Australian Unemployment Rises to 4.7% as 39,300 Jobs Are Lost, Clouding the Case for Another RBA Rate Hike

Australia's labour market weakened in September, handing the Reserve Bank of Australia a harder decision about whether to raise interest rates again. The Australian Bureau of Statistics reported on Thursday, October 15, that the unemployment rate rose to 4.7%, which is the highest in about five years, according to a report by Australian Associated Press carried by Neos Kosmos. August's rate was revised up from 4.6% to 4.7%, so the headline is described by some outlets as steady and by others as a rise, depending on whether they compare with the original or the revised figure. Either way, the rate is up 0.6 percentage points since the start of 2026.

The numbers show a market that lost momentum. Babypips reported that employment fell by 39,300, against a forecast gain of about 19,600 and an August gain of 29,300. The number of unemployed people rose by 8,900. The participation rate, which measures the share of working-age people who are in work or looking for it, fell 0.2 percentage points to 66.8%, below the forecast of 67.0%. Full-time employment rose by 34,400 to about 10.23 million, while part-time employment fell by 73,700 to about 4.55 million. Youth unemployment was 11.1%, up 0.3 percentage points. The trend series, which smooths out month-to-month noise, showed employment up 15,700 and the unemployment rate unchanged at 4.6%. Over the year, employment is up 168,300, or 1.2%. Babypips also noted that hours worked rose 0.1% even as the number of employed people fell 0.3%. Sean Crick, the ABS head of labour statistics, said a higher proportion of people who had previously been outside the labour force moved into unemployment, and that a larger share of people remained unemployed in September than in recent years.

Why is this closely watched? The Reserve Bank raised its cash rate target by 25 basis points to 4.60% on September 30, according to CommBank's newsroom. The decision was unanimous. It was the fourth rise of 2026, taking the total increase to 100 basis points. The board said inflation remains elevated and that some of the upside risks to inflation are materialising. It cited pressure on domestic capacity, the widening conflict in the Middle East, higher global energy prices, and artificial-intelligence-related demand pushing up the prices of technology goods. It also said firms are raising or considering raising prices, and that short-term inflation expectations are elevated. At the same time, it noted that growth has slowed, consumer spending is easing, house prices have fallen in most capital cities and new housing loans have declined noticeably. The RBA left the door open to more increases, saying it will do what is necessary, including raising the cash rate further if needed. CommBank said the effects of earlier increases can take up to 18 months to work through.

Now the jobs data complicate that picture. Babypips said a fifth hike is now harder to justify. A MacroBusiness headline in September, after the August data, said a jump in unemployment would not stop the RBA from hiking, so views on how much the labour market matters differ. The Neos Kosmos report notes that the 4.7% rate is already above the RBA's own forecast of 4.5% for the December quarter, and that RBA staff believe weak productivity has pushed up the unemployment rate needed to keep inflation stable. In other words, the central bank itself has said that Australians may need to accept higher unemployment to bring inflation back to target.

There are two key dates ahead. The September-quarter consumer price index is due on October 28, according to Babypips, and it is the most important input for the Reserve Bank's next decision. The RBA's next meeting is in early November, listed by Babypips as November 2 and 3. CommBank said it still sees risks tilted towards further rate increases, but expects cuts could begin in August or November 2027. That is one bank's forecast and not an official projection.

What does this mean for households? For borrowers on variable-rate mortgages, repayments have already risen after four increases, and the jobs data gives no guarantee that the rises are over. If the RBA pauses, repayments will stay high but stop climbing. For people who are unemployed or worried about their jobs, the priority is to contact lenders early if repayments become hard to manage, because options such as temporary hardship arrangements are easier to arrange before arrears build. For savers, higher cash rates have lifted deposit rates, though banks do not always pass them on in full.

What does it mean for insurers and lenders? Rising unemployment can lead to more mortgage arrears and more claims in some lines, such as income protection and consumer credit insurance. The Reserve Bank's October Financial Stability Review, covered separately in this series, found that most borrowers should cope with harder conditions, but noted pockets of stress, and weaker employment is one factor that could test that judgement. The jobs data alone does not show a rise in arrears, and that evidence would come later.

Monthly labour force data are volatile and are often revised. A single month's fall in employment of 39,300 should not be read as a trend, and the ABS trend estimates show only a small rise in employment. Economists will wait for the October release and for the inflation data before concluding that the labour market has turned. The safest reading is that the labour market is cooling, that inflation remains the central bank's main concern, and that the next two data releases will decide whether the cash rate stays at 4.60%.