Australian unemployment hits 4-year high, rate cut back in play

Australia’s jobless rate surged to a four-year high in September, intensifying pressure on the Reserve Bank of Australia (RBA) to consider cutting interest rates as economic momentum cools.

Official data released on Thursday showed the unemployment rate rose to 4.5%, the highest level since November 2021. The increase came even as employment grew by around 14,900 positions, short of market expectations of about 20,000 new jobs. Analysts said the rise in unemployment was largely driven by a higher participation rate, as more Australians entered the labour force.

The data sent the Australian dollar lower and triggered a rally in bond markets, as investors priced in stronger odds of an RBA rate cut before year-end. Market pricing now suggests a 70% probability of a rate cut at the RBA’s November meeting.

Economists noted that while the labour market remains relatively strong, the steady uptick in unemployment over recent months indicates that earlier rate hikes are increasingly weighing on businesses and households.

“The job market is clearly loosening, and the RBA will be paying close attention to whether this trend continues,” said one Sydney-based economist. “If inflation data later this month shows further moderation, a rate cut becomes very likely.”

However, the central bank faces a delicate balancing act. Inflation remains above the RBA’s 2–3% target range, and policymakers have repeatedly warned against premature easing.

Treasurer Jim Chalmers described the figures as a “reminder of the challenges still facing the economy” but said the government remained focused on keeping Australians in work while supporting the RBA’s inflation fight.

The next major test for the central bank will come with the release of third-quarter inflation data later this month, which could determine whether rate relief arrives before the end of the year.