Reserve Bank Governor Michele Bullock has openly acknowledged that unemployment is drifting higher, yet she keeps describing the level as low by historical standards, and that framing sits at the centre of how the central bank reads its inflation problem.

When the Reserve Bank of Australia (RBA) lifted the cash rate target by 25 basis points to 4.60 per cent on 29 September 2026, one question kept surfacing: how can a central bank keep tightening while the unemployment rate is going up? Governor Bullock's answer, delivered across two public appearances in September, rests on a distinction between direction and level. Unemployment is rising, she has conceded, but it remains low compared with much of Australia's history.

That framing shapes the Monetary Policy Board's judgement that the economy still has capacity pressures. With the cash rate at 4.60 per cent (effective 30 September) and the next decision due at 2.30 pm on 3 November, it is worth unpacking what the Governor has said about jobs, and what she has not.

Two appearances, one consistent line

The first statement came in Canberra on 18 September 2026, when Bullock delivered her opening statement to the House of Representatives Standing Committee on Economics. There she said: "The unemployment rate – at 4.5 per cent – is low by historical standards."

In the same statement she described the labour market as close to, but a little tighter than, full employment, and noted that the share of the population in employment was near a record high.

Eleven days later, at the media conference following the September decision, she was more explicit about the trajectory. She said "the unemployment rate has risen from 3.5 per cent over the past couple of years to 4.6 per cent". She also pointed out that over a million jobs had been created in recent years.

Put together, the two appearances deliver a consistent message:

  • The jobless rate has risen by 1.1 percentage points over the past couple of years, from 3.5 per cent to 4.6 per cent.
  • Even so, the Governor characterises the current level as low by historical standards.
  • Employment as a share of the population remains near a record high.
  • The labour market, in the RBA's assessment, is still a little tighter than full employment.

Why "rising" and "low" can both be true

A rising unemployment rate and a low one are not contradictory. One describes the change; the other the level.

The 3.5 per cent starting point Bullock referred to was lower still than the 4.5 per cent figure she called low by historical standards in Canberra. A rise from there to 4.6 per cent is a genuine increase, and the Governor did not dismiss it. Asked what the higher rate means in practice, she said: "What it often means is that people might be taking longer to find a job."

That is a notable choice of words. It frames the change less as a wave of job losses and more as a slower process of job seekers finding work, alongside the high employment-to-population share she cited before the parliamentary committee.

The RBA's August 2026 minutes, from the meeting held on 10–11 August, struck a similar balance. They recorded that the labour market had eased somewhat more than expected, but that unemployment "remained low". The Board's 29 September statement, meanwhile, said labour market conditions had eased broadly as expected.

Why the framing matters for rates

The Governor's description carries weight because it feeds directly into the Board's assessment of capacity. If the labour market were judged to be loose, with plenty of spare workers, that would point to less pressure on wages and prices. Instead, the RBA's view is that the labour market is still a little on the tight side, and the September statement said capacity pressures remain.

Bullock linked that to the inflation picture at the media conference: "Inflation is too high and has been driven by domestic capacity pressures."

The inflation backdrop is important here. Headline CPI rose 4.0 per cent over the year to August 2026, according to the monthly CPI. Underlying inflation is lower: Bullock said on 29 September that "the underlying inflation rate's been about 3.5 per cent for the past six months", and the trimmed mean measure was 3.6 per cent in the June quarter. Both headline and underlying measures sit above the 2–3 per cent target band.

In the RBA's framing, a low jobless rate is one more sign that the economy is running close to its limits.

What the framing does not tell us

There are clear limits to what can be drawn from the Governor's comments.

First, she has not signalled the next move. At the 29 September media conference she said plainly: "I'm not going to give you forward guidance." The Board's statement said it "will continue to do what it considers necessary" to return inflation to target, and that it remains attentive to the data.

Second, the RBA's most recently published forecasts, recorded in the August minutes, have unemployment rising gradually to 4.8 per cent by the end of 2028. That describes a slow drift rather than a sharp jump, but those forecasts were prepared before the September increase. The RBA has said its next forecast update is due in November.

Third, the labour market picture is uneven. Assistant Governor (Economic) Sarah Hunter told the Regions Rising summit in Canberra on 14 September that "the availability of labour in the regions is more challenging than it is in the cities". National averages can mask differences of that kind.

Finally, asked about recession, Bullock said: "That is not our central base case at this moment." That describes the central case, not every possible outcome.

The bottom line

Governor Bullock's framing of the labour market rests on a simple distinction. The unemployment rate has risen, from 3.5 per cent to 4.6 per cent over the past couple of years, and she has acknowledged that this often means people are taking longer to find work. But she has also described the jobless rate as low by historical standards, pointed to more than a million jobs created in recent years, and placed the labour market a little on the tight side of full employment.

For the RBA, that combination supports the view that domestic capacity pressures are still feeding inflation. Whether that view holds will depend on data still to come, including the September CPI on 28 October, before the Board meets on 2–3 November.