Australia’s unemployment rate could climb to 5.5 per cent by early 2028, the highest figure since 2017, excluding the Covid-19 pandemic between 2020 and 2021.
The forecasts published by National Australia Bank in its annual report on Thursday revealed economic growth is expected to slow to just one per cent in 2027.
NAB warns that Australia’s economic growth will slow sharply over the next two years as the impact of higher interest rates flows through the economy.
‘In Australia, economic growth is slowing, weighed down by 125 basis points of RBA cash rate increases since February 2026 to tackle inflationary pressures,’ the bank said.
‘Real GDP growth is forecast to slow from an annualised level of around 2.9 per cent over 2H25 to 1.4 per cent over 2026 and 1.0 per cent over 2027, before some improvement during 2028.’
While Australia’s labour market has so far remained resilient despite a series of rate rises, the bank warned weaker growth would eventually take its toll.
‘While labour market indicators remain resilient at this stage, a forecast multi-year period of below trend economic growth is expected to result in a gradual rise in the unemployment rate to around 5.5 per cent by early 2028 before stabilising,’ the report said.
The forecast would see unemployment rise from its current level of 4.7 per cent, according to Australian Bureau of Statistics data for September 2026.
Australia’s unemployment rate could climb to 5.5 per cent by early 2028 according to NAB
If realised, the jump from 4.7 to 5.5 per cent would mean around 125,000 more Australians losing their jobs, based on the current size of the labour force.
That would mark the highest unemployment rate since 2017, excluding the Covid-driven spikes of 2020 and 2021.
NAB also flagged that the Reserve Bank is unlikely to cut interest rates any time soon, despite the softer economic outlook.
‘Lags in the transmission of monetary policy likely see official cash rates on hold at 4.85 per cent for a while, with the RBA seeking confidence that inflationary expectations remain consistent with its targeted range,’ the bank said.
However, NAB warned significant risks persist, including ongoing cost pressures, falling house prices and weak productivity growth.
‘Cost pressures continue to pose a material risk to the economy, while the correction in the housing market poses some additional downside risk to growth,’ the report said.
‘For both growth and inflation, productivity remains a key challenge.’
