Australia’s unemployment rate has fallen to 3.5 per cent and employers say they are still struggling to find staff. 

New data from the Australian Bureau of Statistics (ABS) reveals that 88,000 more people were employed in June 2022 than in the previous month, pushing the workforce participation rate to a high of 66.8 per cent. Unemployment fell by 54,000, pushing the unemployment rate down by 0.4 per cent.

The number of unemployed people in Australia is now almost identical to the number of jobs vacant (both at about 500,000), compared with a ratio of about 3 to 1 before the COVID-19 pandemic.

Experts say Australia is in the grip of a labour shortage as businesses and the public service struggle to find enough workers.

“The fall in unemployment is very good news, but the gap between the number of unemployed people and job vacancies has narrowed to just 14,000, emphasising the severity of the jobs [staffing] crisis,” says Andrew McKellar, chief executive of the Australian Chamber of Commerce.

Jennifer Westacott, chief executive of the Business Council of Australia (BCA), says the Federal Government must increase migration and offer more long-term working visas to address chronic staff shortages.

“A lack of workers puts a handbrake on new projects and stifles investment. You can’t employ hundreds of Australians on a construction job if you don’t have a surveyor and you can’t tender for a new project without engineers or labourers,” she said.

In early July, the Reserve Bank of Australia (RBA) lifted the cash rate from 0.85 per cent to 1.35 per cent, with a further 0.5 per cent rise expected in August and further small rises to potentially follow.

Robert Carnell, regional head of research at ING, says the latest labour figures will only increase pressure on the RBA to continue raising interest rates.

“A drop in the unemployment rate was expected this month, but not of the magnitude recorded,” he said. 

“A drop to 3.5 per cent really does look quite alarmingly tight.”

Independent economist Saul Eslake says Australia is “at full employment with unemployment down to 3.5 per cent” while experiencing an “inflation problem”.

“It’s a sign of how strong the tail winds are that the RBA is trying to combat,” he said.