Unemployment has climbed to 4.6 per cent from about 3.5 per cent a couple of years ago, yet Governor Michele Bullock points out that more than a million jobs were created over the same period and still describes the labour market as "a little tight".

At first glance, two of the labour market figures Michele Bullock cited at her 29 September media conference seem to pull in opposite directions. The unemployment rate, she noted, is now 4.6 per cent, up from about 3.5 per cent a couple of years earlier. Over that same period, she said, more than one million jobs were created.

Both can be true at once, and the reasons why help explain how the RBA reads the jobs market, and why a rising unemployment rate did not stop the Monetary Policy Board from raising the cash rate target by 25 basis points to 4.60 per cent.

How rising jobs and rising unemployment fit together

The unemployment rate is the share of the labour force, people who are working or actively looking for work, who do not have a job. It can rise even while employment is growing strongly, if the labour force grows faster still.

In general terms, the labour force can expand for several reasons:

  • Population growth. More people of working age means more potential workers. The RBA's August Statement on Monetary Policy (SMP) table shows population growth of 1.4 per cent over the year to June 2026.
  • Higher participation. If a greater share of the population decides to work or look for work, the labour force grows.
  • Changing circumstances. People returning to work, or entering the workforce for the first time, add to the pool of jobseekers before they find a role.

The minutes of the September Board meeting pointed to the second factor in the latest data. Unemployment rose to 4.6 per cent in August alongside a rise in participation, meaning a larger share of people were in the labour force. That is a different signal from a rise driven mainly by job losses. Over the past couple of years, Bullock said, the economy added more than one million jobs, a reminder that strong hiring and a higher unemployment rate are not mutually exclusive.

The minutes also urged caution. Members noted that changes to the survey methodology behind the labour force data made the figures harder to interpret.

Why the RBA still sees a tight market

Despite the higher unemployment rate, the RBA has not concluded that the labour market has become loose. Bullock's assessment was concise: "Productivity growth remains weak and the labour market remains a little tight." She added that "the unemployment rate is still quite low historically".

The minutes offer more detail on why. Most leading indicators pointed to stable labour demand, and some measures of job advertisements were strengthening slightly. The Board's statement said labour market conditions had eased broadly as expected.

A tight labour market matters for inflation because it can push up labour costs. Here, the RBA's concern centres on productivity rather than pay alone. The minutes recorded that unit labour cost growth, the cost of labour per unit of output, was above what is consistent with the inflation target, driven mainly by subdued productivity growth rather than strong nominal wages. Bullock put it plainly: "The bottom line is that productivity is doing nothing." She also noted a limit on what the central bank can do about it: "monetary policy can't do anything about productivity."

Where the forecasts point

The August SMP, with forecasts finalised on 5 August 2026, set out a gradual path for the labour market. Its table of year-ended figures and forecasts included:

  • Unemployment rate: 4.4 per cent in June 2026, 4.5 per cent in December 2026, 4.6 per cent in June 2027, 4.7 per cent in December 2027 and 4.8 per cent in both June and December 2028.
  • Employment growth: 1.1 per cent in June 2026, 1.4 per cent in December 2026, 1.2 per cent in June 2027, then 1.1 to 1.2 per cent from December 2027 to December 2028.
  • Wage Price Index: 3.3 per cent through to June 2027, easing to 2.9 per cent by December 2028.

The SMP described the rise in unemployment to 4.8 per cent by the end of 2028 as a modest upward revision from May, mainly reflecting a higher starting point.

One detail is worth noting. The August actual of 4.6 per cent is already above the 4.5 per cent forecast for December 2026, though the minutes' caution about survey changes and the link to higher participation both shape how the RBA interprets that gap. The next Statement on Monetary Policy, listed on the RBA calendar for November, will update these forecasts.

What it means for the policy debate

The labour market sits at the heart of the RBA's dual mandate. The minutes' closing statement said the Board "will remain focused on its mandate to deliver price stability and full employment".

In weighing the September decision, the Board considered downside risks to activity and employment as part of the case for holding rates steady. It ultimately judged that upside risks to inflation had materialised and that a timely response best balanced its objectives. On the risk of recession, Bullock said: "That is not our central base case at this moment."

Bullock has not signalled the next move. "I'm not going to give you forward guidance," she said. The next cash rate update is scheduled for 2.30 pm on 3 November 2026. Workers and employers trying to understand what the labour market outlook means for their own situation may wish to seek independent professional advice.

The bottom line

The unemployment rate has risen from about 3.5 per cent to 4.6 per cent over a couple of years, but more than one million jobs were created over the same period, according to Bullock. The latest rise came alongside higher participation, leading indicators point to stable labour demand, and the RBA still describes the market as a little tight. With weak productivity pushing unit labour costs above levels consistent with the target, the jobs data remain a key input into the Board's decisions.