The unemployment rate has edged up from 4.1% in December 2025, an increase of half a percentage point over the course of this year. The August figure represents an additional 28,000 Australians becoming unemployed between July and August alone.
However, the upward trend appears unlikely to dissuade the Reserve Bank from lifting interest rates next week. In a speech on Tuesday, RBA Governor Michele Bullock warned that unemployment may need to rise further to help tame inflation.
"I think [an unemployment rate] between 4.5% and 5% will probably take enough heat out of the labour market that it'll ease pressure on inflation," Bullock said.
Based on these numbers, reaching a 5% unemployment rate would mean roughly 55,000 more Australians out of work, on top of the 28,000 who lost jobs between July and August.
Employment has grown by about 1.2% so far in 2026, maintaining the proportion of the population employed at 63.9% — slightly below its 2023 peak of 64.4% but still well above pre-pandemic levels. The rise in unemployment is being driven partly by increasing workforce participation, which reached 67.1% in August, up 0.4 percentage points since December.
Underemployment — the share of employed people who want more hours — also grew from 5.7% in December to 6.2% in August.
Young Australians have been hit hardest. The employment-to-population ratio for 15-to-24-year-olds fell from 66.6% in late 2022 to 64% in August, reflecting the slowdown in hiring.
Financial analysts and Australia's big four banks are overwhelmingly tipping a 0.25 percentage point rise in the cash rate to 4.6%, to be announced on Tuesday.