Slight rise in unemployment rate in Australia suggests labor market is still tight and supports rate hike

According to the Australian Bureau of Statistics (ABS), the unemployment rate rose to 3.5% in August (July: 3.4%), the lowest level in 48 years.

The unemployment rate increased in August as 33,500 new jobs were created, while the labor force participation rate rose to 66.6%.

This information indicates that the Australian labor market remains tight and that the Reserve Bank of Australia is likely to raise interest rates in the coming months.

The Reserve Bank of Australia (RBA) raised its key interest rate from 0.50% to 2.35% at its meeting on September 6 in a bid to curb inflation.

RBA governor announces further rate hikes as long as Australian inflation remains above the RBA’s 2% to 3% target.

Yesterday (September 7), the Australian Bureau of Statistics reported that Australia’s gross domestic product (GDP) grew 3.6% year-over-year in the second quarter of 2012, better than the market forecast of 3.5% and stronger than the 3.3% growth in the first quarter, suggesting that the Australian economy will be able to withstand pressures from rising interest rates and the cost of living.

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