The Australian Bureau of Statistics released data earlier on Thursday showing the unemployment rate fell to 6.6 per cent in December, down from 6.8 per cent in November.
The jobless rate fell as the economy added 50,000 new jobs and the participation rate climbed to 66.2 per cent from 66.1 per cent.
Here is the reaction to the data from leading market economists.
Justin Smirk, Westpac senior economist
The labour market recovery has been far stronger than anticipated.
Total employment is almost back to pre-COVID levels while under-employment, and those working zero hours for economic reasons, are almost back to more normal levels.
But the recovery has all been in part-time employment as full-time employment still well below pre-COVID levels.
In addition, unemployment remains above pre-COVID levels as participation has lifted.
This suggests while there has been a solid bounce back from the shock, the labour market is quite different to what it was pre-COVID and the supply of labour continues to outstrip demand.
Josh Williamson, Citi chief economist
We expect the unemployment rate to approach 6 per cent in Q4 this year. We were consistently more optimistic than consensus on the labour market last year, forecasting a lower peak in the unemployment rate than consensus.
For 2021, we expect job gains to slightly outpace a small further increase in the participation rate, such that the unemployment rate approaches 6 per cent in Q4.
Despite the improvement to date and our forecast for further job gains, we expect labour market spare capacity to persist.
Our forecasts do not envisage the unemployment rate reaching 5 per cent before 2024.
With this unemployment rate unlikely to be sufficient for a sustained increase in wage-based inflation, we still have the RBA maintaining a cash rate of 10 basis points for the foreseeable future and expect further QE in order for the Bank to meet the inflation mandate.
Paul Brennan, Suncorp chief economist
“There is still a long journey ahead to return the unemployment rate back to pre COVID-19 levels, let alone for us to see a reduction to the level the RBA believes will lead to a sustained pickup in wages.
But signs from job vacancies and other leading indicators suggest that the massive stimulus measures are turning around the labour market much faster than expected.
This positions Australia well for a broader recovery in the economy as the year unfolds.
It also suggests that the scheduled ending of JobKeeper should not materially disrupt the recovery, providing support continues for sectors like tourism and education affected by the closure of the international border.”
Belinda Allen, Commonwealth Bank senior economist
The unemployment rate continued to drift lower, falling to 6.6 per cent in December, down from 6.8 per cent in November.
This occurred even with a lift in the participation rate from 66.1 per cent to 66.2 per cent, an all-time high.
The participation rates for both males and females have risen in recent months. A lack of overseas arrivals has reduced the supply of labour.
Health officials in Australia have noted international borders are unlikely to reopen for much of 2021.
This means a lift of 6000 in employment each month is now only required to keep the unemployment rate steady