Australia’s unemployment rate has risen to 4.7 per cent in September, marking a five-year high according to official figures from the Australian Bureau of Statistics. The last time the rate was higher occurred during the end of Covid lockdowns in October 2021. Throughout 2026, the unemployment rate has steadily climbed from 4.1 per cent in January, signaling a cooling labour market.
Rising Unemployment and Rate Decisions
The increase in unemployment reduces the likelihood of another interest rate hike by the Reserve Bank of Australia next month. Following the latest jobs data, market expectations for an early November rate increase dropped from 30 per cent to 18 per cent. The Reserve Bank of Australia is scheduled to meet on Melbourne Cup Day to decide on interest rates, facing a delicate balancing act between its dual mandate of stable prices and maximum employment.
RBA Governor Michele Bullock previously warned that unemployment may need to rise further to ease inflationary pressures. This prediction is now materializing as the unemployment rate reaches the 4.5–5 per cent range she cited. The International Monetary Fund also projects this rate as a peak for 2027, aligning with current conditions.
Labour Market Signs and Employment Shifts
The September figures show employment fell by 39,300, with fewer people seeking work offsetting some of the decline. The 8,900 increase in unemployment reflects classic signs of a weakening labour market. Full-time employment rose by 34,300 to 10.2 million, while part-time jobs declined by 73,600, pushing underemployment to 6.3 per cent.
The labour market’s weakness is now more pronounced. Earlier in 2026, unemployment rises were partly attributed to increased job-seeking activity. However, September’s increase was driven solely by job losses. Revised August data also confirms the market was weaker than the Reserve Bank of Australia anticipated when it raised rates in September.
The Reserve Bank of Australia must decide whether recent rate hikes, raising the cash rate from 3.6 per cent to 4.6 per cent, have sufficiently cooled inflation without pushing unemployment too high. However, another rate hike risks pushing unemployment toward 5 per cent, which would add 45,700 more unemployed individuals compared to these September figures. Managing both inflation and employment presents a significant challenge on this tightrope walk. While inflation remains above the 2–3 per cent target, the labour market’s deterioration adds urgency to the November decision.
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