Australia’s Unemployment Hits 4.6% in August, Highest Since Pandemic

Australia’s unemployment rate jumped to 4.6% in August, the highest since the pandemic ended, after 28,000 people entered unemployment despite 39,000 new jobs being created. The surprise rise came as more Australians entered the workforce seeking work, with part-time employment surging 46,000 while full-time roles fell 6,000. The Reserve Bank is still expected to raise interest rates on September 29.

Why unemployment rose despite job growth

Employment increased by 39,000 in August, yet unemployment also climbed. This happened because 28,000 more people entered the labour force actively seeking work. The participation rate rose 0.2 percentage points to 67.1%, meaning more Australians are now either employed or looking for jobs. Sean Crick, ABS head of labour statistics, said this August saw a higher proportion of people moving from outside the labour force into unemployment than in recent years.

Part-time work replaces full-time jobs

Part-time employment surged by 46,000 in August, but full-time roles fell by 6,000. This shift reflects households scrambling for more income to cover rising living costs and prepare for higher mortgage payments. KPMG chief economist Brendan Rynne said households are scrambling to find more income as inflation stays high and mortgage costs rise. The underemployment rate fell slightly to 6.2%, but remains elevated compared to earlier in the year.

RBA likely to raise rates despite softer jobs data

The unemployment rise is unlikely to stop the Reserve Bank from hiking interest rates on September 29. RBA Governor Michele Bullock said this week that an unemployment rate between 4.5% and 5% is needed to ease inflation pressure. Inflation sits at 3.5%, above the RBA’s 2% to 3% target band. Markets are pricing in a 95% probability of a 25-basis-point rate hike, which would lift the cash rate from 4.35% to 4.6%, its highest in nearly 15 years.

State-by-state jobless rates vary widely

Unemployment rates differ sharply across Australia. Victoria and Tasmania recorded the highest rates at 5.2% and 5.0% respectively, while New South Wales had the lowest at 4.3%. Queensland and Western Australia both sat at 4.5%, and South Australia matched the national average at 4.6%. The ACT posted the lowest rate at 4.0%. According to the Australian Bureau of Statistics, employment growth of 1.6% annually has kept pace with hours worked growth of 1.7%.

Final Thoughts

Australia’s 4.6% unemployment rate signals a softening labour market, but the RBA is expected to raise rates anyway to fight inflation. Households are working more hours and taking part-time jobs to cope with rising living costs and mortgage pressures.

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