Yasmine Raso
Senior Journalist
24 August 2026
In its analysis of the latest labour market print released last week, HSBC has pointed to “quite volatile” but loosening figures to cement its base case that the Reserve Bank of Australia’s (RBA’s) tightening cycle has come to an end.
The bank noted that July’s fall in employment by 15,800 jobs, rise in unemployment to 4.5 per cent and drop in labour force participation to 66.9 per cent was a significant pivot that surprised market expectations given a strong print delivered in June.
According to Chief Economist, Paul Bloxham, this “softer-than-expected” result all but reflects persistent month-on-month volatility giving rise to a “gradual loosening pathway” that will see the RBA hold the cash rate steady at 4.35 per cent before commencing cuts from Q3 2027.
“The key measures of spare capacity in the jobs market also show continued trend loosening,” he said.
“The unemployment rate rose to 4.5% in July, continuing is gradual upwards trend. It briefly touched this rate back in April and, prior to that, is the highest since November 2021.
“Other measures, such as the underutilisation rate and youth unemployment rate – which tend to be guides to more-cyclical elements of the jobs market – edged down slightly in July, but are still drifting higher in trend terms.
“A trend loosening pathway for the jobs market was also highlighted in yesterday’s Q2 Wage Price Index data. Private sector wages growth slowed to 0.7% q-o-q in Q2 (2.8% annualised) and is now running at its slowest annual pace since June 2022.
“We see these figures, on the margin, suggesting the jobs market is loosening just a bit faster than the RBA had been expecting. Recall, in the RBA’s August projections, the central bank forecast the unemployment rate at 4.5% and wages growth of 3.3% y-o-y by Q4 2026.
“The unemployment rate may be trending up a bit faster and wages growth is a bit softer, although the minimum wage decision for award wage rises will come into play from 1 July, which could lift wages momentum a bit.”