Mr Fabo asked whether “the jobless rate has begun a downward trend towards ‘full employment’ of around 5 per cent. We don’t think it has.”

Above-average growth was needed for sustained unemployment falls, said Mr Fabo, and this didn’t look like happening.

GDP growth in 2015 had slowed and would remain “noticeably below 3 per cent for some time”, leading to more moderate jobs growth, he said.

“Below-average output growth suggests that a higher jobless rate is still more likely than a persistently lower one.”

There had been stronger jobs growth in 2015, but this was “catch-up”, said Mr Fabo, reflecting “better economic activity last year when growth rose to be close to its 3 per cent average rate.”

Mr Fabo said unemployment would have been even higher if immigration had remained at previous rates.

“Slower population growth via lower net immigration may be taking some pressure off the supply of labour and unemployment,” he said.

“However, it is difficult to put a positive spin on this because slowing immigration is largely indicative of weaker demand in the economy, with less people being drawn to Australia by employment opportunities, particularly in the resources intensive states.”

But the Reserve Bank could be tempted to cut rates if unemployment remained around 6 per cent, said Mr Fabo.

“A lengthy period of circa 6 per cent unemployment would be uncomfortable,” said Mr Fabo. “Ample spare capacity would remain in the labour market which would likely prolong the period of weak wages growth already happening. This would further mute household spending at a time when stronger demand growth is needed to encourage a pick-up in non-mining business investment.

“This is a key reason why we think the risk is for further monetary policy easing at some point but not in the next few months.”