- The Australian Unemployment Rate is expected to remain steady at 4.1% in June.
- Australia is expected to have added 20,000 new job positions in the month after losing 2,500 in May.
- AUD/USD gains downward traction around 0.6500, aims for lower lows.
Australia is set to release the June employment report on Thursday at 1:30 GMT. The Australian Bureau of Statistics (ABS) is expected to announce that the country added 20,000 new job positions in the month, reversing the 2,500 lost positions announced in May. The Unemployment Rate is foreseen steady at 4.1%, while the Participation Rate is also expected to remain unchanged at 67%. Ahead of the announcement, the Australian Dollar (AUD) is under strong selling pressure amid fears dominating financial boards.
Australian ABS reports both full-time and part-time positions through the monthly Employment Change. Generally speaking, full-time jobs imply working 38 hours per week or more and usually include additional benefits, but they mostly represent consistent income. On the other hand, part-time employment generally means higher hourly rates but lacks consistency and benefits. That’s why the economy prefers full-time jobs.
The 2,500 jobs lost in May were less concerning than the crude number, as, over the month, the country managed to add 38,700 full-time jobs while losing 41,200 part-time positions. At the end of the day, full-time jobs weigh more than part-time ones when it comes to measure the labor sector health.
Australian unemployment rate expected to hold steady in June
Market analysts anticipate the Australian Unemployment Rate will remain at 4.1%. It has been stable around that level for almost a year, dropping to 4% a couple of months early in 2025, but overall steady, a relief for policymakers.
The Reserve Bank of Australia (RBA) has been cautious when it comes to trimming interest rates and has been among the latest major economies to abandon the tightening monetary policy cycle. Easing inflationary pressures and tepid growth supported the decision, yet the labor market has remained tight.
The RBA Board met earlier in July and decided to maintain the Official Cash Rate (OCR) unchanged at 3.85%, against market bets of a 25 bps cut, citing elevated uncertainty among the reasons behind the decision. On a positive note, officials acknowledged “that the most extreme outcomes are likely to be avoided.”
Regarding the employment situation, the Monetary Policy Statement shows: “Various indicators suggest that labour market conditions remain tight. Measures of labour underutilisation are at relatively low rates, and business surveys and liaison suggest that availability of labour is still a constraint for a range of employers. Looking through quarterly volatility, wages growth has softened from its peak, but productivity growth has not picked up, and growth in unit labour costs remains high.”
With that in mind, tepid job creation could accelerate the loosening of monetary policy. The decline in part-time jobs, however, is not as bad news as it could be in full-time ones.
Governor Michele Bullock spoke following the July decision. She said that it is appropriate for the Board to have a cautious, gradual stance on easing, adding the effects of the 50 bps cut delivered this year still had to “flow through.” She also noted that the Board is confident on a path to ease further, leaving the door open for another 25 bps cut before year-end.
With that in mind, an employment report in line with expectations would have no actual impact on the AUD. Signs of a strengthening labour market could further delay potential interest rate cuts and benefit the Aussie, while the opposite scenario is also valid.
When will the Australian employment report be released, and how could it affect AUD/USD?
The ABS June report will be released early on Thursday, and the Australian economy is expected to have added 20,000 new job positions in the month, while the Unemployment Rate is foreseen steady at 4.1% and the Participation Rate at 67%.
Ahead of the announcement, the AUD/USD pair battles to retain the 0.6500 mark amid a risk-averse environment, benefiting the USD. Valeria Bednarik, Chief Analyst at FXStreet, notes: “The AUD/USD pair has scope to extend its slide, according to intraday technical readings, as it is accelerating its slump below all its moving averages in the 4-hour chart. Even further, technical indicators accelerated south, with room to extend their declines before reaching oversold conditions.”
Bednarik adds: “The 0.6480 area comes as immediate support, as the pair bottomed around earlier in July. Further declines expose the 0.6430 region, en route to the 0.6400 mark. AUD/USD would need to recover above 0.6520 to shrug off the negative stance, with additional gains exposing the 0.6570 area.”
Economic Indicator
Employment Change s.a.
The Employment Change released by the Australian Bureau of Statistics is a measure of the change in the number of employed people in Australia. The statistic is adjusted to remove the influence of seasonal trends. Generally speaking, a rise in Employment Change has positive implications for consumer spending, stimulates economic growth, and is bullish for the Australian Dollar (AUD). A low reading, on the other hand, is seen as bearish.
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RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
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