Unemployment rate drops to 3.6%, near 50-year low: ABS

The jobless rate dropped to 3.6 per cent in May after the economy added almost 62,000 full-time jobs and 14,300 part-time positions.

It has been 3.5 per cent several times in the past year, briefly dropping to 3.4 per cent in October last year.

The employment-to-population ratio rebounded to 64.5 per cent in the latest figures, after easing slightly in April, while hours worked fell and the under-employment rate edged up to 6.4 per cent but remains low by historical standards.

The result comes as a separate Australian Bureau of Statistics report shows the nation added almost 497,000 people in the year to the December quarter, including an influx of 387,000 migrants, driving a 1.9 per cent population increase - the fastest rate of growth since September 2009.

The surge of new arrivals is helping ease labour shortages but is also adding to pressure on the nation's already-stretched housing market.

The sustained strength of the jobs market in the face of other evidence that an economic slowdown is under way is likely to buttress consumer spending and fuel Reserve Bank of Australia concerns about the risk of wages and prices spiraling higher.

Markets expect one more rate rise by September and think there is a better than even chance the official cash rate will reach 4.6 per cent by late this year.

The latest jobs numbers from the Australian Bureau of Statistics follow the decision from the United States' central bank, the Federal Reserve, to hold its interest rate target steady at 5 to 5.25 per cent.

The Federal Reserve's decision came after the release of data showing inflation in the US is easing but remains above the central bank's 2 per cent aim. The headline consumer price index grew at annual rate of 4 per cent in May, well down from a high of 9 per cent in June last year.

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In explaining its decision, the Federal Reserve said while it was "highly attentive" to inflation risks, it wanted time to assess the effects of the succession of rate hikes it has implemented since March last year.

"Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring and inflation," the US central bank said. "The extent of these effects remains uncertain."

Judo Bank economic adviser Warren Hogan said the decision was significant for Australian borrowers because it would reduce the pressure on the Reserve Bank of Australia to hike its cash rate.

"The US Fed[eral Reserve] pause is important for the RBA," Mr Hogan said. "[It] gives the RBA board some breathing space at [its] July meeting. They too can wait for more information."

Mr Hogan said there was a "good chance [that] both central banks are done for 2023", though he flagged the possibility the RBA would decide on another rate hike in August depending on the strength of June quarter inflation data and whether conditions in the labour market began to loosen.

But in estimates accompanying its statement, members of the Federal Reserve interest rate setting committee reckoned two more rates hikes would be needed.

ANZ economists Brian Martin and Tom Kenny said it was "way too early to conclude [US] inflation is defeated", particularly given the strength of the labour market.