Australia's unemployment rate rose to 4.7% in September, marking its highest level in nearly five years, according to data from the Australian Bureau of Statistics (ABS). The increase coincided with an unexpected decline in total employment, which fell by 39,300 jobs during the month, contradicting economists' expectations of a 20,000 rise.

The decline in jobs was notably driven by a sharp decrease in part-time employment, which dropped by 73,700 positions. This contraction was partially offset by an increase of 34,400 full-time jobs. Underemployment, a measure that accounts for individuals working fewer hours than they desire, also edged up slightly to 6.3% from 6.2% in August. The ABS also revised the August unemployment rate upward from 4.6% to 4.7%.

KPMG’s chief economist, Brendan Rynne, described the figures as evidence that the Australian economy is losing momentum. He said while the labour market appeared to be slowing, the current data alone was unlikely to reduce demand sufficiently to curb inflation toward the Reserve Bank of Australia’s (RBA) target of 2.5%.

The recent jobs report has tempered expectations of an interest rate hike at the RBA’s upcoming meeting scheduled for November 3. Financial markets adjusted the implied probability of a rate increase to below 20%, down from around 35% earlier in the day. Despite this shift, economists warned it was premature to dismiss the possibility of a further tightening of monetary policy this year. Krishna Bhimavarapu, an economist at State Street Investment Management, noted that while the threshold for additional rate hikes had risen, further moves could not be ruled out.

Political reaction to the figures was swift. Shadow Treasurer Tim Wilson criticized the government’s economic management, attributing the higher unemployment and other economic challenges to the current policy direction. Speaking during Treasurer Jim Chalmers’s attendance at G20 finance minister meetings in Bangkok, Wilson highlighted what he described as negative consequences of the Albanese administration’s approach, citing increased unemployment, taxes, spending, inflation, and interest rates.

In response, Prime Minister Anthony Albanese maintained that despite the recent uptick, the unemployment rate remained low by historical standards. Speaking in parliament, Albanese underscored that the current government presided over the lowest unemployment rate recorded in 50 years. The unemployment rate in Australia began 2023 at 4.1% before rising in recent months.

The evolving labour market indicators and their implications for monetary policy remain closely watched as Australia navigates economic pressures amid efforts to balance growth and inflation control.