Key Highlights

  • The Unemployment rate reached 4.7 per cent in September 2026.
  • The RBA's November statement says the labour market has softened faster than its August forecasts allowed.
  • Employment is still growing, but unemployment is rising by more than expected.
  • Labour market data will be central to the Board's next decision.

When the Reserve Bank of Australia (RBA) published its August forecasts, it pencilled in an unemployment rate averaging 4.4 per cent for the September quarter. The figures that have since arrived tell a different story. According to the economic conditions chapter of the November 2026 Statement on Monetary Policy, the unemployment rate was 4.7 per cent in September 2026 and averaged 4.6 per cent across the September quarter.

A gap of two-tenths of a percentage point on the quarterly average may look small, but in labour market terms it is a noticeable miss. The admission came on the same day the Monetary Policy Board lifted the cash rate target by 25 basis points to 4.85 per cent, a reminder that the Board is weighing a cooling jobs market against Inflation it describes as broadly based.

What the numbers actually show

It helps to be precise about which figure is which, because three different numbers are in circulation.

  • 4.7 per cent is the unemployment rate for the single month of September 2026.
  • 4.6 per cent is the average unemployment rate across the three months of the September quarter.
  • 4.4 per cent was the RBA's August forecast for that September quarter average.

The comparison that matters for judging the RBA's own forecasting is quarterly average against quarterly forecast: 4.6 per cent against 4.4 per cent. The monthly 4.7 per cent reading shows where the rate finished the quarter, which is why it sits higher than the average.

Because the RBA expresses its unemployment forecasts as quarterly averages, the September monthly figure is not a like-for-like comparison with any single forecast number. Still, September's monthly reading already matches the 4.7 per cent the Bank now forecasts as the December quarter 2026 average — a figure that was 4.5 per cent in the August forecasts.

Why the script changed

The November Statement on Monetary Policy says unemployment rose by more than anticipated, partly because more people have been joining or staying in the labour force. That is a different explanation from a straightforward collapse in hiring. The economic conditions chapter notes that "employment growth held up in the September quarter as expected."

jobs were being created at roughly the pace the RBA expected, but the pool of people looking for work grew faster. The participation rate — the share of the working-age population that is either employed or actively looking for work — averaged 66.9 per cent in the September quarter, which the RBA notes was above its expectations. When more people enter the labour force than there are new jobs to absorb them, the unemployment rate can rise even while employment keeps growing.

That distinction shapes how the number should be read. A rising jobless rate driven mainly by Job losses usually signals sharper economic stress. A rise driven partly by stronger labour Supply is more ambiguous: it still means more people are searching for work without success, but it does not by itself point to employers shedding staff.

The RBA itself flags this ambiguity. In its discussion of risks, the Statement notes that uncertainty about spare capacity cuts both ways: pressures may be understated, or labour supply may be stronger, pushing unemployment higher.

The broader economic backdrop

The labour market is not moving in isolation. The Monetary Policy Board's statement put it bluntly: "The economy is slowing." GDP grew 0.4 per cent in the June quarter, and household consumption, which grew 0.4 per cent in that quarter and 1.8 per cent over the year, is identified as a key drag. Housing prices have fallen about 5 per cent from their March peak, with the economic conditions chapter putting national prices 4.7 per cent below peak in September.

Yet the Board still raised rates. Its statement said "Inflation remains elevated and recent data indicate that it is broadly based." On the data, headline CPI rose 3.9 per cent over the year to the September quarter, while the trimmed mean — the RBA's preferred underlying measure — rose 3.7 per cent over the same period. Separately, the monthly headline CPI indicator was 4.3 per cent over the year to September 2026.

The majority of the Board — six members voted to raise rates, three to leave the cash rate target at 4.60 per cent — judged that "there is an increasing risk that higher inflation expectations will become embedded." The statement gives no reasons for the minority view.

That leaves the RBA balancing two parts of its mandate. As the statement puts it, "the Board is focused on its mandate to deliver price stability and full employment." A jobless rate running ahead of forecast is relevant to the second; broadly based inflation weighs on the first.

Where the RBA now sees unemployment heading

The November forecasts — RBA forecasts, expressed as quarterly averages — show a steady upward drift (August forecasts in brackets):

  • December 2026: 4.7 per cent (4.5)
  • June 2027: 4.8 per cent (4.6)
  • December 2027: 4.9 per cent (4.7)
  • June 2028: 5.0 per cent (4.8)
  • December 2028: 5.1 per cent (4.8)

The Monetary Policy Board's statement summarised the shift: "Employment is expected to continue to grow, but the unemployment rate is projected to rise by more than expected in the August forecasts." The Statement on Monetary Policy describes the end-2028 rate as about a quarter of a percentage point higher than in August.

These forecasts rest on a cash rate assumption drawn from market pricing as at 28 October 2026, not on any RBA promise. That pricing implies the cash rate rises about 35 basis points by mid-2027 before stabilising at 4.8 per cent in 2028. If interest rates follow a different path, the unemployment outlook could change too.

The bottom line

September's 4.7 per cent unemployment rate, and the 4.6 per cent September quarter average, sit above the 4.4 per cent the RBA expected in August. The Bank attributes part of the overshoot to more people joining or staying in the workforce rather than to weaker hiring, since employment growth held up as expected. Even so, the RBA now forecasts unemployment rising gradually to 5.1 per cent by the end of 2028.

The broader message is that the RBA is openly acknowledging a softer labour market while still tightening policy to address inflation. Upcoming data, including the CPI release on 25 November 2026, will feed into the Board's next decision on 8 December 2026.