RBA Set to Raise Interest Rates Despite Rising Unemployment

Australia's unemployment rate has risen to 4.6% in August, its highest level since November 2021.

This increase is not expected to deter the Reserve Bank from lifting interest rates next week, as Governor Michele Bullock warned that a higher unemployment rate may be necessary to combat inflation.

The labour force participation rate has risen by 0.4 percentage points since December, reaching 67.1% in August, while underemployment - the proportion of employed people who would like to work more hours - has also grown from 5.7% to 6.2% over the same period.

The Reserve Bank is set to consider a 0.25 percentage point rise in the cash rate next week, taking it to 4.6%, despite concerns that this may increase unemployment and cause further economic hardship for some groups, particularly young people who are most exposed to changes in the labour market.