Australian unemployment rose more than anticipated in September, while job growth lagged expectations, signaling a loosening labor market and heightening expectations that the Reserve Bank of Australia may cut interest rates as soon as next month, Bloomberg reported. The jobless rate climbed to 4.5% from an upwardly revised 4.3%, while employment increased by just 14,900 positions, below forecasts of 20,000. The participation rate rose to 67%, reflecting more Australians seeking work despite softer job creation.
Markets reacted swiftly to the data. Yields on three-year government bonds, sensitive to RBA policy, dropped 11 basis points — the steepest decline since May — as traders raised bets on further easing later this year. The Australian dollar also slid 0.5% following the report. Analysts said the numbers underscore that the labor market, once a pillar of the economy, is beginning to cool after months of tightness that previously supported inflation pressures.
Third-quarter inflation data, due in just under two weeks, will be a critical determinant for the central bank’s November policy decision. Traders currently assign a roughly 70% probability that the RBA will cut its cash rate from the current 3.6% to around 3.35%, in line with expectations from most economists surveyed by Bloomberg. Governor Michele Bullock recently described Australia’s economy as in a “pretty good spot” with inflation within the 2%-3% target band, though she acknowledged that current policy settings remain “marginally tight.”
The September jobs report revealed that full-time employment rose by 8,700 and part-time positions by 6,300, while underemployment increased to 5.9% and the broader underutilization rate climbed to 10.4%. The employment-to-population ratio remained steady at 64%. Analysts said the figures show that while the labor market is still relatively strong, momentum is fading, giving the RBA room to act to support growth.
Global uncertainties also weigh on the central bank’s decisions. Trade tensions between the US and China, heightened geopolitical risks, and slowing Chinese demand — Australia’s largest trading partner — have all contributed to a cautious economic outlook. US Treasury Secretary Scott Bessent recently indicated that a pause in US import duties on Chinese goods could be extended if China halts plans for new export controls on rare-earth elements, signaling potential ripple effects for Australian trade and economic growth.
Overall, the data confirm a labor market that is cooling faster than expected, reinforcing expectations that the RBA may resume its easing cycle to sustain economic momentum and maintain inflation within its target range.
