The Australian dollar is climbing again, boosted by upbeat jobs data that’s reigniting speculation the Reserve Bank may deliver another rate hike sooner than expected.
Strong Jobs Data Lifts Market Confidence
Fresh figures from the Australian Bureau of Statistics (ABS) show that the economy added 38,000 new positions in December, while the unemployment rate dipped to 4.1%, down from 4.3% the month before. The stronger-than-expected jobs growth surprised analysts who had predicted softer numbers amid signs of slowing household spending.
Following the release, the Australian dollar jumped to around US$0.67, hitting a one-month high. Traders quickly adjusted their forecasts, betting that the Reserve Bank of Australia (RBA) may lean toward another rate rise when it meets next month. Economists say the latest data reinforces the message that Australia’s labour market remains remarkably resilient, even as higher borrowing costs and cost-of-living pressures weigh on consumers.
RBA Faces Fresh Rate Hike Pressure
With the jobs market still tight and wages growing steadily, the RBA’s challenge has become more complicated. Governor Michele Bullock has repeatedly said the central bank won’t declare victory over inflation until there’s clear and sustained evidence of cooling demand — and this latest data suggests that may take longer than hoped.
Investors now believe there’s a growing chance of a 0.25 percentage point hike as early as February, though much will depend on upcoming inflation figures due later this month. Currency strategists say the Aussie’s rise reflects a renewed sense of confidence in the economy’s strength — but also a dose of caution.
A stronger dollar makes exports slightly less competitive, and any surprise rate increase could put extra strain on mortgage holders already feeling the pinch.
Markets React as Economy Defies Gravity
The reaction across financial markets was immediate. Bond yields edged higher, and local equities fell slightly as traders priced in the possibility of tighter monetary policy. Analysts said that while the RBA may prefer to hold rates steady, it now faces the risk of appearing too passive if inflation proves sticky.
Still, many believe the central bank will tread carefully, balancing the need to rein in inflation with the risk of overburdening households. For now, the stronger jobs numbers have given the RBA some breathing space — and perhaps a reason to stay cautious rather than cutting too soon.
But for borrowers, the message is less comforting: with the economy still generating plenty of work and wages continuing to rise, any hopes of lower interest rates might have to wait a little longer.
