Private Credit Weekly Insights, 18 July 2025

The latest ABS Labour Force data for June 2025 revealed a loss of momentum in Australia’s labour market, reinforcing recent signs of broader economic softness. The national unemployment rate rose to 4.3% (from 4.1% in May), reaching its highest level in over three years and exceeding expectations.​

Employment growth was minimal, with a net gain of just 2,000 jobs, driven entirely by an increase in part-time roles, while full-time positions declined materially. Total hours worked also contracted by 0.9%, and the underemployment rate ticked higher to 6.0%, highlighting increased spare capacity in the workforce. While labour force participation nudged up to 67.1%, the data points to growing underutilisation and a trend towards more precarious forms of employment.

The data reinforces the narrative of a cooling economy and a labour market that is no longer acting as a source of resilience. Importantly, it adds weight to expectations of monetary policy easing. Markets are now pricing a 94% chance of a 25bps rate cut by the RBA at its August meeting, with bond yields and the Australian dollar falling in response to the release. A shift to a lower interest rate environment would provide renewed support to borrowing conditions and business activity, particularly for mid-market borrowers facing tighter margins and higher refinancing costs.

RBA Governor Michele Bullock has emphasised that the board places limited weight on monthly CPI prints, instead anchoring its decisions to the more stable quarterly inflation data. As such, it would likely take a significant upside surprise in the Q2 CPI figures to be released on 30 July to hold back a rate cut in August. It’s also worth noting that while unemployment has ticked higher, it remains low by historical standards. The current 4.3% rate is still below the RBA’s estimate of the non-inflationary rate of full employment of 4.5%.

Source: Australian Bureau of Statistics, Labour Force, Australia, 17 July 2025

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