Unemployment drop leaves door open to more rate hikes

Australia’s unemployment-rate drop is strengthening the case for additional Reserve Bank of Australia (RBA) rate hikes, after labor-market data pointed to resilience. The Australian Bureau of Statistics reported that an extra 40,300 jobs were added in May, pushing the unemployment rate down to 4.4%. Economists expected a decline, but the job increase exceeded consensus forecasts of about 25,000. The rate had risen 0.2 percentage points to 4.5% in April, helped by a reduction in a backlog of people waiting to start work. The move comes alongside stronger-than-expected underlying inflation released Wednesday, and a household-spending rebound of 1.3% in May. RBA forecasts still expect unemployment to rise gradually, averaging 4.2% in the June quarter, even after three hikes already in 2026.