As coronavirus lockdowns were lifted in November, Australian employment surpassed all predictions, bringing the unemployment rate considerably lower and providing a major boost to the economy.
The positive surprise occurred as the Reserve Bank of Australia’s (RBA) governor hinted at a possible early conclusion to bond purchases if the recovery outperforms forecasts.
The Australian Bureau of Statistics reported on Thursday that employment increased by a record 366,100 in November, far exceeding market expectations of a 205,000 increase.
After a Delta-driven contraction in the third quarter, a dramatic 4.5 percent increase in hours worked indicated a solid return in economic growth.
The unemployment rate fell to 4.6 percent in November, down from 5.2 percent in October, and considerably below estimates of 5.0 percent. Even though more individuals went hunting for work, the participation rate rose to 66.1 percent, bringing it back to pre-pandemic levels.
The RBA may have to revise its projections as a result of the outperformance, as it had previously estimated that unemployment would not reach 4.5 percent until the middle of next year.
“It’s safe to conclude that the labour market has almost fully recovered from the lockdowns,” Capital Economics senior economist Marcel Thieliant said.
“The RBA’s impressive turnaround suggests the asset purchases will come to an end in February.”
As part of its quantitative easing programme, the central bank buys A$4 billion ($2.87 billion) of government bonds every week and had planned to taper that in February until stopping purchases in May.
An early conclusion to the programme would follow the Federal Reserve of the United States’ decision to stop buying bonds in March, however the RBA continues to say that a rate hike in 2022 is improbable.
“We are not in a rush to raise interest rates,” RBA Governor Philip Lowe said earlier on Thursday, adding that Australia’s inflation and wage growth were still significantly behind those in the United States and rising slowly.
Futures are fully priced for a raise to 0.25 percent by June and rates approaching 1.0 percent by the end of the year, according to financial markets.
Data on labour demand appear to be bolstering the market, with job advertisements rising 15% in October and November to 13-year highs, more than 40% higher than pre-pandemic levels.
Businesses are also increasingly lamenting a lack of qualified staff, owing in part to Australia’s continued closure to migrants and travellers.