Market Commentary - Labour Market Tightens ahead of Festive Season

As we move towards the Festive season period and the end of the calendar year, new consensus data released this week has confirmed a renewed tightness in the labour-force market – suggesting a potential holding or cut of Royal Bank of Australia (RBA) rates in 2026.

As tentatively predicted in our October Insights newsletter, the RBA held Interest Rates at 3.60%, when meeting on Melbourne Cup Tuesday; providing a potential indicator into their actions at the next meet in a few months’ time.

A rise in employment figures in October was much stronger than economically predicted compared to previous suggestions, resulting in an unemployment rate drop back to 4.3% (from 4.5%).

The other indicators I look at for the labour market both tightened last month. The underemployment rate fell to 5.7% and the underutilization rate fell considerably to 10%.

This would reinforce the RBA’s position of a labour market that is still tight. Accordingly any RBA rate cut may push further into 2026.

Whilst it is too early to determine the trigger for this slightly-better than average economic movement, labour tightening and an increased movement of people into the workforce may signal businesses (likely in the retail, FMCG, and hospitality sectors) are gearing for an active Festive season – especially in the lead-up to the Christmas period – where spending is forecasted to increase around 14%, compared to 2024.

Household spending budgets are tipped to rise, with pre-Christmas sales forecast up 4.2% on 2024, and Black Friday/ Cyber Weekend spending up 4% compared to last year. It is anticipated that over half of Christmas gifts are likely to be purchased in November – accounting for majority of the Christmas spend. Gifted monies and gift-card presents are likely to be redeemed in the post-Christmas rush – signifying for strong retail revenue during this period.

For businesses, each of these factors present a positive opportunity to build cash-flow and drive revenue growth across a historically buoyant consumer spending period. Likewise at an individual level, confidence in maintaining (or even a lowering) of RBA Interest Rate, may support greater utilisation of discretionary income – both in the short & long-term going forward.

As a result, for business owners it is important to consider workforce planning over the next month – especially where operating on skeleton staff. We will be releasing a corresponding Insights article on the best tips for workforce planning across the Christmas season period later this month.

Should you require assistance in this area in the lead-up to the Festive period, please contact the adviser team at Archer Gowland Redshaw on (07) 3002 2699 | info@agredshaw.com.au.