RBA forecasts unemployment to rise to 4.8% by 2028

The Reserve Bank of Australia (RBA) forecasts that the unemployment rate will climb to 4.8% by the end of 2028, marking a gradual increase from its current level. This projection is part of the RBA's strategy to bring inflation back to its target range of 2-3%. Governor Michele Bullock noted that the unemployment rate has risen from 3.5% over the past couple of years to 4.6%, yet the labour market remains relatively tight.

The RBA expects this modest rise in unemployment to coincide with a cooling of economic demand, which is necessary to reduce inflationary pressures. The August 2026 Statement on Monetary Policy projected GDP growth of 1.4% over the year to December 2026, aligning with the RBA's goal of slower demand growth. Trimmed mean inflation is anticipated to remain above 3% until mid-2027 before easing to 2.5% by early 2028.

Deputy Governor Andrew Hauser emphasized that the RBA's actions are aimed at protecting the job gains made during the pandemic rather than sacrificing employment. He noted that inflation is expected to return to the target range by the end of 2027. Governor Bullock also clarified that the RBA does not foresee a recession as its central scenario.

However, the August forecasts may soon be outdated. The RBA has since raised the cash rate by 25 basis points to 4.60%, and global energy prices have surged higher than anticipated. These changes, along with stronger-than-expected economic data, could alter the unemployment outlook. The updated forecasts are set to be released on 3 November, alongside the next monetary policy decision.