Falling home prices are one of the economic headwinds making long-awaited wage growth unlikely this year despite solid jobs growth and low unemployment, economists say.

Australia’s unemployment rate fell by 0.1 percentage points in seasonally adjusted terms to 5 per cent in December, the latest Australian Bureau of Statistics labour force figures released on Thursday show.

The number of unemployed people dropped by 14,100 to 666,700 during the month, while employment rose by 21,600 people to 12,714,100,

It wasn’t all good news, though, with the full-time employment falling for the second month in a row, down by 3000 in December to 8,678,800, with part-time employment increasing by 24,600 to 4,035,300.

While the labour market finished 2018 “on a strong note”, the figures belie rising economic headwinds that make growth unlikely to continue into 2019, Callam Pickering, APAC economist for jobs site Indeed said.

“Solid employment growth and a lower unemployment rate appear increasingly at odds with other economic indicators, whether that be house prices or inflation or even economic growth more generally,” Mr Pickering said.

Australia’s underutilisation rate – a measure of labour market slack – remains “excessively high” at 13.4 per cent, making the prospect of long-awaited wage growth unlikely.

“High levels of slack continue to weigh on wage growth, despite a decline in the unemployment rate, which in turn is helping to contain inflation,” Mr Pickering said.

“Add falling property prices into the mix and it suddenly becomes clear why the market has become a little skittish.”

Last year was the housing market’s worst year in a decade, adding to the likelihood of the Reserve Bank cutting the official cash rate – already at a historic low of 1.5 per cent – in 2019 as concerns about the impact of the housing downturn on the economy grow.

“The market though has certainly placed its bets, pricing in a greater than 50 per cent chance of a cash rate cut by the end of the year. The RBA certainly has a lot to think about,” Mr Pickering said.

On Thursday, NAB became the first of the big four banks to move out-of-cycle with the RBA in 2019, announcing that it will lift its standard variable rate on home loans for owner-occupiers by 0.12 percentage points to 5.36 per cent – the same as ANZ but lower than CBA and Westpac, at 5.37 and 5.38 per cent respectively, from January 31.

The ongoing housing downturn will be a significant constraint on Australian growth, AMP chief economist Shane Oliver said.

Australian home prices are likely to fall by 5 to 10 per cent this year, Dr Oliver forecast, driven by a 15 per cent fall in Sydney and “more in Melbourne”.

First-home buyers looking to gain a foothold in the housing market will be the big winners from falling home prices as long as the housing downturn doesn’t tank the economy, Dr Oliver said.

“For millennials trying to get in its great news – assuming the housing downturn is not so great that it knocks the economy for six and they lose their jobs,” he said.

Master Builders Australia chief economist Shane Garrett said the housing market faces a tough year ahead with “declining house prices and the fallout from the Royal Commission really starting to bite”.

“The fundamentals of the Australian economy are actually pretty solid at the moment with the robust labour market fuelling a healthy pace of migration-driven population growth,” Mr Garrett said.

“As a result, the underlying demand for new home building is still elevated. But unfortunately this is not being translated into stronger activity on the ground because of the credit crunch and decision paralysis ahead of the election.”