Job buttonDespite a second consecutive rate reprieve from the RBA this month, economists believe the ongoing strength in the domestic labour market could result in an interest rate hike as early as August.

Australia’s unemployment rate was unchanged at 5.1 per cent in June, from a downwardly revised 5.1 per cent the previous month, according to an Australian Bureau of Statistics (ABS) report.

It is the lowest jobless rate as well as the fewest number of unemployed workers, 598,400, since January 2009.

A total of 45,900 jobs were created in June, triple the market forecast of 15,000, statistics revealed.

Part-time positions rose by 27,500 in June, while full-time staff increased 18,400.

Employment has increased in nine of the past 10 months, with 356,300 jobs added to the national economy since June 2009.

JP Morgan economist Helen Kevans said the improvement in the labour market could accelerate wage rises and add to pressures on inflation.

“Further evidence of building wage pressure will add to an already worrisome inflation outlook, with headline inflation likely to remain above the RBA’s 2-3 per cent target range this year and next, and core inflation to be above target by year end,” Ms Kevans said.

“We believe an elevated print on the upcoming second quarter CPI on both the headline and core measures will be enough to trigger another rate move, with our forecast calling for a further 25 basis point hike to the cash rate in August, providing conditions do not deteriorate offshore.”

The RBA’s decision to hold the interest rate steady recently, followed six increases from 3.0 per cent to 4.5 per cent between October 2009 and May 2010. 

National Australia Bank senior economist David de Garis said the jobs data reflected the strong local economy against a backdrop of weak Atlantic economies and brought into focus the consumer price index (CPI) report on July 28. 

”For the RBA, this reasserts the importance of the upcoming second quarter CPI," Mr de Garis said.

”If underlying inflation is running at a year to 3.0 per cent or more (rather than the RBA’s 2.75 per cent forecast) then the RBA would have to seriously consider another rate hike to crimp interest sensitive demand to make room for the resources boom that now looks to be coming to the fore.’’ 

Commonwealth Bank senior economist Michael Workman said the mining states had usurped Victoria in leading the nation’s employment growth. 

The unemployment rate in Queensland fell from 5.5 to 5.3 per cent and Western Australia dropped 0.1 percentage point to 4.0 per cent. 

“So most probably you’d argue here that some of the mining states are starting to show more consistent and stronger jobs growth than the east coast states,’’ Mr Workman said. 

In WA, 18,000 part-time jobs were added during the month, ABS data showed. 

Mr Workman said if inflation and the jobs market remained strong, the RBA could possibly lift interest rates twice by year end.