Australian Labour Market update

The unemployment rate averaged 4.2% in the final quarter of 2025, defying expectations of an increase, and sitting close to KPMG’s latest estimate of NAIRU. At the same time, households remain nervous about labour market conditions. Survey measures of unemployment expectations show that sentiment has deteriorated back to pre‑pandemic levels, even though the unemployment rate through the quarter was 1.0 percentage point lower than the average during 2019.

Annual employment growth slowed to 1.2% in the December quarter, a downshift from the strong post‑pandemic years. Growth in filled jobs within the non-market sector slowed sharply to 1.6% in the September quarter 2025, from 6.8% a year ago, but still outpaced the market sector at 1.0%. The pace of wages growth in the public sector also continued to outpace the private side of the economy.

Wages grew 3.4% over the year to the September quarter 2025, but rising inflation pushed real wage growth into negative territory (‑0.2%). Annual growth was strongest in Electricity, gas, water and waste services and Public administration & safety (both +4.3%), followed by Health care & social assistance (+3.8%). Financial & insurance services recorded the weakest growth (+2.5%).