National unemployment rate

IBISWorld forecasts the national unemployment rate to rise by 0.23 percentage points in 2025-26, to average 4.32% over the year. As of August 2025, the national unemployment rate was measured at 4.24%, up from 4.12% the previous year. However, tight labour market conditions are expected to ease slightly, placing upward pressure on the unemployment rate over the rest of the year. The RBA anticipates the unemployment rate to stabilise around 4.3% throughout the later stage of 2025 and into the first half of 2026. Forecasts from major banks estimate the unemployment rate will peak at up to 4.5% by the end of 2025-26. Regardless, the labour market is expected to remain relatively stable in comparison to the turbulent conditions experienced between 2019-20 and 2023-24.

The unemployment rate rose sharply in late 2019-20, due to the onset of the pandemic and associated lockdown measures. Lockdowns and social distancing requirements led to the Australian economy entering a recession for the first time in nearly 30 years. Closure of many non-essential businesses and international borders essentially shut down demand for many sectors, such as tourism, retail and recreational activities. In response, many businesses cut costs and personnel, resulting in reduced employment across the economy. The unemployment rate peaked at 7.44% in July 2020, but remained elevated throughout 2020-21, particularly in the first half of the financial year. However, the unemployment rate largely trended downward between the start of 2021 and the end of the 2021-22 financial year. Economic support packages, including quantitative easing via the Reserve Bank and the Federal Government's JobKeeper Payment scheme, placed downward pressure on the unemployment rate throughout this period. By October 2022, the national unemployment rate had fallen to a low of 3.44%, with job vacancies near record highs in the wake of the pandemic. In 2022-23, the unemployment rate was relatively stable, ranging from 3.4% to 3.7% throughout the year. Labour demand was strong as the economy rebounded, with households spending excess savings accumulated during the pandemic's high discretionary incomes.

The unemployment rate trended upwards across 2023-24 and 2024-25, as high inflation caused households to cut back on spending, limiting private sector businesses from maintaining high job creation rates. This trend was exacerbated by the RBA holding interest rates at or above 4.10% across the two-year period to combat high inflation, as elevated borrowing costs reduced private sector expansion. Continued strong positive net migration also allowed supply to catch up to the labour demand created by the initial post-pandemic boom, placing further upwards pressure on the unemployment rate. Overall, IBISWorld forecasts the national unemployment rate to decline at an average annual rate of 0.38 percentage points over the five years through 2025-26.