Australia’s unemployment rate rose to 4.6 percent in August, marking a post-pandemic high as the economy faces challenging conditions exacerbated by recent interest rate increases and ongoing geopolitical tensions. Despite the increase in joblessness, economists widely anticipate the Reserve Bank of Australia (RBA) will proceed with a fourth rate hike at its September meeting, bringing the cash rate to 4.6 percent.

Data released by the Australian Bureau of Statistics showed the economy added 39,000 jobs in August, all of which were part-time positions. However, 6,000 full-time jobs were lost, and the overall increase in labour force participation outpaced employment growth, driving the unemployment rate higher than market expectations. Economists had forecast the rate to hold steady at 4.5 percent with only 20,000 jobs added.

The unemployment rate rose across several states, with Victoria at 5.2 percent, up 0.1 percentage points, Tasmania at 5 percent, and South Australia climbing to 4.6 percent from 4.1 percent the previous month. The figures follow comments by RBA Governor Michele Bullock, who recently indicated unemployment might need to reach around 5 percent to bring inflation back to the central bank’s target range.

David Bassanese, chief economist at Betashares, suggested the data could reinforce the RBA’s rationale for lifting rates despite the rise in joblessness, describing it as "the price that needs to be paid" to slow domestic demand and reduce inflation pressures. Bassanese maintained his projection for a 25 basis point rate increase at the September 28–29 meeting, with an uncertain possibility of a further hike in early November.

All of Australia’s major banks, along with most money market participants, have factored in the upcoming rate increase. ANZ is unique among the banks in forecasting consecutive hikes in both September and November.

Meanwhile, voices from organised labour and social welfare groups called on the RBA to pause rate increases. Australian Council of Trade Unions secretary Melissa Donnelly cautioned against policies that could lead to higher unemployment, emphasizing the impact on vulnerable workers. Similarly, Australian Council of Social Service chief executive Cassandra Goldie urged the central bank to refrain from additional hikes and called on the government to take a more active role in managing inflation.

Compounding concerns for the economy, the National Australia Bank’s latest quarterly business survey revealed the business conditions index had turned negative for the first time in five years. Companies cited falling profitability and deteriorating trading conditions, with wage pressures remaining the leading concern. The survey reported a decline in sales margins to their lowest level since mid-2020, reflecting ongoing strain on businesses amid higher costs and tightening monetary policy.

Taken together, these indicators suggest that while the labor market and broader economy show signs of weakening, the RBA is poised to continue tightening monetary policy in efforts to control inflation.