Unemployment rises to 4.6%, but a September interest rate hike still looks likely

Unemployment rose to 4.6% in August, new Australian Bureau of Statistics figures show .

That’s the highest it’s been since November 2021.

Since the start of this year, Australia’s unemployment rate has increased by 0.5 percentage points, up from 4.1% last December.

However, that upward trend appears unlikely to dissuade the Reserve Bank board from lifting interest rates next week, given the central bank’s recent stern warnings about fighting inflation.

On Tuesday, Reserve Bank Governor Michele Bullock warned that unemployment may need to rise further to help rein in 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.

Based on these latest numbers for August, a 5% unemployment rate would equate to about 55,000 extra Australians out of work.

That would be in addition to the 28,000 who became unemployed between July and August.

Job trends since December So far in 2026, employment has grown by about 1.2%.

This has been just enough to keep the proportion of the population who are employed at the same level as the end of 2025, at 63.9%.

That is down a little from its peak during 2023 of 64.4%, but still well above the proportion of people employed before the pandemic.

So, if the proportion of Australians who are employed has stayed the same since the end of 2025, what’s behind the rate of unemployment rising from 4.1% in December to 4.6% in August? This is because an increasing proportion of Australians are wanting to work.

Since December, the labour force participation rate rose by 0.4 percentage points, to reach 67.1% in August.

Meanwhile, “ underemployment ” – the proportion of employed people who would like to work more hours – has also grown, from 5.7% in December to 6.2% in August.

Why it’s tougher for young job seekers As the labour market goes through ups and downs, not all groups are equally affected.