Australia's unemployment rate is tipped to rise as consumer caution weighs on business confidence and hiring intentions.
The jobless rate is expected to increase from 5.8 per cent to 5.9 per cent when the Australian Bureau of Statistics releases labour force figures for June on Thursday.
The economy is expected to have added 12,000 jobs while the participation rate - those that have a job, are looking for work or are ready to start work - is expected to remain steady at 64.6 per cent, according to an AAP survey of 13 economists.
The number of new jobs added won't be enough to stop unemployment from rising, AMP chief economist Shane Oliver said.
Weaker consumer confidence following the federal budget, which outlined a raft of spending cuts and tax hikes, was weighing on business hiring intentions, he said.
"The May budget was a blow to confidence and spending, consumer confidence particularly took a bit of a hit, so that's acting as a constraint," Dr Oliver said.
"Businesses which were thinking of hiring might have put some of those plans on hold for the time being.
"That's all occurring at a time when the economy is adjusting from mining investment-driven growth to more broad-based growth.
"So you've got this environment of uncertainty about what's going to drive growth in the economy going forward at a time when the budget is having an adverse impact on confidence and, consequently, you're seeing a labour market which is not generating enough jobs to decisively push the unemployment rate down."
Dr Oliver said the budget's negative impact on consumers should fade, particularly if some of the measures announced are softened on their way through the Senate.
JP Morgan chief economist Stephen Walters said weak consumer spending and the high Australian dollar were making businesses reluctant to hire.
"Business confidence has been sliding for a little while and we think we'll get more of that," Mr Walters said.
"Firms are just a little reluctant to make big decisions on things like taking on new staff and actually putting in new plant equipment or expanding.
"You need consumer confidence to stabilise and perhaps rise and the Aussie dollar coming down would certainly help."
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