As jobs soften here, Australia’s economy matters more than ever

Wednesday, 5 November 2025

The latest jobless figures will be another read on the grim task ahead of the Government, writes Luke Malpass.

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OPINION: When the latest jobless figures come out this morning, they will give another good sense of what is going on in the economy. Another proof point of economic averageness. Another read on the grim task ahead of the Government. Another reason to consider decamping to the eastern seaboard.

Obviously, there is the headline unemployment figure, which is expected to be 5.2% to 5.3% — a mild rise compared with the past quarter. That measures unemployment among those in the labour market.

But of more interest will be the workforce participation rate and the utilisation rate. The former measures what percentage of working-age people — 15- to 65-year-olds — are actually in the labour market. The latter measures slack in the labour market and whether people are working as many hours as they would like to.

Christopher Luxon says government is working on getting growth in Auckland

Together, they will give a fuller picture. Both have been trending weaker.

This particular jobless number is unlikely to excite much political reaction if it does not move much. If it has lagged the poor growth figures of the last quarter, there could be an unpleasant shock — but according to the general market consensus, that seems unlikely.

What does appear clear is that there is now quite a bit of slack in the labour market.

There have been more interesting developments in markets offshore over the past week than in New Zealand. The domestic economy essentially remains weak, and while the Government’s fiscal policy has eased over the past two years, it is still essentially stimulatory.

Another factor likely masking the employment impact of the economic dreariness is the significant level of Kiwi migration to Australia — now at its highest level in more than a decade.

On Tuesday, the Reserve Bank of Australia held its interest rate steady, while in the US, Federal Reserve chairperson Jerome Powell delivered a rate cut before warning not to expect the same thing next month — thanks to inflation.

In Australia, a headline annual inflation rate of 3.2% has ended any talk of another interest rate cut. RBA governor Michelle Bullock said the just-below-3% underlying rate “was not good enough” for the bank and that it had misjudged the gap between supply and demand.

For New Zealand, the Australian cut — or lack of it — is of more immediate importance. Unlike here, most Australian mortgages are floating, meaning the transmission of rate changes can be fast.

Australia is New Zealand’s biggest tourist market, making up almost half of all visitors. It is also our second-largest trading partner. Lower Australian interest rates mean more economic activity — and some of that activity can be expected to spill over into New Zealand through demand for our goods and services.

In other words, Australian rate cuts are also good for us.

So the new unemployment numbers are almost certainly not going to deliver good news. The question is whether they will be particularly bad.

The Government has returned from recess and the prime minister is back in the country. But in the House on Tuesday, in response to questions about the economy, Christopher Luxon’s defence remained fundamentally backward-looking: that the Government is cleaning up Labour’s many messes.

It is unclear how long the public will continue to accept — or care about — that explanation (assuming they still do). The economic indicators over the next couple of months will determine the mood music going into election year.