Job market yet to feel impact of Iran war, rate hikes

The result was driven by an increase in employment of 17,900 and almost 4000 fewer unemployed people compared to February, the Australian Bureau of Statistics reported on Thursday.

While economists had predicted the unemployment rate would hold steady, employment growth was below expectations for a rise of 20,000 new jobs.

In trend terms, the unemployment rate had been at 4.3 per cent since July 2025, suggesting the labour market was on a solid footing, Commonwealth Bank economist Harry Ottley said.

"Unsurprisingly, there is no evidence in the data of an adverse impact to the labour market from the conflict in the Middle East," he said.

"Economic shocks typically influence firms' hiring decisions with a lag.

"Hours worked will likely be a canary in the coal mine for any slowing in broader labour market conditions as firms will typically trim staff hours before headcount."

Hours worked were strong in March, up by 0.5 per cent, while the participation rate fell by 0.1 percentage points to 66.8, the bureau's head of labour statistics Sean Crick said.

Mr Ottley predicted the jobless rate to peak at 4.7 per cent by late 2027.

However, Citi economists Josh Williamson and Faraz Syed expect unemployment to hit 4.8 per cent by the end of 2026.

The rise in new jobs was driven by a surge in full-time employment of 53,000, while part-time roles fell by 35,000.

The latest figures follow a surprise jump in unemployment from 4.1 to 4.3 per cent in February due to fewer unemployed people waiting to start a new job than in the same period in previous years.

Treasurer Jim Chalmers said the figures were reassuring despite the global volatility.

"We are not immune from the impacts of this conflict on the other side of the world, but we confront them from a position of relative strength due to our resilient labour market," he said.

"It is encouraging to see the unemployment rate remain at 4.3 per cent despite all of the uncertainty in the global economy right now."

With unemployment at historically low levels, the data would not shift the Reserve Bank's assessment the labour market was still a little too tight, NAB economists Taylor Nugent and Michael Hayes said.

"The path forward from here hinges on how the RBA weighs the competing pressure on growth versus inflation," they said.

NAB, CBA, ANZ and Westpac all predict the central bank to raise the cash rate to 4.35 per cent at its next meeting in May.

The Reserve Bank has lifted the official cash rate at each of its meetings in 2026, with governor Michele Bullock outlining concerns on inflation ahead of the Iran war.

In a recent report, the International Monetary Fund said the war, if not resolved soon, could cause a global recession, although Australia would likely experience stronger economic growth than other advanced economies.

Meanwhile, Australia's budget balance was predicted to be among the three strongest of the G20 nations, the IMF said in a separate report.

The budget balance as a share of GDP was ahead of countries such as the US, UK, Germany and Japan, while the nation had the fifth-lowest debt when weighed against economic output, the report said.

The findings coincide with Dr Chalmers holding talks in Washington for the IMF-World Bank spring meetings, along with his counterparts from the UK, China and Japan.

China's economy grew stronger than expected in the first quarter, at five per cent in annualised terms, which could help support demand for Australian exports.