Rise in unemployment increases chance of an August rate cut

Source: Canstar. Notes: based on an owner-occupier paying principal and interest. Calculations assume a cut in August and that the banks pass it on in full to existing variable customers. 

Unemployment the latest piece in the rate cut puzzle

Canstar’s data insights director, Sally Tindall says, “Today’s unemployment figures are the next piece in the puzzle building an already strong case for the RBA to cut the cash rate in August.”

“This rise in unemployment isn’t cause for alarm, however, Australia’s previously rock solid jobs market is showing signs of wear.

“If inflation continues to trend down, as expected, the RBA will have very little reason to delay its next cash rate cut, especially when so many Australians are still struggling under the weight of their mortgage.

“The RBA’s mandate is to keep prices stable, but also Australians in jobs, and today’s Labour Force figures are an important reminder of this. Inflation is coming down, but the strength of the jobs market is starting to slip. If the data continues in this direction, the case for a rate cut will be impossible to ignore.

“An August cut won’t move mountains, but it’ll offer some sorely needed breathing room for households juggling high mortgage repayments and rising living costs.

“If lenders pass on the full 0.25 percentage point cut, a household with a $600,000 loan could see their minimum repayments drop by $90 a month.

“However, last meeting’s shock decision is a reminder that nothing is set in stone until a cut hits your bank account. The RBA still needs to drop the hammer on the next rate cut, but also, banks need to then pass it on to their variable customers.

“While we fully expect the banks to do this, should there be a cut in August, keep the pressure on your lender, even in the lead up to the next RBA meeting by asking for your own personalised cut.”