Australia's unemployment rate has unexpectedly climbed to 4.5%, its highest level in nearly four years, raising concerns among economists about the sustainability of the country's labour market. The rise, from near 50-year lows of 3.4% in late 2022, has surpassed both the Reserve Bank of Australia's and Treasury's forecasts of around 4.3%.
Shane Oliver, chief economist at AMP, described the jobless rate as being in a clear rising trend. He warned that further increases could violate the RBA's full employment objective. Oliver attributed the rise to a 'messy handover' from public sector to private sector job creation, as government-funded care economy hiring slows.
Since Labor took office in 2022, around 80-90% of new jobs have been in taxpayer-subsidised sectors such as aged care, childcare, and health. Treasurer Jim Chalmers has defended these as 'real jobs', but economists note that this reliance on public spending masks underlying weakness in the private sector.
Pat Bustamante, an economist at Westpac, calculated that unemployment could push towards 4.8% in early 2026 if private sector hiring fails to compensate for slower government spending. The RBA has held off on further rate cuts pending inflation data, but the latest jobs figures have complicated its decision-making ahead of the Melbourne Cup day meeting.
However, not all analysts are pessimistic. Jonathan Kearns, chief economist at Challenger and former RBA official, argued that markets may have overreacted to a single data point. He noted that employment still rose in September, and the uptick in unemployment was partly due to an influx of new jobseekers, which could reverse in October.
