"The Australian labour market is slowly slumping as the economy struggles with the burden of high inflation and interest rates," said Innes Willox, Chief Executive of the national employer association, Australian Industry Group.
"Today's data showing a rise in the unemployment rate to 4.5% in July confirms that the labour market is slowly but surely weakening. Since around Easter we have seen a clear jump in unemployment and under-employment, alongside a decline in the number of hours worked in the economy.
"The timing points clearly to the culprit – soaring inflation and the rising rates needed to control it. CPI jumped rapidly around Easter in response to the energy crisis, with consumer and business confidence falling rapidly with it. Rate rises by the RBA – a painful but necessary corrective – has further weakened economic activity.
"There is every expectation the labour market will continue to weaken. The RBA had forecast that unemployment would only marginally rise to 4.6% over the coming year, but today's data suggests it may deteriorate faster. The RBA now faces a careful balancing act to manage high inflation alongside a weakening labour market, with difficult choices on either side.
"Australia's woeful productivity performance underpins our dilemma. Inflation is too high because the economy is at its productive limits, and even modest growth triggers an inflationary spike. Without a return to productivity growth Australia will continue to labour with high inflation, high rates and ultimately a faltering labour market," Mr Willox said.
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