Key Highlights

  • The RBA forecasts Unemployment at 4.7% in December 2026.
  • The path edges up to 5.1% by December 2028.
  • The September quarter increase mainly reflected higher labour supply, not mass Job losses.
  • The forecast is conditioned on the market-based cash rate path.

The Reserve Bank's November forecasts show the unemployment rate edging up at every six-monthly checkpoint between now and the end of 2028, and each point sits higher than the bank expected in August.

Plot the Reserve Bank of Australia's latest unemployment forecasts on a chart and the result is a line that never turns down. From 4.4 per cent in June 2026 it climbs steadily to 5.1 per cent by December 2028. The rises are small at each step, but they are persistent, and they have been revised up across the board since the previous Statement on Monetary Policy.

The starting point: June and September 2026

The forecast table in the November 2026 Statement records the unemployment rate as a quarterly average of 4.4 per cent in June 2026. By the September quarter it had moved higher. The Overview states: "The unemployment rate rose by more than expected to average 4.6 per cent in the September quarter."

The RBA's Economic Conditions chapter explains the composition of that increase. It says "employment growth held up in the September quarter as expected", and that the rise in unemployment largely reflected higher-than-expected labour supply. In other words, the jump did not mainly come from job losses; more people were looking for work than the bank anticipated.

Checkpoint by checkpoint

The RBA's forecasts, finalised on 28 October 2026, set out the quarterly average unemployment rate at six-monthly intervals. Alongside each is the figure published in the August Statement:

  • December 2026: 4.7 per cent (August: 4.5 per cent). A small step up from the September quarter.
  • June 2027: 4.8 per cent (August: 4.6 per cent). Another small increase, again 0.2 points above the previous projection.
  • December 2027: 4.9 per cent (August: 4.7 per cent). The gap to the August forecast holds at 0.2 points.
  • June 2028: 5.0 per cent (August: 4.8 per cent). The forecast reaches the 5 per cent mark.
  • December 2028: 5.1 per cent (August: 4.8 per cent). The final point is 0.3 points above the August view, which had the rate flattening out at 4.8 per cent.

The Overview captures the end point in one sentence: "The unemployment rate is forecast to rise to a bit over 5 per cent by end-2028."

The shape of the revision is worth noting. In August, the RBA had the unemployment rate levelling off during 2028. In November, it keeps rising right to the end of the forecast horizon.

What is driving the line higher

Two broad forces sit behind the upward drift: slower economic growth and tighter financial conditions.

On growth, the RBA's forecasts for year-ended GDP growth show a clear easing. Growth is projected at 2.1 per cent over the year to June 2026, 1.6 per cent to December 2026 and June 2027, then 1.3 per cent to December 2027 and June 2028, before recovering slightly to 1.5 per cent by December 2028.

The Economic Conditions chapter notes that GDP growth "has slowed this year to a little below its potential growth rate". When an economy grows more slowly than its potential, spare capacity tends to build up, and one way that shows up is in a gradually rising unemployment rate.

On financial conditions, the RBA judges them to be "restrictive, but with various cross-currents". The Monetary Policy Board lifted the cash rate target by 25 basis points to 4.85 per cent on 3 November, stating that "the Board judged that a further tightening in financial conditions is warranted". The forecasts are built on a cash rate assumption drawn from market pricing as at 28 October, with the cash rate path that "increases by 35 basis points by mid-2027, before declining a little to stabilise at 4.8 per cent in 2028."

Why the RBA accepts a higher jobless rate

A Central Bank forecasting rising unemployment while tightening policy might seem counterintuitive. The explanation lies in the Inflation outlook.

The November forecasts have headline CPI inflation rising to 4.5 per cent over the year to December 2026, up sharply from the 3.6 per cent forecast in August. The Outlook chapter says: "Headline inflation is expected to peak at 4.5 per cent in the December 2026 quarter". The trimmed mean, the RBA's preferred underlying measure, is forecast at 3.6 per cent for December 2026 and 3.5 per cent for June 2027. For reference, headline inflation was 3.9 per cent and trimmed mean inflation 3.7 per cent over the year to the September quarter, while the separate monthly CPI indicator showed headline inflation of 4.3 per cent in the September month.

Governor Michele Bullock framed the trade-off at her media conference: "Some pain now will prevent even worse pain down the track." She also said: "It is critical that we stop expectations for high inflation from becoming embedded in price-setting decisions".

The rising unemployment path, then, is part of the adjustment the RBA expects as policy restrains demand. Inflation is forecast to fall to 2.7 per cent in headline terms and 2.9 per cent in trimmed mean terms by December 2027, and to 2.4 per cent on both measures by December 2028.

Forecasts are not promises. They rest on assumptions, including a market-based cash rate path and an oil price assumption the Outlook says is "35 per cent higher than assumed in August" for the December quarter. The decision itself was split, too: six Board members voted to increase the cash rate, while three preferred to leave it at 4.60 per cent.

The bottom line

The RBA's November forecasts trace an unemployment rate that rises at every checkpoint, from 4.6 per cent in the September quarter to 4.7 per cent by December 2026, 4.9 per cent by December 2027 and 5.1 per cent by December 2028. Each figure is above the August projection, reflecting a higher starting point, slower growth and restrictive financial conditions. The bank presents this gradual softening as part of bringing inflation back to target. The minutes of the November Board meeting, due on 17 November, and the 8 December decision are the next points at which the RBA's thinking will be visible.