RBA to drive unemployment to 5%


HSBC chief economist Paul Bloxham believes that the Reserve Bank of Australia (RBA) will need to see Australia’s unemployment rate rise to 5% before it considers cutting interest rates.

“The unemployment rate at the moment has risen from 3.5% to 4% and we think that the unemployment rate will probably have to get up closer to 5%”, Bloxham told Sky News.

“Without the unemployment rate rising, it’s hard to see how you’re going to get enough loosening in the labour market to get wage growth to come down enough, or productivity to improve enough to get inflation down from for where it is right now”.

The RBA currently forecasts that Australia’s unemployment rate will peak at 4.3% early next year, which would see around 40,000 Australians lose their jobs.


The federal budget was more pessimistic, projecting the unemployment rate to edge up to 4.5% by June 2025 and to remain there the next year.

unemployment forecasts

If Bloxham’s 5% forecast comes to fruition, it would mean that around 150,000 Australians would lose their jobs.


I personally think that an unemployment rate of around 5% is inevitable given the deterioration in job advertisements amid historically high labour supply growth.

SEEK’s job ad series points to rising unemployment:

Seek job ads

The same applies to the ANZ-Indeed job ad series:

ANZ-Indeed job ad series

It appears that labour hoarding by companies has so far prevented a bigger rise in unemployment, with the adjustment instead taking place via fewer hours worked.

As we know, Australia’s annual GDP growth hit a 33-year low in the March quarter.

Annual GDP growth

GDP growth typically leads employment growth and, by extension, the unemployment rate.

Therefore, it seems inevitable that Australia’s unemployment rate will eventually shoot upwards.

About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.