The Reserve Bank's November forecasts show the Unemployment rate climbing steadily for more than two years, a cost the Central Bank openly acknowledges as it pushes Inflation back towards target.

Buried in the forecast table of the November 2026 Statement on Monetary Policy (SMP) is a row that tells a sobering story for workers. The RBA now forecasts that the unemployment rate will rise in every half-year period it projects, reaching 5.1% by December 2028.

The forecasts were released at 2.30 pm AEDT on 3 November 2026, the same afternoon the Monetary Policy Board lifted the cash rate target by 25 basis points to 4.85%. Like all SMP projections, they are forecasts conditional on assumptions, not certainties.

The numbers, side by side

Here is the SMP's year-ended unemployment forecast, with the August 2026 forecast in brackets:

  • June 2026: 4.4% (4.4%)
  • December 2026: 4.7% (4.5%)
  • June 2027: 4.8% (4.6%)
  • December 2027: 4.9% (4.7%)
  • June 2028: 5.0% (4.8%)
  • December 2028: 5.1% (4.8%)

Two features stand out. First, the path is upward throughout, with no period in which the RBA expects unemployment to fall. Second, every forecast from December 2026 onwards is higher than it was three months ago. By late 2028, the gap between the August and November forecasts has widened to 0.3 percentage points.

The Board's statement made the change explicit: "the unemployment rate is projected to rise by more than expected in the August forecasts".

For context, the minutes of the September 2026 meeting recorded unemployment at 4.6% in August. The Board's 3 November statement noted that "The economy is slowing, housing prices have fallen significantly and the unemployment rate has risen."

Why the RBA expects joblessness to rise

The SMP links the softer labour market outlook to slower growth. Its GDP growth forecasts, again year-ended, are 1.6% for December 2026, 1.6% for June 2027 and 1.3% for both December 2027 and June 2028, before a modest lift to 1.5% in December 2028. The forecasts for late 2027 and 2028 are lower than they were in August.

The SMP explains the reasoning in a single sentence: "Tighter monetary policy alongside a weaker outlook for the housing market is expected to keep GDP growth below trend."

The Board's statement added: "Higher interest rates and falls in housing prices and turnover are expected to weigh on growth".

In other words, the higher unemployment forecast is not an accident or an unforeseen side effect. It is part of how the RBA expects tighter policy to work. Deputy Governor Andrew Hauser said as much at a Citi conference fireside chat on 21 October: "We need a period of below-trend growth to bring inflation down, and we're seeing that happening."

The trade-off the Board is making

The rise in forecast unemployment sits alongside a stubborn inflation outlook. The SMP forecasts headline CPI inflation of 4.5% in December 2026 and trimmed mean inflation of 3.6% at the same point, both well above the 2–3% target. On the RBA's projections, trimmed mean inflation does not reach the midpoint of 2.5% until June 2028, by which time unemployment is forecast at 5.0%.

That is the central trade-off of the November forecasts. The RBA is projecting that bringing inflation back to the middle of the target range will come with a labour market that is noticeably softer than today.

The Board justified accepting that cost by pointing to the risk of letting high inflation persist. Its statement said "there is an increasing risk that higher inflation expectations will become embedded" and "The Board is conscious of the period in which inflation has been too high."

Hauser framed the stakes around expectations: "We can't allow expectations to shift away from the target."

The decision to raise the cash rate was not unanimous. Six members voted to increase it to 4.85%, while three preferred to hold at 4.60%.

How RBA officials talk about the human cost

Senior RBA officials have not described rising unemployment as a goal in itself. Hauser put it bluntly in October: "No lost Job is one to celebrate."

Assistant Governor (Economic) Sarah Hunter, in an interview aired on 25 October, argued the RBA had previously managed to reduce inflation without a sharp rise in joblessness. "We have actually brought inflation down over the last few years," she said. "We've managed to do that and not see a really big increase in the unemployment rate."

She also stressed that the RBA is not aiming for a severe downturn: "We're not trying to achieve a sharp stop or a really big downturn or anything like that." Asked about recession, she said: "We don't see any signs of that yet in any of the data that we track."

Inflation peaked at 7.9% at the end of 2022, and the RBA's view is that letting it remain high for too long would bring its own costs. "We don't want to live with high inflation for a long time," Hunter said.

The unemployment forecasts depend on assumptions, including a cash rate path drawn from market pricing as at 28 October, with a year-average assumption of 4.9% for 2026/27 and 4.8% for 2027. They also assume energy prices decline from elevated levels, though the SMP notes they could stay high or rise if shipping and refining disruptions persist.

The Board's statement also flagged heightened uncertainty, with scenarios in which inflation is higher and activity lower. On the other side, the statement says employment is still expected to keep growing, and the SMP describes the economy as "currently operating with excess demand", judged to reach balance next year.

The bottom line

The RBA's November forecasts show unemployment rising from 4.4% in June 2026 to 5.1% by December 2028, higher at every point from late 2026 than it projected in August. That rise is part of the central bank's expected path back to its inflation target, not a separate shock, and officials have acknowledged its cost in plain terms.

Whether the labour market follows this path will depend on how inflation, energy prices, housing and global conditions evolve. The next decision is due at 2.30 pm on 8 December 2026. Readers concerned about how these conditions affect their own circumstances can consider speaking with a licensed adviser or their lender.