The unemployment rate has climbed despite more people in work. Picture: Attila Czar
The national unemployment rate has risen to 4.6 per cent in a sign that recent interest rate hikes may be working to slow the economy, adding to the case against a further lift in the official cash rate next Tuesday.
In an outcome the complicates the task for the Reserve Bank of Australia board as it meets early next week to consider its monetary policy settings, Australian Bureau of Statistics data show the jobless rate increased by 0.1 of a percentage point last month.
The rise in unemployment came despite an increase in the number of Australians with a job. An extra 45,800 people entered part-time work, more than offsetting the loss of 6300 full-time positions, with monthly hours worked increasing 0.7 per cent.
The labour data show that although the nation is continuing to generate new jobs, the number of people entering the workforce is growing more quickly, pushing the participation rate up to 67.1 per cent, just 0.1 of a percentage point shy of the all-time high.
If this is sustained it would suggest some slack is emerging in the labour market. This may be welcomed by central bank governor Michele Bullock, who in recent days has mused that the economic slowdown needed to drag inflation lower may result in a jobless rate of between 4.5 and 5 per cent.
Consistent with the national trend, WA’s unemployment rate also edged higher to 4.5 per cent despite the addition of 19,100 full-time jobs.
The state’s labour market remains tight – the number of those with a job as a proportion of the population reached 65.4 per cent last month.
But the pool of potential workers is also increasing, underpinned by strong interstate and overseas migration. Reflecting this, the labour force participation rate – which includes both those with a job and those seeking one - rose in August to 68.4 per cent.
Last Updated: 24 September 2026
BDO chief economist Anders Magnusson said that although the latest employment update weakened the case for a September rate hike, he nonetheless expected the RBA to lift the official cash rate to 4.6 per cent next week.
The fact that 39,500 jobs were added in August suggested that the economy was still running hot, Mr Magnusson said.
“Domestic capacity pressures remain, weak productivity growth continues to constrain supply, and energy prices present a material upside risk to inflation,” he said, warning that further increases in the jobless rate are likely.
“With the economy operating close to capacity, some increase in unemployment is required to reduce competition for workers, ease domestic cost pressures and bring inflation sustainably back towards target,” he said.
But KPMG chief economist Brendan Rynne said the labour market may be even weaker than the August figures show.
Dr Rynne said all the growth in employment last month had been in part-time work, which was affected by the influx of around 30,000 part-time workers hired by the ABS itself to help conduct the 2026 census.
The KPMG economist said the high participation rate indicated the financial strain being felt by families.
“[It] suggests families are scrambling to find more income to help cover their rising day-to-day expenses and future increases in mortgage payments,” he said.
“Today’s unemployment rate reaffirms the idea that the Australian economy is weak and slowing.”
Dr Rynne said the increase in the jobless rate should give Ms Bullock some comfort that the central bank was making progress in its effort bring inflation down.
