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    In December, Australia’s participation rate was lower than expected at 66.7%

    by VT Markets
    /
    Jan 22, 2026
    In December, Australia’s participation rate was 66.7%, just below the expected 66.8%. This indicates a slight shift from economic predictions. The participation rate shows the percentage of the working-age population engaged in the labor force. The December numbers suggest stable but slightly lower involvement than anticipated.

    December 2025 Labour Market Overview

    The December 2025 labor participation rate was a bit lower than we expected, indicating that the job market may be cooling off. This data point supports the idea that the rate hikes during 2024 and 2025 may finally be making an impact. It suggests a possible change for the Reserve Bank of Australia’s policies. This softer labor data matches the recent quarterly CPI figures from Q4 2025, which revealed that headline inflation dropped to 3.5%, down from 4.1% in the previous quarter. As signs of a slowing economy increase, the market is betting more on an RBA rate cut before the end of the third quarter this year. We now see over a 60% chance of a cut by September. With this outlook, we think it’s wise to prepare for a weaker Australian dollar in the coming weeks. In 2024, we noticed the AUD declined when global growth worries coincided with expectations of a less aggressive RBA. Selling AUD/USD futures or buying put options on the currency could be good strategies to consider.

    Impact on Equities and Bonds

    Lower interest rates should provide a boost to Australian equities. The ASX 200 has usually performed well when markets expect a period of easing, as lower borrowing costs lead to higher corporate profits. We expect to see increased interest in call options on the index, especially in sensitive sectors like technology and real estate investment trusts. The most immediate impact will likely be seen in interest rate markets. This labor report strengthens the argument for buying Australian government bond futures since their prices rise when yields drop on expectations of rate cuts. The three-year bond futures contract appears to be a key option for positioning towards a more dovish RBA through 2026. Create your live VT Markets account and start trading now.

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