AUD/USD Forecast: Jobs Shock Strengthens Case for an RBA Pause
The Australian Dollar faces weaker rate support after a jobs slump, although Goldman Sachs says the RBA’s November decision still depends on inflation.
Australia’s labour market has delivered a setback to expectations for further interest-rate rises, with an unexpected fall in employment reinforcing Goldman Sachs’ view that the Reserve Bank should stop tightening.
AUD/USD traded near 0.6909 on Thursday afternoon, down about 1% from Wednesday’s close.
Euro to Australian Dollar (EUR/AUD): 1.621749 (+1.08%)
The September labour-force release showed employment falling by 39,300, against the 20,000 increase expected by Goldman and the market consensus cited by the bank.
Unemployment reached 4.7%, leaving policymakers with clearer evidence that demand for workers is weakening just as expensive energy keeps inflation risks alive.
Goldman’s economists describe the result as part of an emerging trend: “Today’s data provide further evidence of a gradual and orderly softening in the labour market. The unemployment rate has averaged 4.6% over 3Q2026, up from an average of 4.4% in 2Q2026, and is now 60bp higher than the start of the year.”
The result complicates the RBA’s renewed tightening message examined in our earlier coverage.
Full-time hiring softens the headline blow
The employment decline was concentrated in part-time work, rather than a fall across both categories.
Goldman reports: “Compositionally, the decrease was driven by part-time employment (-73.7k), while full-time employment rose (+34.4k). In year-over-year terms, annual employment growth slowed by 30bp to 1.2%yoy.”
Full-time hiring helped total hours hold up.
The economists write: “Hours worked edged up 0.1%mom, despite the decline in total employment. In year-over-year terms, growth in hours worked slowed to 1.3%yoy.”
The ABS also cautions that changes to survey collection may still be influencing the seasonally adjusted figures, although its quality checks found the September statistics fit for use.
It would therefore be premature to treat one month’s employment loss as proof of an abrupt downturn.
The quarterly unemployment average is now close to the RBA’s estimate of a rate consistent with stable inflation.
Goldman says: “This leaves the unemployment rate at the RBA’s NAIRU estimate (4.6%), slightly above their most recent forecasts (4.4% – 4.5%), and marks the third consecutive month the unemployment rate has risen by more than consensus expectations.”
Inflation can still prevent a November pause
Before the jobs release, Westpac economist Ryan Wells had warned against assuming that softer employment would settle the policy debate.
He wrote: “Today’s labour force data is unlikely to throw a major spanner in the works as far as monetary policy is concerned-the RBA’s immediate focus is clearly centred on inflation, especially the risks emanating from the Middle East-although another weak read on unemployment would continue to complicate the RBA’s communication challenge, especially given the more hawkish minutes received earlier this week.”
US inflation adds a separate headwind for AUD/USD.
Thursday’s US producer-price report showed a 1.3% monthly rise in September, adding to concerns about further Federal Reserve tightening after Wednesday’s consumer-inflation surprise.
A pause in Australia would offer less help to the Aussie if US interest-rate expectations remained elevated.
Goldman nevertheless retains its hold call, with one important condition: “We continue to expect the RBA to remain on hold from here, though view November’s rate decision remains conditional on the outcome of the 3Q2026 CPI report (28 October).”
AUD/USD exchange rate FAQ
Why has the Australian Dollar weakened?
The jobs disappointment has reduced the case for further RBA tightening while US inflation continues to support expectations of higher American rates.
Does Goldman expect another RBA increase?
It expects rates to remain on hold, subject to the inflation figures due on 28 October.
Did every part of the jobs report weaken?
No. Full-time employment and total hours worked increased, although overall employment fell
