Key Highlights

  • The RBA expects Unemployment to reach 5.1 per cent by the end of 2028.
  • That is about a quarter of a percentage point above its August view.
  • Slower growth, weaker housing and a higher assumed cash rate path weigh on the outlook.
  • The forecast difference at that point is small but in the same direction as the wider revision.

"Employment is expected to continue to grow, but the unemployment rate is projected to rise by more than expected in the August forecasts."

That single sentence from the Monetary Policy Board's statement on 3 November 2026 captures the shift in the Reserve Bank of Australia's labour market outlook. The accompanying November Statement on Monetary Policy puts a number on it: unemployment is forecast to rise to 5.1 per cent by the end of 2028, about a quarter of a percentage point higher than in August.

The revision, horizon by horizon

The RBA's unemployment forecasts are quarterly averages. Comparing the November forecasts with the August forecasts (in brackets) shows the gap opening early and persisting:

  • June 2026: 4.4 per cent (4.4), no change
  • December 2026: 4.7 per cent (4.5), up 0.2 points
  • June 2027: 4.8 per cent (4.6), up 0.2 points
  • December 2027: 4.9 per cent (4.7), up 0.2 points
  • June 2028: 5.0 per cent (4.8), up 0.2 points
  • December 2028: 5.1 per cent (4.8), up 0.3 points

Two features stand out. First, the August forecasts had unemployment levelling out at 4.8 per cent through 2028, whereas the November forecasts show it still rising at the end of the forecast horizon. Second, most of the upgrade is already locked in by December 2026. That reflects the starting point: the unemployment rate averaged 4.6 per cent in the September quarter, against an August forecast of 4.4 per cent, and was 4.7 per cent in September itself.

The RBA's own summary describes the end-2028 figure as about a quarter of a percentage point higher than in August; the rounded forecasts differ by three-tenths at that point, consistent with that approximate description.

Part of the revision is simply a matter of beginning from a weaker base. The economic conditions chapter says unemployment rose by more than anticipated, partly because more people were joining or staying in the labour force; the participation rate averaged 66.9 per cent in the September quarter, above the RBA's expectations. At the same time, "employment growth held up in the September quarter as expected."

When a forecast begins from a higher unemployment rate, and the drivers of further increases remain in place, the whole path tends to shift up.

Slower growth further out, and what is dragging on it

The more substantive reason for the revision lies in the growth outlook beyond 2026. The RBA's GDP forecasts (year-ended, August in brackets) have been lifted in the near term but cut further out:

  • December 2026: 1.6 per cent (1.4)
  • June 2027: 1.6 per cent (1.5)
  • December 2027: 1.3 per cent (1.6)
  • June 2028: 1.3 per cent (1.6)
  • December 2028: 1.5 per cent (1.8)

The Statement says activity this year has been somewhat stronger than expected, helped by data centre investment. From mid-2027, however, growth is weaker, and the Bank expects it to stay below trend. Sustained below-trend growth generally means firms add fewer jobs than the labour force grows, which pushes unemployment higher over time.

The Statement on Monetary Policy identifies several forces behind the softer outlook.

  • Housing. Established housing prices are falling faster than expected, and are about 5 per cent below their March peak. The Board's statement said "falls in housing prices and turnover are expected to weigh on growth in dwelling investment". Dwelling Investment is forecast to fall 2.8 per cent over the year to December 2027 and 1.8 per cent over the year to December 2028.
  • Interest rates. The forecasts assume a higher cash rate path than in August, based on market pricing as at 28 October 2026. That pricing implies the cash rate rises about 35 basis points by mid-2027, up to 50 basis points above the August path, before stabilising at 4.8 per cent in 2028. The Statement names weaker housing and the higher cash rate path as a key reason for lower GDP growth from mid-2027.
  • Households. The consumption outlook has been revised lower, with household consumption growth forecast at 1.4 per cent in December 2026 and 1.6 per cent by December 2028. Real household Disposable Income growth is forecast to slow to 1.0 per cent by December 2026.

The cash rate path is market pricing, not an RBA promise. On 3 November the Board, by a six-to-three majority, raised the cash rate target by 25 basis points to 4.85 per cent.

Why tighten when jobs are softening?

A higher unemployment forecast alongside a rate rise can look contradictory. The Board's answer is inflation. The Statement says the Inflation outlook has been "revised materially higher", and the RBA forecasts headline CPI inflation peaking at 4.5 per cent in the December quarter 2026, with trimmed-mean (underlying) inflation at 3.6 per cent at that point. On the latest data, headline CPI was 3.9 per cent and trimmed mean 3.7 per cent over the year to the September quarter.

The majority judged that "there is an increasing risk that higher inflation expectations will become embedded." In effect, the Board has accepted a somewhat weaker labour market outlook as part of bringing inflation back to the 2–3 per cent target. The statement gives no reasons for the three members who preferred to hold.

Risks around the forecast

The RBA stresses that the jobs outlook is uncertain in both directions. Its downside activity scenario — in which households and businesses respond more strongly to oil prices, interest rates and falling house prices — would leave unemployment a further 0.3 percentage points higher by end-2028. On the other side, the Bank notes that capacity pressures may be understated. Labour Supply could also prove stronger, which would itself push unemployment higher.

The bottom line

The RBA's revised jobs forecast is about a quarter of a percentage point grimmer than in August, ending at 5.1 per cent in December 2028 rather than 4.8 per cent. The upgrade reflects a weaker starting point, slower growth from mid-2027, falling housing prices and a higher assumed cash rate path. These are RBA forecasts built on market pricing as at 28 October, and they will be revisited as new data arrive ahead of the next Board decision on 8 December 2026.