Australia’s labour market has thrown economists a curveball. The unemployment rate fell sharply to 4.3% in October 2025, reversing last month’s surprise spike and exceeding all forecasts in the process.
The Australian Bureau of Statistics released figures showing 42,000 new jobs flooded the economy last month. That’s more than double what economists predicted. Markets had braced for just 20,000 new positions.
Full-Time Jobs Drive October Surge
The employment gain came almost entirely from full-time work. These positions jumped by 55,000, split fairly evenly between men and women. Full-time roles for women rose by 29,000, while male employment climbed 26,000. Part-time work took a hit, falling by 13,000 positions. Women bore the brunt, losing 21,000 part-time roles.
Unemployment rate falls to 4.3%
Sean Crick, the ABS head of labour statistics, pointed out something unusual. “This month more unemployed people moved into employment compared to a typical October,” Crick said. The jobless figure dropped by 17,000 people, bringing the total number of unemployed Australians to 669,600.
RBA Faces Fresh Inflation Dilemma
The strong jobs data arrives at an awkward moment for the Reserve Bank of Australia. Just weeks ago, Australia’s inflation jumped to 3% in the September quarter, well above the RBA’s forecasts. That unexpected surge had markets betting interest rate cuts were off the table.
Now the unemployment drop suggests the labour market remains tight. Tight labour markets typically fuel wage growth and inflation. The RBA cut rates three times this year, bringing the cash rate to 3.6%. Governor Michele Bullock has stressed the need for caution amid persistent inflation pressures.
In its November policy statement, the central bank noted inflation was “materially higher than expected.” The trimmed mean measure hit 3% annually, up from 2.7% in June. Commonwealth Bank economists now expect the RBA will hold rates steady through summer. Earlier hopes for a November cut have evaporated.
What the Numbers Really Mean
Looking beyond the headline figures reveals more complexity. The underemployment rate fell to 5.7%, down 0.2 percentage points. That’s half a percentage point lower than October 2024.
The underutilisation rate, combining unemployment and underemployment, dropped to 10%. This sits 0.3 points below last year and nearly 4 points below the March 2020 pandemic peak.
Hours worked crept up just 0.1%, slightly trailing the 0.2% employment gain. Over the past year, hours worked rose 1.4%, marginally below the 1.5% employment growth.
The participation rate edged up to 67%, matching recent highs. The employment-to-population ratio held at 64%.
Key October 2025 Labour Market Figures:
- Unemployment rate: 4.3% (down from 4.5%)
- Employment change: +42,200
- Full-time employment: +55,300
- Part-time employment: -13,000
- Participation rate: 67.0%
- Underemployment rate: 5.7%
Expert Reactions Split
Economists remain divided on what comes next. Some view October’s data as proof the economy can handle current interest rates without tipping into recession. Australia’s broader economic outlook shows GDP growth forecasts around 1.7% for 2025.
Others warn the tight labour market could reignite inflation concerns just as price pressures were moderating. “The unemployment rate dropped to 4.3% after rising to 4.5% in September,” Crick noted. “The October unemployment rate is in line with June, July, and August 2025.”
Sean Crick, ABS head of labour statistics
Financial markets reacted swiftly. The Australian dollar strengthened against the US dollar, climbing toward the 0.66 level. Bond markets repriced expectations for future rate cuts, with traders now betting on just one or two 25-basis point reductions through 2026.
Historical Context Matters
October’s unemployment rate marks a return to levels seen earlier this year. The September spike to 4.5% was the highest since November 2021.
That brief jump had raised concerns about a weakening labour market. October’s reversal suggests it may have been a temporary blip. Trend employment, which smooths out monthly volatility, rose by 27,100 people or 0.2%. Over the past year, trend employment grew 1.5%.
The labour force now totals 14.7 million people, with employment sitting at 14 million. Compared to pre-pandemic levels, Australia’s labour market shows remarkable strength. The unemployment trajectory has remained well below historical averages despite aggressive interest rate increases.
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What Happens Next
All eyes turn to the RBA’s next meeting and upcoming inflation data. The central bank must balance competing pressures. Strong employment supports consumer spending and economic growth. But it also risks keeping inflation above target for longer.
Housing affordability remains a critical concern for many Australians. With interest rates likely staying higher for longer, mortgage stress continues affecting households.
The September quarter inflation surge caught policymakers off guard. Whether that proves temporary or signals renewed price pressures will shape the RBA’s next moves.
For now, Australia’s job market delivers good news. Workers are finding employment, unemployment is falling, and the economy shows resilience. Whether that strength translates into rate relief remains the critical question facing borrowers heading into 2026.
