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Rate cut chances downgraded amid signs jobs market improving

Despite the lift in employment, Victoria’s jobless rate rose by 0.3 percentage points to 4.9 per cent as more people started looking for work. NSW’s unemployment rate edged down 0.1 percentage points to 4.5 per cent. Elsewhere, there were big falls in unemployment in Queensland (to 5.7 per cent), Tasmania (to 5.5 per cent) and Western Australia (to 5.4 per cent, its lowest level since mid-2017).

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Despite the national fall in unemployment, the under-utilisation rate remained stuck at 13.4 per cent.

Since the RBA started cutting official interest rates in June, almost 124,000 jobs have been created, the number of people looking for work has fallen by 20,000 and the jobless rate has edged down by 0.2 percentage points.

Ahead of the figures, markets put the chance of an interest rate cut next month at 60 per cent. After the release, this had been wound back to one-in-four.

Commonwealth Bank, which had expected a rate cut in February, now believes the RBA will consider a move later in the year.

Senior economist Gareth Aird said the jobs report on top of better than expected retail figures and other positive signs suggested there was no urgency for the RBA to start the year with a rate cut.

“It’s too soon to say rate cuts are done [but] we have removed the February rate cut in our forecasts and pushed it back to April,” he said.

ANZ and UBS also abandoned their calls for a rate cut next month, pointing to the jobs figures as evidence the RBA’s previous moves might be working.

But EY chief economist Jo Masters said while an immediate rate reduction was unlikely, the RBA would still have to boost the economy.

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“With the economy already growing below potential, it remains likely that the unemployment rate will drift higher in coming months, which would present another headwind to household spending,” she said.

“Moreover, wage growth is likely to remain anaemic given ongoing spare capacity in the labour market with the under-utilisation rate at 13.4 per cent.”

The ABS said the recent bushfires had disrupted its jobs survey in NSW, Victoria and the ACT, adding that most of its work had been done before the Christmas period. It said quality-assurance work had shown the disruptions did not affect the jobs survey result.

But the January survey was likely to have suffered more disruption due to the expansion of the bushfire threat.

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