Unemployment shock muddies interest rate picture

Ajouté : 2026-05-24

[00:00:00]Hey, I didn't get the chance to get to this yesterday morning cuz we were just so busy, but the unemployment rate has gone up from 4.3% to 4.5% a jump.

[00:00:09]Economists and the RBA didn't predict.

[00:00:12]It's the highest unemployment rate since 2021. Now, that's off the back of COVID.

[00:00:17]Here to explain is the unconventional economist Leith van Onselen. Leith, thanks for joining us. I guess my question to you is are we heading towards a recession? Yeah, look, I I I personally think that yeah, there's a very high chance of a recession.

[00:00:30]Obviously, we've had three rate hikes in a in a row from the RBA and the financial markets still tipping, you know, one more at least by the end of the year. So, so did the latest statement of monetary policy that they basically from the RBA which is released a couple weeks back they they essentially forecast another rate hike.

[00:00:47]So, I think with that monetary tightening and obviously with the rising energy costs globally which starting to filter through with sort of like second round impacts cuz we're starting to see, you know, the the the prices for construction materials and that sort of thing go up.

[00:01:00]Um, I think there's a very good chance we will actually have a recession. Um, my my view's always been Jason that the RBA is going to hike actually this year which they already have obviously. Then we'll end up reversing track next year when the when when when the economy has a downturn and it's kind of reminiscent of what we had during the global financial crisis. Anyone who's old enough might remember that um, after the US subprime crisis hit in late 2007 in the US, the RBA hiked rates by 1%. Yeah.

[00:01:28]So, hiked four times and then when the full GFC hit in September 2008 the RBA then slashed rates because it was worried about recession. So, I think we'll probably experience something like that again whereby they they they hike and then they go too hard and then they're forced to actually cut pretty heavily. So, that that's kind of my thinking on it. Now, obviously, I could be proven wrong because nobody knows what the future is and nobody knows how the war overseas is going to play out, but that's kind of my gut feeling that we're going to have a sort of repeat of what happened during the the crisis whereby they cut where where they lifted rates too high and then they have to reverse.

[00:02:00]Yeah, I do remember that. You know the other thing I found concerning with these figures yesterday and and as a small business owner myself, I talk to other businesses and I don't know anyone putting anyone on. I only know people are having to cut people back. Whether it's with, you know, changes to, you know, employment law or wages. Junior wage going is an absolute disaster by this government and I'll I'll get to that, but in seasonal terms, employment dropped by 18,600 people.

[00:02:31]Are businesses doing it tough and just have to let these people go? Yeah, so so it's also worth pointing out that this is just one month's data. So often the the these figures do jump around a bit.

[00:02:40]So we could get a bit of a rebound next month whereby, you know, they add jobs, etc. So just bear that in mind, but but but the trend's obviously not good, right? And and and certainly for, you know, if you're a small business, you're facing cost inflation everywhere and also, you know, we've we've we've also got this artificial intelligence shock that's sort of rolling through globally whereby, you know, there is a there is a potential for quite a lot of jobs to actually be made redundant because that people actually get replaced by artificial intelligence.

[00:03:09]Now, we don't know how that's exactly going to play out, but that that is certainly a risk and and and that technology is starting to be rolled out now and and already some surveys have come out in Australia whereby HR managers have have basically said that they they believe that their companies are going to hire less people or lay people off because of AI. So that's another barrier that's that that is happening and and certainly activity indicators so the purchasing managers index, called the PMI from S&P Global, they they do one every month in the Australian economy and that basically shows that activity levels in Australia are falling.

[00:03:44]So that is often a precursor to job losses. Yeah, right. It's interesting though where AI is having a, you know, on an impact on the private sector, but jeez, no job cuts in the public service or area when when AI could surely do some of these jobs. Oh, absolutely. Look, there's a lot of fat to be trimmed in the public service, especially in the bureaucracy, so both at state and federal.

[00:04:08]Uh but obviously they they those jobs tend to be a lot safer than than than those of us who work in the in in the private sector. Now, another reason why the the outlook for unemployment is actually pretty bad is that uh over the past several years, the biggest creator of jobs in the economy has actually been the the government-funded sector. So, it's called the non-market sector. So, it's bureaucrats, but it's also jobs in the NDIS, that sort of thing. So, it's government-funded jobs.

[00:04:33]>> Yeah. Yeah, yeah. So, so since the start of 2023, basically well, just around 2/3 of jobs created in Australia have been actually government-funded. And now that the government wants to cut back on the NDIS and they're trying to trim costs, that means that we're likely to get back to the tailwind of job growth going forward. And plus, you know, a lot of state and federal governments are now putting on hiring freezes for the public service or trying to sort of trim trim staff there.

[00:05:00]Um so, as a result, we're not going to get that tailwind of employment growth that we've had over recent years. And really, the reason why Australia has had this historically low unemployment, and it's amongst the lowest in the advanced world, is because we've had this massive boom in government-funded jobs that hasn't occurred elsewhere. And that's that's primarily because of the NDIS.

[00:05:17]Yeah, right. Okay. Finally, mate, the next RBA meeting, you expect rates to stay on hold, yeah? Oh, absolutely. So, so so the minutes came out from last meeting earlier this week, and it basically suggested that the RBA is going to sit on its hands. And obviously, after this labor market reading, I can't see them hiking rates next meeting. They'll they'll they'll want to take a wait-and-see approach.

[00:05:34]And if we get another bad job number next month, well, then I think they'll they'll remain on hold, but we'll just have to wait and see how it how it, you know, all pans out. All right. The unconventional economist, Leith van Onselen. I wish we could talk about happier things, mate. I appreciate your time this morning.

[00:05:51]Yeah, no, it's just If you