Australia's labour market has reached a quiet turning point, with unemployment rising to 4.5 percent in July — its highest since the pandemic — signalling that the long campaign against inflation is gradually reshaping the lives of working people. The Reserve Bank of Australia, which has spent years tightening monetary conditions to cool price pressures, now finds its own forecasts confirmed: the economy is softening, deliberately and by design. A further rate rise in September appears unlikely, though the central bank has not yet declared its work complete, watching still for the labour marke
Australia's unemployment hits 4.5%, highest post-COVID level, dimming rate hike odds
The labour market needs to loosen before inflation can fall
Mark
Why does a 4.5 percent unemployment rate matter so much right now?
Mimi
Because it's the first time since COVID that we've hit this level, and it signals the labour market is finally loosening up. The RBA has been raising rates to fight inflation, but you can't keep hiking if jobs are disappearing—it becomes politically and economically untenable.
Mark
So the bank wanted unemployment to rise?
Mimi
Not wanted, exactly. But the RBA's own economists think the labour market is still too tight. They believe inflation won't come down unless there's more slack—more people out of work, or working fewer hours. It's a deliberate trade-off.
Mark
That sounds grim for workers.
Mimi
It is. Wage growth is already weaker than expected, and now fewer people are finding work. The bank would say this is necessary medicine, but it's medicine that tastes bitter for households.
Mark
Does this mean interest rates are done rising?
Mimi
Almost certainly for now. Another hike in September looks very unlikely. But economists are careful to say the cycle might not be completely over—it depends on whether inflation stays stubborn or whether the labour market tightens again.
Mark
What happens if unemployment keeps climbing?
Mimi
Then the RBA gets more confidence that inflation is coming under control, and the case for any future hikes becomes even weaker. The bank's own forecast has unemployment hitting 4.8 percent by mid-2028.
Il Polso
- Australia shed 15,800 jobs in July, with part-time workers absorbing the sharpest losses, pushing unemployment to its highest level since the COVID era.
- The data has effectively taken a September rate hike off the table, as economists point to a convergence of softer inflation, slowing house prices, and a cooling jobs market.
- The RBA's own projections anticipate unemployment climbing further — to 4.8 percent by mid-2028 — as the price of bringing inflation under lasting control.
- Economists describe the jobs report as 'thoroughly mediocre': bad for workers and households, but precisely the kind of signal the central bank needs to justify holding steady.
- Despite the reprieve, analysts warn the hiking cycle may not be over — if inflation proves stubborn, the RBA retains both the rationale and the tools to move again.
Australia's labour market has reached a quiet turning point, with unemployment rising to 4.5 percent in July — its highest since the pandemic — signalling that the long campaign against inflation is gradually reshaping the lives of working people. The Reserve Bank of Australia, which has spent years tightening monetary conditions to cool price pressures, now finds its own forecasts confirmed: the economy is softening, deliberately and by design. A further rate rise in September appears unlikely, though the central bank has not yet declared its work complete, watching still for the labour market to yield just enough to bring inflation fully to heel.
Australia's unemployment rate rose to 4.5 percent in July, its highest point since the pandemic, edging up from 4.4 percent the month before. The country lost 15,800 jobs over the period, with part-time work bearing most of the decline, while the number of people counted as unemployed grew by 4,200. These are not dramatic figures, but they move steadily in the direction the Reserve Bank of Australia has been engineering.
The RBA has been lifting interest rates to suppress inflation, and this latest data makes another increase at the September meeting far less likely. The bank's own forecasts, released just before the July numbers arrived, had already anticipated unemployment reaching 4.5 percent by year's end — and projected it would continue rising to 4.8 percent by mid-2028. Governor Michele Bullock has been candid about the logic: bringing inflation down requires a labour market with a little less tightness, and most indicators suggest that slack has not yet fully arrived.
Economists reading the data drew similar conclusions. David Bassanese of BetaShares cited the combination of rising unemployment, cooling house prices, and softer inflation as reasons to expect the RBA to hold in September. Callam Pickering of Indeed called the report 'thoroughly mediocre' — underwhelming for workers, but useful for the central bank's purposes, as tighter monetary policy appears to be doing exactly what it was designed to do.
Still, few are willing to declare the hiking cycle over. The labour market remains the key variable, and as long as underlying tightness persists, the RBA keeps its options open. For now, attention turns to whether unemployment continues its slow drift upward and whether wage growth keeps softening — the twin signals that will tell the bank whether its long strategy is finally working.
Australia's unemployment rate climbed to 4.5 percent in July, marking the highest point since the pandemic ended. The figure represents a steady creep upward from 4.4 percent the month before, and it carries real weight for what happens next with interest rates. The Reserve Bank had been hiking rates to combat inflation, but this jobs data makes another increase in late September far less likely.
The employment picture itself tells a story of gradual softening. The country lost 15,800 jobs in July, with part-time work bearing the brunt of the decline. At the same time, the unemployment rolls grew by 4,200 people. These are not dramatic swings, but they move in the direction economists have been watching for—a labour market that is slowly losing its tightness.
The Reserve Bank's own forecasts, released just days before this data, had already penciled in a 4.5 percent unemployment rate by year's end. But the bank's economists went further, projecting the rate would keep climbing through 2027 and reach 4.8 percent by the middle of 2028. This trajectory reflects a deliberate economic strategy: the RBA believes inflation cannot be brought under control without some slack in the labour market. As Governor Michele Bullock put it, the economy needs "a little bit less tightness in the labour market in order to bring inflation down." The bank's own analysis shows most labour market indicators are still hovering near or above their trend levels, suggesting there is more room for unemployment to rise before the bank considers its work done.
Economists reading the July figures see a clear message. David Bassanese, chief economist at BetaShares, pointed to the combination of rising unemployment, slowing house prices, and softer-than-expected inflation data from the previous quarter as reasons to expect the RBA to hold steady at its September meeting. Callam Pickering, an Asia Pacific economist at Indeed, called the jobs report "thoroughly mediocre," noting that both wage growth and unemployment have underperformed expectations. He framed this as bad news for workers and households but good news for the RBA's inflation-fighting mission—tighter monetary policy is doing what it was designed to do.
Yet Pickering and others are careful not to declare the rate-hiking cycle finished. The data flows have been positive enough from the central bank's perspective to make another hike this year unlikely, but economists caution against assuming the bank has put its tools away for good. The labour market remains the crucial variable. As long as it retains some underlying tightness, the RBA retains the option to move again if inflation proves stubborn. For now, though, the focus shifts to watching whether unemployment continues its slow drift upward and whether wage growth continues to soften—the twin indicators that will tell the bank whether its strategy is working.
Citazioni salienti
We need a little bit less tightness in the labour market in order to bring inflation down— RBA Governor Michele Bullock
Another rate hike this year is now unlikely, but it would be a mistake to believe the hiking cycle is over— Callam Pickering, Indeed
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Economy & Finance