The number of employed people declined by 15,800 in July. (AAP: Dan Peled)
Australia's unemployment rate keeps slowly drifting higher.
Data show the national unemployment rate rose to 4.5 per cent in July, up from 4.4 per cent in June.
The unemployment rate has not been this high in the post-COVID era, in trend terms.
Economists say the rise in unemployment is consistent with the Reserve Bank's expectation that economic conditions will gradually slow over the coming year, and it makes the chance of another interest rate hike less likely.
The number of employed people declined by 15,800 in July, driven by a large fall in part-time employment, and unemployment increased by 4,200 people.
Along with slowing house prices, and the recent lower-than-expected June quarter inflation result, it's another reason to expect the RBA to remain benched at the upcoming late-September policy meeting, David Bassanese, chief economist at BetaShares, said.
Unemployment expected to keep rising
In the Reserve Bank's most recent forecasts, published last week, the unemployment rate was expected to reach 4.5 per cent by the end of this year.
It was then forecast to keep rising over next year, and to hit 4.8 per cent by mid-2028.
But it also made it clear that, at this point in the cycle, the RBA's economists thought the labour market was probably still a little tight and the economy would need a higher rate of unemployment or under-employment to squash inflation.
We need a little bit less tightness in the labour market in order to bring inflation down, RBA governor Michele Bullock said last week.
The graphic below shows how, according to the RBA's estimates, a majority of the labour market indicators in Australia are still close to, or tighter than, their estimated trend levels.
(Source: Reserve Bank of Australia, Statement on Monetary Policy August 2026, page 34.)
Callam Pickering, Asia Pacific economist at Indeed, said the July employment data was a thoroughly mediocre jobs report.
The unemployment rate continues to drift upwards and should rise further over the remainder of the year, he said.
Recent labour market data, including both wage growth and the unemployment rate, have been weaker than expected.
That's bad for workers and households, but also a sign that tighter monetary policy is having the desired impact.
With recent data flows quite positive, at least from the RBA's perspective, we believe that another rate hike this year is now unlikely.
However, it'd be a mistake to believe the hiking cycle is over.
Labour market closer to balance
Harry Ottley, CBA economist, says with the unemployment rate drifting higher, there should be less upward pressure on wages and inflation going forward, all else being equal.
He says the under-employment rate has risen from 5.9 per cent in January to 6.4 per cent in July, and the under-utilisation rate has risen from 10.2 per cent to 10.8 per cent.
To be sure, the labour market is on a solid footing, is not weakening precipitately, and [it] likely remains on the tight side. And it is important not to overinterpret monthly moves, he said.
But in our view there is a noticeable trend of increasing slack in the labour market, bringing it closer to balance.
Mr Ottley estimated that the so-called NAIRU (the unemployment rate that officials suspect may be consistent with inflation at target) was probably about 4.6 per cent.
In broad terms, the labour market does appear to be closer to balance than it has for some time, he said.
