Australia’s unemployment rate hits four-year high, putting RBA under pressure

Australia’s labour market showed fresh signs of strain in September, with unemployment unexpectedly climbing to 4.5%—the highest level since late 2021— as more people re-entered the workforce.

Data released by the Australian Bureau of Statistics revealed a modest rise in net employment, up 14,900 from August, but short of market expectations. The increase wasn’t enough to absorb the surge in jobseekers, pushing the jobless rate above the Reserve Bank of Australia’s (RBA) own forecasts.

The news has fuelled market speculation that the RBA could deliver another rate cut as early as November. Investors have lifted the probability of an easing move to over 70%, up sharply from 40% before the data release.

“The RBA is increasingly caught between a rock and a hard place,” said Harry Murphy Cruise, head of economic research at Oxford Economics Australia. “Inflation is proving stubborn, but the labour market is clearly cooling faster than expected.”

The central bank has already trimmed interest rates three times this year to support growth, holding the benchmark at 3.6% in September. While core inflation eased to 2.7% in the June quarter within the RBA’s target range, recent spending trends suggest that price pressures remain uneven.

Economists say the upcoming third-quarter inflation data will be critical. A softer reading could give the central bank room to act, easing financial conditions further to support hiring and demand.

For now, the latest jobs figures highlight the delicate balance facing the RBA as it seeks to curb inflation without stifling Australia’s economic momentum.