employment.

With the release of unemployment figures on Thursday (18 September), the RBA has a bit of a conundrum on its hands.

Although the seasonally adjusted unemployment rate was steady at 4.2 per cent in August, there was a sizeable drop of 41,000 full-time jobs and a rise of 36,000 part-time positions.

The RBA Board members will also be aware of what’s coming down the pipeline. A veritable wave of job losses is about wash ashore.

Banks and mining companies in particular have in the past couple of weeks announced a swathe of job cuts so large they would move the unemployment dial upwards.

ANZ has said it will cut 3,500 jobs (14 per cent of its workforce), Westpac is reportedly looking at 1,500 redundancies, while Bank of Queensland (200 roles), Bendigo Bank (637) and NAB (410) add to the woes of many employees.

Throw in 750 jobs being cut by BHP in Queensland, 550 from an ever-shrinking Telstra workforce, and more losses from CSL and the picture looks far bleaker than the 4.2 per cent figure announced Thursday.

When unemployment goes up, the prospects of a rate cut go up with it.

It’s the opposite with inflation. When it goes up, as it surprisingly did at the end of August, expectations of a rate cut wane.

When the monthly consumer price index leapt from 1.9 per cent in June to 2.8 per cent in July, belittling market predictions of a 2.3 per cent figure, a September rate cut was seemingly dead in the water.

That was further compounded by the Wednesday (24 September) ABS figures showing the monthly CPI indicator rose 3.0 per cent in the 12 months to August 2025, the highest annual inflation rate since July 2024.

But the new unemployment figures may have resuscitated those hopes among borrowers (but not savers).

When the RBA Board makes its next interest rate call on 30 September it will be wrestling with these contradictory numbers. One eye is on the job numbers that suggest a cut is in order, while the other is squinting as it looks at the inflation data that suggests a more cautionary approach.

The market money is on inflation carrying the most weight.

Financial markets are pricing in a mere 10 per cent chance of a rate cut this month. The first Tuesday in November looks to be a near certainty for the next cut, with an 86 per cent likelihood of rates falling by 0.25 of a percentage point.

AMP economist Shane Oliver said, “the risks to unemployment are shifting to the upside and monetary policy is still tight so it makes sense to continue easing.”

Head of Macroeconomic Forecasting at Oxford Economics Australia, Sean Langcake, was convinced November would be when the RBA pulled the trigger.

“Employment growth is running out of steam, with headcount little changed from four months ago,” he said.

“We don’t think the data is bad enough to spur the RBA into action this month but another cut in November is expected.”

In addition to inflation and jobs, the RBA has recently been more forthright in saying it also kept tabs on the property market, which is again experiencing a resurgence. 

Helen Avis, Director of Finance, Specialist Mortgage, said the RBA might be reluctant to pour more fuel on that property market fire by making further rate cuts in 2025.

“Personally, I cannot see the RBA cutting rates again so soon, especially as the government’s First Home Guarantee (FHG) loan deposit scheme is changing from 1 October and that is anticipated to generate a buying frenzy among first home buyers, which will in turn push up prices.”

Ms Avis said her clients in that price bracket had serious concerns about the direction the more affordable market segment was heading.

“Younger buyers are worried that what they can maybe buy today will be firmly out of reach by next year due to the change in the scheme’s price limits and the removal of income limits for first home buyers.

“We have seen an uptick in enquiries, with more clients buying property and completing more settlements.

“With the interest rate trend being downwards, it has given buyers confidence to act and I doubt the RBA will want to add to that demand with another rate cut.”

Growing population adds to employment concerns

The jobs stagnation comes as population growth figures, also released Thursday, point to an ever-rising number of people who will need jobs.

Australia’s population grew by 1.6 per cent in cent in the 12 months to March 2025, according to the latest figures released by the Australian Bureau of Statistics (ABS).

Beidar Cho, ABS’ Head of Demography, said the population on 31 March 2025 was 27.5 million people, which is 423,400 more than the same time in 2024. 

“Natural increase, that is the number of people born minus those who died, added 107,400 people from March 2024 to March 2025.

“Both births and deaths registered in Australia went up by 2.1 per cent.

“We saw 315,900 people added to our population from overseas migration from March 2024 to March 2025, which compares with 493,800 people in the previous 12 months.

“Western Australia had the fastest rise in population of 2.3 per cent with Victoria and Queensland equal second highest, as both grew by 1.8 per cent,” Ms Cho said.

Tasmania saw the slowest growth over the 12-month period, with a 0.2 per cent rise in population.

The RBA’s official cash rate sits at 3.60 per cent.

Among the big four banks, Westpac is still the market leader for fixed rates, holding the lowest fixed rates across the board except for the three-year fixed rate, where it shares the title with NAB.

The list of lenders offering at least one fixed rate under 5 per cent continues to grow, with Canstar analysis showing there are now over 30 lenders offering at least one fixed rate under 5 per cent, when at the start of the year there were none.

This article was updated on 24 September with inflation data released by the Australian Bureau of Statistics.