Unemployment in March remains steady at 4.3 per cent despite first full month of Iran war adding to inflation

Unemployment in March remained steady at 4.3 per cent during the first full month of the Iran war, increasing the chance of an interest rate hike next month. The number of people without work in fact fell by 3700 to 656,300, new Australian Bureau of Statistics data released on Thursday showed, with the LNG-rich Queensland seeing its jobless rate plunge to an ultra-low 3.7 per cent. Far from putting up unemployment, the Middle East conflict is creating demand for labour in resource rich states. With inflation expected to soar as a result of higher fuel prices, the Reserve Bank of Australia is now more likely to hike rates on May 5 by another 25 basis points to 4.35 per cent. A continuation of low unemployment and inflation at 3.7 per cent in February, before the US strikes on Iran, means the RBA would be more inclined to act aggressively to bring inflation back towards the mid-point of its 2-3 per cent target as part of its dual mandate. Treasurer Jim Chalmers said the low jobless figure was a good sign, without mentioning already-high inflation. “All of the global economic uncertainty we are seeing in the world right now is informing our thinking ahead of next month’s Budget, but these figures show we have strong economic foundations to confront the challenges ahead,” he said from Washington on Thursday. Higher crude oil prices now at $US91 a barrel, Iran’s blockade of the Strait of Hormuz and the destruction of Qatar’s LNG facilities mean more demand for Australian liquefied natural gas and coal. The resources-rich states had the strongest labour markets with Queensland, a major LNG and coal exporter, having a 10-month low jobless rate of just 3.7 per cent, Australia’s lowest. This followed a plunge from 4.4 per cent in February, marking the biggest monthly drop in the Sunshine State’s jobless level since COVID in 2020. The Northern Territory, which exports LNG to Japan, had a participation rate of 72.7 per cent, well above the national average of 66.8 per cent but a slightly higher than average jobless rate of 4.4 per cent. The states with the weakest housing markets had the highest unemployment with Victoria’s 4.8 per cent level the nation’s worst, ahead of only Tasmania. Western Australia, an iron ore rich state more susceptible to the effects of a global economic slowdown, had a below-average jobless rate of 4.2 per cent, while South Australia was even lower at 4 per cent. NSW was in line with the national average at 4.3 per cent, slightly above the Australian Capital Territory on 4.2 per cent. Australia’s unemployment rate is low by international standards which Deutsche Bank said increased the risk of even higher inflation and therefore interest rate rises. “For economies where demand and inflation were already strong (Australia), oil price rises are more likely to filter through to realised and expected inflation, in contrast to economies where the macro context was weak (giving firms less pricing power, and thus more likely to dent margins, and in turn hiring and capex decisions),” it said. “So, for the same shock, relative macro context can affect whether inflation or growth should be the greater concern for policymakers.”