RBA Assistant Governor Sarah Hunter signalled that Australia’s labour market remains tight despite signs of moderation elsewhere in the economy. In a speech today, she said the RBA’s full employment and NAIRU frameworks indicate that conditions have stabilized and remain “a bit tight,” consistent with “some inflationary pressure in the economy.”
She described the relationship between labour tightness and inflation as “like the entwined double helix,” arguing that persistent capacity constraints continue to underpin price pressures. Recent data support that view, with unemployment unexpectedly falling to a seven-month low of 4.1% in December, raising the possibility that the labor market may be tightening again.
Hunter noted that the slowdown over the past few years has occurred primarily through fewer vacancies, reduced job switching, and slower hiring rather than a material rise in unemployment.
