National

Unemployment rate falls to 4.4 per cent in May

Jun 25, 2026

For sale sign on property in the suburb of Fitzroy in Melbourne — The door remains open to more interest rate hikes after a fall in unemployment. -AAP Image

Australia's unemployment rate fell back to 4.4 per cent after a surprise jump the month earlier, leaving the door open to more interest rate hikes.

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An extra 40,300 jobs were added to the economy in May, driving down the unemployment rate from 4.5 per cent, the Australian Bureau of Statistics reported on Thursday.

The fall in the unemployment rate was in line with economist expectations.

But the jump in employment exceeded consensus forecasts for around 25,000 new jobs to be added to the economy.

The labour force survey is notoriously volatile and the drop in the unemployment rate comes after a 0.2 percentage point jump in the month prior.

The result was driven by a reduction in the backlog of people who were waiting to start a job, said ABS head of labour statistics Sean Crick.

While the result suggests the labour market is still relatively resilient, it doesn't necessarily suggest it is tightening further.

After three interest rate rises so far in 2026, unemployment is expected to rise, but only gradually.

In its most recent set of forecasts, the Reserve Bank predicted the unemployment rate to average 4.2 per cent in the June quarter.

A rise in the unemployment rate to 4.6 per cent or more would have added weight to the view that the RBA has tightened enough, while a stronger print of 4.4 per cent or less would leave the door open to more hikes, said IG market analyst Tony Sycamore ahead of the release.

Part-time employment drove the growth in jobs, up 35,000 compared to 5000 additional full-time jobs.

The participation rate held steady at a relatively high 66.7 per cent.

Consumer price figures released on Wednesday showed the underlying pulse of inflation continued to strengthen in May, even as a sharp fall in fuel prices caused headline inflation to fall.

Fuel prices were still higher than before the onset of the Middle East conflict and businesses were passing on higher transport and material costs, Challenger chief economist Jonathan Kearns said.

A three-monthly measure of the trimmed mean, which filters out some of the noise from the relatively new monthly measure, has been stuck about 0.8 per cent, the former RBA official said.

"That's too high for the RBA to be comfortable," Dr Kearns said.