Australia witnessed an increase in employment, with a rise of 65.2K jobs in December. This figure exceeded the anticipated growth of 30K.
The unemployment rate remained stable at 4.5% during the same period. The stronger-than-expected job growth highlights resilience in the Australian labour market.
Part Time And Full Time Employment Growth
Part-time employment showed growth, with a contribution of 41K jobs. Full-time employment also experienced an uptick, recording an increase of 24.2K jobs.
Labour force participation edged slightly higher, rising to 66.2%. This indicates more individuals are participating in the job market compared to previous months.
The December 2025 employment data came in more than double what we expected, showing a very robust labor market. This strength kills any immediate hope for a near-term interest rate cut from the Reserve Bank of Australia. We are now factoring in a “higher for longer” scenario from the RBA, with rate cuts pushed further out into 2026.
In the rates market, we are seeing traders sell off bond futures, pushing yields higher to reflect the new reality. Market pricing for a rate cut by the RBA’s May meeting has collapsed from around 50% just last week to under 15% this morning. Look to position for this by using options to bet on the cash rate remaining at or above its current 4.35% through the first half of the year.
Hawkish Shift And Market Reactions
This hawkish shift is a clear tailwind for the Australian dollar, as higher potential yields attract capital. We are already seeing the AUD/USD spot rate climb, and buying call options on the Aussie dollar for the coming weeks looks like a primary strategy. This situation reminds us of the surprise inflation prints in late 2024, which caused a similar rapid repricing and a sustained rally in the currency.
For equities, this news is a mixed bag, creating uncertainty that should increase volatility. A strong economy supports corporate earnings, but the prospect of sustained high interest rates puts pressure on company valuations and borrowing costs. Therefore, we expect ASX 200 index futures to face headwinds, and purchasing put options for downside protection seems prudent for any existing long positions.
