Australia’s unemployment rate reached 4.5% in September, matching a forecast made by the Reserve Bank of Australia (RBA) in late 2024 but exceeding its updated estimate of 4.3% published in August for the end of this year, ABC News reported.
The development has drawn attention to how the central bank will position its economic outlook when it issues its next Statement on Monetary Policy in November.
The Australian Bureau of Statistics said the number of unemployed people increased by 33,900 in September, while 14,900 people gained employment. The participation rate rose by 0.1 percentage points to 67% as the labour force expanded by 48,800 individuals. In trend terms, the unemployment rate held steady at 4.3%.
Economists say employment demand has moderated in recent months. BetaShares chief economist David Bassanese said “the pace of employment demand has slowed” and that the labour market was “no longer proving able to find jobs for all that want them,” pushing the unemployment rate to 4.5%. He said this level was in line with the RBA’s view of full employment, meaning the central bank could not describe the labour market as tight.
When the RBA released its forecasts in November last year, it projected the unemployment rate would reach 4.5% by the end of 2025. Earlier this year, however, it adjusted its projection to 4.3% by the end of 2025, citing slower-than-expected increases in unemployment at the time. Its latest forecast issued in August repeated the 4.3% estimate for year-end, but labour market conditions have since changed.
Indeed Asia-Pacific economist Callam Pickering said “the RBA will have little choice but to revise up its unemployment rate forecasts” in November because the 4.3% estimate “has proved too optimistic.”
Employment growth has slowed through the year. Pickering said that after increasing employment by 14,900 in September, Australia added 116,000 jobs in the first nine months of 2025 compared with 323,000 over the same period last year. He described this as evidence that “labour market conditions continue to cool,” and said “the Reserve Bank would be foolish not to cut rates when they meet in November.” However, he noted that vacancy indicators such as ANZ-Indeed Job Ads and ABS Job Vacancies remained positive, describing a current disconnect between “mediocre employment gains and ongoing strength in vacancies.”
Minutes from the RBA’s recent board meeting said shifts in the composition of employment had contributed to slower hiring. Non-market sector employment, which is more labour intensive, grew strongly in 2024.
In contrast, 2025 has seen most gains in the market sector, which is less labour intensive. Board members said this pattern was consistent with a slowdown in overall employment growth. They also noted “healthy demand for workers in the near term.”
Westpac economist Ryan Wells said the decline in hiring from the “care economy” was notable this year and suggested industry data due in December would likely confirm a continuation of recent trends. BDO chief economist Anders Magnusson said the labour market was “cooling, not collapsing,” and added he did not expect the RBA to cut interest rates in November, citing a 3.3% fall in job advertisements in September as a sign employers were cautious.
Treasurer Jim Chalmers said unemployment remained low by historical standards, participation was high and 15,000 jobs were created in September despite global uncertainty.
Should the Reserve Bank adjust interest rates in response to these labour market trends? Share your thoughts in the comments.
