Australia: Unpacking Labor Market Resilience

Australia’s labor market has remained resilient despite slower growth, with strong employment gains and low unemployment but limited wage pressure. This paper argues that recent dynamics reflect both cyclical and structural forces. First, headline indicators such as vacancies and unemployment may overstate cyclical tightness, partly due to sectoral shifts like healthcare expansion. Second, rapid labor supply growth reflects structural trends and cyclical responses to high living costs and interest rates, boosting participation, hours, and multiple jobholding. Third, strong labor supply, alongside sectoral labor demand has contained wage pressure at low levels of unemployment, implying a temporarily lower NAIRU.