Jobs figures 'settling back' into pre-COVID levels

An economic settling after the effects of the COVID pandemic is behind a surprise jump in the jobless rate, the employment minister says, but the figures could mean good news for borrowers.

The unemployment rate increased to 4.5 per cent in September, a four-year high, defying predictions from economists it would remain stable for the month.

Employment Minister Amanda Rishworth said the increase was in line with official forecasts, but indicated the rise was an adjustment of economic conditions following turbulence triggered by the pandemic.

"The unemployment figure is still at historically low levels. If we look pre-pandemic ... our unemployment rate was 5.2 per cent, so as we came out of the pandemic there was a big roaring back in terms of jobs and involvement," she told ABC Radio on Friday.

"It is about settling back into what is normal in our economy, but obviously, in terms of the impact on industries, that data will be coming out over future months."

Ms Rishworth said the growing number of jobs in the labour market was also a factor behind the jump in unemployment.

"There are also more people, and there's more people looking for jobs as well," she said.

"I would say that having an increase in jobs in the last month of close to 15,000 is good news."

The increase has led to hopes the Reserve Bank could cut interest rates from 3.6 per cent at its next meeting in early November.

After a surprise uptick in partial inflation figures in August, the Reserve Bank is between a rock and a hard place as its dual mandate - price stability and full employment - pulls it in opposite directions, Oxford Economics head of research Harry Murphy Cruise said.

"Inflation looks set to come in hotter than the bank's latest forecasts, while the labour market is weaker than expected," he said.

"Each development warrants different policy responses."

Despite the lift in rate cut expectations, most local banks and global investment giants still tip the Reserve Bank will hold the cash rate steady at 3.6 per cent on November 4.

"Until the tension between inflation and labour market is resolved, we expect the RBA to remain cautious and watchful of the data flow," Commonwealth Bank's head of Australian economics Belinda Allen said.

"September quarter inflation should show no further progress on trimmed mean inflation in the quarter and makes it hard to see the cash rate lowered at the November meeting."

The RBA had expected some cooling in September's jobs data but neither the central bank, nor scores of analysts and economists, had tipped anything near the 4.5 per cent jobless figure.

While narrowing bets on further interest rate cuts helped Australia's stock market soar to record highs on Thursday, analysts noted monthly unemployment prints were often revised, and partial CPI data didn't hold the same weight as the quarterly figure, due at the end of October.