Australia's unemployment rate rose over 4% for the first time in 2 years. Now bets are almost off for an RBA interest rate hike

Australia's unemployment rate is rising a litter faster than the RBA thought and now bets have dropped of a rate hike in Australia in May.

Today's data release showed the jobless rate (unemployment rate) in Australia rose to 4.1% in January, up from 3.9%, (vs 4.0% read expected).

Australia's unemployment rate rose over 4% for the first time in 2 years. Now bets are almost off for an RBA interest rate hike

The biggest weight on the data was that most economists didn't expected a drop-in part-time employment. And that's why the overall unemployment rate rose to 4.1% vs the expected rise to 4%.

Sure, the ABS thinks its seasonal and pointed to employment rising in February. But we can't lean into that thinking too much, because overall unemployment is expected to rise as Aussie businesses are suffering the lagging effects of rate rises. Job cuts in the US are at a one year high and I think Australia may follow suit.

A proxy of business and the consumer, CBA $CommBank(CBA.AU)$ the biggest bank in Australia reported a dark outlook for 2024 (in their results yesterday) seeing further financial strain in 2024 as customers continue to miss repayments and delinquencies are continuing to rise. This is why CBA expects more arrears and impairments.

Please also remember that RBA forecast the jobless rate rise to 4.25% in 2025. But you probably do not want to trust that. I think we could see the unemployment rate hit that rate this year.

So…If you read the tea leaves, this all points to the RBA NOT making any more rate hikes this year. And this is what we are seeing now in RBA futures markets. Bets have now dropped for the RBA making a rate hike in May. And bets of potential rate cuts are increasing.

As for bets of a rate CUT, they are not that really telling though ( * see below under %Hike/Cut). So as bets are not greater than 50% (of a chance of a cut) it bascially tells me, that the RBA may just keep rates as they are for the rest of the year… unless anything drastic happens.

RBA Implied Cuts