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The Reserve Bank's August forecasts have unemployment drifting up to 4.8% by the end of 2028, a gradual loosening that sits at the heart of its plan to bring inflation back to target.

Australia's jobs market has been one of the economy's most resilient features through the post-pandemic inflation fight. The Reserve Bank of Australia (RBA) expects that resilience to fade gradually rather than suddenly.

In its August 2026 Statement on Monetary Policy, the RBA said: "The unemployment rate is forecast to increase to 4.8 per cent by the end of 2028." That is a modest rise from where the rate sits now, but the direction is telling. The RBA's central scenario involves a labour market that loosens slowly over more than two years.

This explainer looks at where unemployment is today, why the RBA is comfortable with a higher rate, and why the forecast itself could change soon.

Starting point: 4.6% and climbing slowly

At her media conference on 29 September, Governor Michele Bullock said unemployment "has risen from 3.5 per cent over the past couple of years to 4.6 per cent". Over the same period, she said, more than a million jobs have been created.

That 4.6% is the latest figure the Governor cited. In her opening statement to the House of Representatives Standing Committee on Economics on 18 September, she had quoted a slightly lower number: "The unemployment rate – at 4.5 per cent – is low by historical standards."

Even with the increase, the RBA does not regard the labour market as weak. "The unemployment rate is still quite low historically, and we still think the labour market is a little bit tight," Ms Bullock said on 29 September.

The path from 4.6% today to the forecast 4.8% by end-2028 is therefore a small step in percentage-point terms. It is the trend, and the reason behind it, that tells the story.

Why the RBA expects, and accepts, a softer jobs market

The RBA's priority is inflation, which remains above its 2–3% target range. Headline inflation from the August monthly CPI indicator was 4.0%, according to the RBA homepage. Underlying, or trimmed mean, inflation is lower: Ms Bullock said it has been about 3.5% for the past six months.

To bring that down, the RBA has argued that demand across the economy needs to cool. "A period of subdued growth of aggregate demand is needed to reduce capacity pressures and bring inflation down sustainably," the Governor said on 18 September.

When demand grows more slowly, businesses tend to hire less aggressively. That is why the unemployment forecast and the growth forecast go hand in hand. The August Statement projected GDP growth of 1.4% over the year to December 2026, a subdued pace consistent with the RBA's call for a period of slower demand.

The August Statement also mapped out the inflation path the RBA expected alongside that softer jobs market: "Trimmed mean inflation is expected to remain above 3 per cent until mid-2027, before easing to 2.5 per cent by early 2028."

Put simply, the forecasts describe a trade-off spread over time: inflation gradually returning to the midpoint of the target, while unemployment edges up to 4.8%.

Hauser's framing: protecting jobs, not sacrificing them

It might seem odd for a central bank to raise rates while forecasting higher unemployment. Deputy Governor Andrew Hauser offered a different framing during an ABC 7.30 interview on 8 September.

"We're doing it in order to try to protect the jobs gains that happened during COVID," he said of the RBA's rate rises.

He linked the rate rises directly to preserving the employment gains of the pandemic period, rather than presenting higher unemployment as the goal. He also said: "Inflation is due to be back in target by the end of next year", meaning back within the 2–3% range by the end of 2027.

The Governor, for her part, indicated the RBA is not forecasting a slump. Asked about recession at the 29 September media conference, she said: "That is not our central base case at this moment."

Why this forecast may not survive November

There is an important caveat. The 4.8% figure came from forecasts prepared in August, and the RBA has since said those assumptions have been overtaken.

The August Statement noted: "The forecasts assume less than one full cash rate increase by the end of 2026, before a small reduction in the cash rate further out." In September, the Monetary Policy Board raised the cash rate by a full 25 basis points to 4.60%, the fourth increase this year.

The Board's 29 September statement also said: "The conflict in the Middle East has broadened and global energy prices are now much higher than had been assumed in the August forecasts." It added that recent data suggest growth and inflation in Australia have been higher than expected.

A higher cash rate, higher energy prices and stronger-than-expected growth are all inputs that could shift the labour market outlook. The RBA has not said in which direction its unemployment forecast will move, and it would be speculation to guess.

The updated picture is due on 3 November, when the November Statement on Monetary Policy is released at 2.30 pm AEDT, alongside the Board's next decision. The Governor's media conference follows at 3.30 pm.

There is also a lag to consider. Ms Bullock said "it can take 12, perhaps even 18 months" for the full effect of rate changes to flow through. That means part of the impact of this year's rises on hiring has yet to show up in the data.

The RBA's calendar offers several markers worth watching:

  • The September meeting minutes on 13 October, which may shed light on how the Board weighed labour market conditions.
  • The next CPI release on 28 October.
  • The November Statement on Monetary Policy on 3 November, which will carry fresh unemployment forecasts.
  • Assistant Governor (Economic) Sarah Hunter's appearance at the UBS Australasia Conference on 9 November.

The bottom line

The RBA's August forecasts have unemployment rising gradually from today's 4.6% to 4.8% by the end of 2028, a slow loosening that accompanies the expected easing of trimmed mean inflation to 2.5% by early 2028. The RBA regards the current labour market as still a little tight and does not see recession as its central case. But those forecasts pre-date a full rate rise, a jump in energy prices and stronger-than-expected data, so the November Statement on Monetary Policy will be the next official read on where the jobless rate is heading.