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WEEKLY E-MAIL

INTEREST RATE CUT NOW A POSSIBILITY AS JOBLESS FIGURE SPIKES

By James Malliaros

An unexpected jump in Australia’s unemployment rate has increased pressure on the Reserve Bank of Australia (RBA) to cut interest rates at its next meeting. Labour force figures showed unemployment rising from 4.2% to 4.5% in September, according to the Australian Bureau of Statistics – this is the highest figure since November 2021.

The result defied market predictions, with most economists tipping the jobless rate to remain steady. Unemployment rose by 34,000 during the month – Victoria recorded the highest unemployment rate at 4.7%, while in Queensland it fell slightly to 4.2%.

The labour force figures will be a crucial indicator for the RBA on whether to further cut interest rates from the current 3.6% when it next meets on November 4 – Melbourne Cup Day.

The unemployment rate was still low considering the global economic conditions, Treasurer Jim Chalmers said. “Nobody wants to see the unemployment rate tick up, but unemployment is still low, participation is high, and 15,000 jobs were created last month,” he said. Given the data, which signalled a weaker-than-expected Australian jobs market, analysts’ bet on a rate cut in November has strengthened.

The main factor for the spike was slowing employment growth, with the average monthly job gains in 2025 dropping to 12,900, compared to 32,600 in 2024. The 12-month trend shows that the unemployment rate hovered around 4.1% in late 2024, then gradually rose through 2025. From June to August, it reached 4.3%, before spiking to 4.5% in September.

The monthly figures can be quite volatile, but on a positive note, the OECD projects the unemployment rate to ease slightly to 4.2% by December 2025, as monetary policy loosens and economic conditions stabilise.

After the September jobs report, the ASX 200 surged to record highs (9,109 points) as rate-sensitive sectors like Financials and Real Estate rallied on expectations of cheaper borrowing costs, increased lending activity and increased property valuations. There was also an increase in the gold miners’ share price, which benefited from a weaker Australian Dollar and safe-haven demand.

From a broader market outlook, interest rate cuts typically boost equities and property but can signal an economic slowdown, which could cap gains if labour market weakness persists. In addition, if unemployment continues to rise, it will erode confidence and lead to market volatility, despite lower rates.

Implications for investors

In a falling interest rate environment, the following factors are worth considering:

  • Equities: Structural growth sectors (renewables, technology and AI infrastructure) become more attractive over cyclical defensive sectors
  • Fixed Income: Extended interest rate duration to capture falling yields
  • Alternatives: Gold and infrastructure become attractive hedges

James Malliaros
Senior Financial Planner
Certified Financial Planner®
SMSF Specialist Advisor™
Authorised Representative No. 291633

If you have any questions or comments, please email me at james@gfmwealth.com.au

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