The unemployment rate Governor Michele Bullock cited on 29 September matches the figure the RBA's August forecasts had pencilled in for June 2027, raising fair questions about what the early arrival does — and does not — tell us.

Forecast tables are easy to skim past. But one number in the Reserve Bank's August Statement on Monetary Policy (SMP) has taken on fresh relevance. The RBA projected that the unemployment rate would reach 4.6 per cent by June 2027. At her media conference on 29 September, Governor Michele Bullock said "the unemployment rate has risen from 3.5 per cent over the past couple of years to 4.6 per cent".

In other words, a level the central bank expected to see in about nine months' time had already arrived. That is a striking comparison, but it needs to be read carefully — both for what the forecasts were designed to do and for how the Monetary Policy Board itself has described the labour market.

The forecast path, line by line

The August SMP set out a gradual rise in unemployment over the following two and a half years. The year-ended forecasts looked like this:

  • June 2026: 4.4 per cent
  • December 2026: 4.5 per cent
  • June 2027: 4.6 per cent
  • December 2027: 4.7 per cent
  • June 2028 and December 2028: 4.8 per cent

When the SMP was published, unemployment had risen to 4.4 per cent, in line with the starting point of that table. By the time Bullock appeared before the House of Representatives Standing Committee on Economics on 18 September, the then-latest figure was 4.5 per cent — the level pencilled in for December 2026. By 29 September, she was quoting 4.6 per cent.

One important caveat applies to every number above. The August forecasts were prepared with a cash rate assumption of around 4.3 to 4.5 per cent. They pre-date the Board's 29 September decision to raise the cash rate target by 25 basis points to 4.60 per cent, so they are a snapshot of the RBA's thinking at the time rather than an updated outlook.

Eased broadly as expected: two ways to read it

It would be tempting to conclude that the labour market is weakening faster than the RBA thought. The Board's own words suggest a more measured view. Its 29 September statement described the labour market as having eased broadly as expected.

There are a few reasons the two observations can sit side by side. Forecasts for any single date are uncertain, and the RBA itself has stressed that uncertainty is high. The direction of travel — a gradual drift higher from low levels — is what the RBA had expected, even if the level has arrived sooner than the table implied. And Bullock has repeatedly framed the current level as low. On 18 September she told MPs: "The unemployment rate – at 4.5 per cent – is low by historical standards." She also said "the share of the population with a job is close to a record high."

At the media conference, she added that "there's been over a million jobs created" and that "it doesn't mean job losses." The August forecasts themselves had employment growing by 1.1 per cent over the year to June 2026 and 1.4 per cent over the year to December 2026, alongside a rising unemployment rate.

Why an earlier arrival didn't stop a hike

If unemployment is running ahead of the forecast path, why did the Board still raise rates? The answer lies on the inflation side of the ledger, where outcomes have also run ahead of expectations — in the wrong direction.

The Board's statement said recent inflation outcomes were stronger than expected and that some upside risks flagged in August were materialising, including higher global energy prices linked to a broader Middle East conflict, AI-related demand pushing up technology goods prices, capacity pressures, and firms raising or planning to raise prices. It also noted that output growth, while slower, was stronger than expected in the June quarter.

The latest figures show the gap the Board is trying to close. Headline inflation, measured by the monthly CPI indicator, was 4.0 per cent over the year to August. The quarterly headline measure was 3.9 per cent over the year to the June quarter. Underlying inflation, measured by the trimmed mean, was 3.6 per cent in the June quarter, and Bullock described it as "about 3.5 per cent". The target is 2–3 per cent, with a midpoint of 2.5 per cent.

Bullock was blunt: "Inflation is too high and has been driven by domestic capacity pressures." The August minutes recorded that spare capacity was expected to emerge from late 2027. A labour market loosening a little sooner than pencilled in does not, by itself, mean those capacity pressures have gone.

Not stagflation, says the Governor

The combination of rising unemployment and above-target inflation has prompted some to reach for the word "stagflation". Bullock rejected it: "I wouldn't call inflation of 3.5 per cent and an unemployment rate of 4.6 per cent stagflation." Asked about recession, she said: "That is not our central base case at this moment."

She also stressed that much of the year's tightening is still working through. "We raised interest rates three times earlier in the year," she said. "A lot of that effect is still to flow through." The full effect, she noted, "can take 12, perhaps even 18 months". That lag is one reason a forecast made in August may look different by the time the RBA updates it.

The bottom line

Unemployment at 4.6 per cent has reached the level the RBA's August forecasts pencilled in for June 2027, roughly nine months early. The Board nonetheless describes the labour market as having eased broadly as expected, and the Governor characterises current unemployment as low by historical standards.

Because those forecasts pre-date the September hike, the next set of RBA projections will be the real test of whether the path has shifted. In the meantime, the Board has offered no commitment. "I'm not going to give you forward guidance," Bullock said. The September minutes are due on 13 October, the next CPI release is on 28 October, and the next decision is due at 2.30 pm on 3 November, with the Board saying it will remain attentive to the data.