Unemployment climbs to highest level since 2021
Australia’s jobless rate rose to 4.5% in September, marking its highest level since 2021 and intensifying debate over whether the Reserve Bank of Australia (RBA) will cut interest rates when it meets on Nov. 4.
The latest Australian Bureau of Statistics (ABS) data showed unemployment climbing from 4.2% in August, surpassing economists’ expectations of 4.3%. Employment increased by 14,900, while the number of unemployed rose by 34,000 to 684,000. The participation rate edged up to 67%, below the record 67.2% at the start of the year.
Sean Crick, ABS head of labour statistics, said the increase in both employment and unemployment reflected more people entering the labour market. Full-time roles grew by 9,000, driven by a 23,000 rise among men, while full-time employment among women declined by 15,000. Hours worked rose 0.5% month-on-month.
The data have prompted economists to reassess their expectations for the RBA’s next move. The central bank had anticipated some softening in the labour market, but the higher-than-expected rate complicates its policy outlook. ANZ economists said the figures signal continued easing in labour conditions and make it harder for the RBA to maintain that the market has been steady.
RBA is expected to keep the cash rate at 3.6% in November, though the decision is now less certain. A stronger September quarter consumer price index (CPI) reading, due on Oct. 29, could outweigh the labour data and reinforce inflation concerns.
IFM Investors chief economist Alex Joiner said the unemployment rise “has taken the RBA a little bit by surprise,” suggesting the board may need to reconsider its assessment of labour tightness.
NAB senior markets economist Taylor Nugent said the figures increased the probability of a November rate cut, noting that “today’s outcome clearly makes a November cut a higher probability than would have been the case had today’s number been near our and consensus expectations.”
The Commonwealth Bank continues to forecast one final 25-basis-point cut in February 2026, although it acknowledges a “higher chance” of a move in November. Its head of Australian economics, Belinda Allen, said the data present “a classic case of conflicting signals,” with inflation remaining strong while employment growth slows.
Meanwhile, underlying pressures on businesses continue, with hiring averaging just 12,900 per month in 2025 compared with 32,600 in 2024. The unemployment rate in Victoria has risen to 4.7%, reflecting weaker state growth.
