The latest payroll jobs figures continue to point to a tightening labour market, although they are growing at a slower pace compared to the first half of 2021.
The Australian Bureau of Statistics said payroll jobs rose 0.2 per cent in the month to May 14, recovering from a fall linked to Easter and the school holidays in April.
"The growth in payroll jobs during the first half of 2022 continues to be slower than the first half of 2021, when the labour market was recovering from the shocks that occurred in the first year of the pandemic," ABS head of labour statistics Bjorn Jarvis said.
"The 2022 estimates continue to reflect tightening labour market conditions, together with ongoing disruption from Omicron-related employee absences."
This positive comes as the Organisation for Economic Cooperation and Development warned that the Reserve Bank of Australia may need to hike interest rates more aggressively to contain inflation.
Australia's central bank has so far raised the cash rate by a total 75 basis points at its past two monthly board meetings, taking it to 0.85 per cent.
In its latest economic outlook released on Wednesday - but finalised before this week's RBA board meeting - the OECD said it expected the cash rate to reach 2.5 per cent by the end of 2023.
But it warned strong global inflationary pressures and a tight labour market pose further upside risk to inflation in Australia.
"(This) could lead the Reserve Bank of Australia to tighten monetary policy more aggressively, with potential negative implications for consumption, investment and economic growth more generally," the OECD said.
Treasurer Jim Chalmers said the report is an important contribution to the understanding of the substantial challenges facing the economy.
"High and rising inflation, rising interest rates and falling real wages all have consequences for our economy at a time of serious international uncertainty as well," Dr Chalmers told AAP.
RBA governor Philip Lowe has warned inflation is likely to be higher than the central bank had expected just a month ago, and the size and timing of further rate increases would be driven by incoming economic data.
Treasury Secretary Steven Kennedy - who is also a member of the RBA board - told a conference that inflation is likely to rise "potentially well above six per cent and remain there for the rest of this year".
The OECD expects inflation will still be 4.1 per cent in 2023, still well above the two to three per cent target.
It expects the Australian economy to grow by 4.2 per cent in 2022, a fraction faster than the 4.1 per cent predicted in December. It now sees growth slowing to 2.5 per cent in 2023 rather than three per cent.
But CBA economists are less confident about the outlook, downgrading their economic growth forecasts in anticipation of a downturn in household consumption in the face of multiple rate rises in the months ahead.
CBA head of Australian economics Gareth Aird expects a further 50 basis point increase in July, followed by 25 basis point hikes in August, September and November, taking the cash rate to 2.1 per cent.
"Our expectation is that Australia's current economic boom has a little further to run and the labour market will remain tight, so we don't foresee a bust," Mr Aird said.
But he does now expect annual growth to slow to 2.3 per cent by the December quarter of this year, rather than running at 4.3 per cent, and 2.2 per cent by end 2023, instead of 2.6 per cent.
