Australia's Unemployment Hits Five-Year High as RBA Prepares for Rate Hike

Australia's unemployment rate has reached a five-year high of 4.6% in August, surpassing the previous mark set in late 2021.

According to the Australian Bureau of Statistics, this increase was driven by a surge in people actively seeking work, pushing the labor force participation rate up to 67.1%. Despite this rise, the total number of employed Australians actually grew, with an additional 39,500 people finding work during the month.

However, the composition of that employment shift raised concerns among economists, as full-time employment contracted by approximately 6,000 positions lost, while part-time roles absorbed the majority of new entrants to the workforce. This transition toward underemployment and casualized labor suggests that businesses are adjusting to higher operating costs by reducing hours rather than shedding staff entirely.

The Reserve Bank of Australia remains focused on cooling aggregate demand due to stubborn inflation hovering around 3.5%, well above its target band. Governor Michele Bullock has warned a parliamentary committee that inflation risks are materializing, and the board remains vigilant against entrenched price pressures, particularly in the services sector where wage growth continues to outpace productivity gains.

The central bank is widely expected to lift the cash rate by 25 basis points next week, moving it from 4.35% to 4.6%. This anticipated rate hike would mark the fourth increase in 2026, compounding financial pressure on households already grappling with elevated mortgage repayments and a sustained cost-of-living crisis.