4.6% Unemployment, 90% Hike Odds (RBA Preview, 29 September 2026): What to Expect and What It Means for the Aussie
The RBA decides at 2:30pm AEST on 29 September. Markets price ~90% for a hike to 4.60% even with unemployment at 4.6%. Here's why, and what moves the Aussie.
4.6% Unemployment, 90% Hike Odds (RBA Preview, 29 September 2026): What to Expect and What It Means for the Aussie
The Reserve Bank of Australia announces its decision at 2:30pm AEST (04:30 UTC) on Tuesday 29 September 2026, and markets price roughly a 90% chance that it raises the cash rate by 25 basis points, from 4.35% to 4.60. All four major banks expect it. The complication arrived five days before the meeting: unemployment rose to 4.6% in August, the highest since late 2021. It will probably not stop a hike, because two days earlier Governor Michele Bullock had said an unemployment rate "between 4.5 and 5" is what it takes to cool inflation. The decision itself is priced. What is not priced is what the Board signals about November, and that is what moves the Aussie.
This is the first RBA meeting of 2026 where the market has a clear view on the direction and the Board has no fresh forecasts to publish. The September meeting carries no Statement on Monetary Policy. The only new information will be the statement's wording, the vote and the Governor's press conference an hour later. This post sets out what changed between August and September, why a rising jobless rate fits the Board's own logic, and how each outcome would reach AUD through the rate, growth and risk factors.
- Decision at 2:30pm AEST / 04:30 UTC, Tuesday 29 September. There is no SMP this meeting, and the press conference is at 3:30pm AEST.
- Roughly 90% priced for a hike to 4.60%. Pricing was ~95% on 18 September and ~90% after the jobs data, and all four major banks forecast the move.
- The swing came from inflation, not jobs. After the August meeting, swaps put the odds of any further 2026 hike at ~40%. Then July's trimmed mean came in at 3.6%, unchanged, while headline eased to 3.5%.
- Unemployment rose to 4.6%, and that fits the plan. Bullock said 22 September that "between 4.5 and 5" per cent unemployment "will probably take enough heat out of the labour market". The August rise was driven by participation hitting 67.1%, not by job losses.
- The priced part won't move AUD. November will. Pricing is near even odds for a second hike to 4.85%, so the statement's language and the vote decide which way the expected path moves.
- Check the rate, growth and risk factors for the Aussie against the other seven majors on the live meter.
When it drops, and what is on the table
The Monetary Policy Board meets across Monday 28 and Tuesday 29 September. The statement is released at 2:30pm AEST on the Tuesday, which is 04:30 UTC and half past midnight in New York. Governor Bullock takes questions at 3:30pm. The cash rate target has been 4.35% since May 2026, after three 25 basis point increases in February, March and May. The Board then held in June and again, unanimously, on 11 August. We covered that decision in our August RBA post.
What makes September unusual is how little the Board publishes. Forecasts come quarterly, and the next set is due in November. So Tuesday's decision will be explained in a single page of statement text plus a press conference. In practice the market will read three things:
- The move itself. Either 25 basis points to 4.60%, or a hold at 4.35%.
- The guidance clause. Since June the statement has said the Board will do what is necessary, "including increasing the cash rate target further if upside risks materialise." Whether that clause survives a hike tells the market whether 4.60% is a floor or a ceiling.
- The vote. The RBA reports whether a decision was unanimous. August's was. A split vote on a hike would count as real information either way.
How September became a priced meeting
Six weeks ago, a September hike was a minority view. The August minutes, published on 25 August, laid out both cases. The minutes say the argument for a 25 basis point increase "was founded on an assessment of the risks to the inflation forecast." The case for holding "relied on forming a judgement that, following the increases in the cash target earlier in the year, monetary policy appeared sufficiently restrictive." The hold won. The minutes also added the line that set up this meeting: "Several members judged that it was quite possible that the upside risks to the inflation forecast would crystallise, requiring some further tightening."
The Board said it would wait for the monthly inflation and labour reports and the June quarter national accounts. Here is what arrived:
| Release (ABS) | Date | Figure | Read for the Board |
|---|---|---|---|
| Wage Price Index, Q2 | 19 Aug | +0.8% q/q, 3.2% y/y | Wages are cooling slowly, but that is still too fast with productivity flat or falling |
| Labour force, July | 20 Aug | Unemployment 4.5% | The labour market is easing |
| Monthly CPI, July | 26 Aug | Headline 3.5% (from 3.8%); trimmed mean 3.6% (unchanged) | Underlying inflation has not moved |
| National accounts, Q2 | 2 Sep | GDP +0.4% q/q, 2.1% y/y | Demand is a touch firmer than forecast |
| Labour force, August | 24 Sep | Unemployment 4.6%; +39,000 jobs; participation 67.1% | Unemployment is higher, but job creation is still positive |
The July CPI did most of the work (ABS, 26 August). Headline inflation fell, but the trimmed mean held at 3.6%, and that is the measure the Board steers by. The mix inside the index made it look persistent. Housing rose 5.0% over the year, and new dwellings rose 5.7% "as builders passed on higher costs for materials and labour," in the ABS's words. Fuel jumped 7.5% in the month, which the bureau put down to higher world oil prices and the partial unwinding of federal fuel excise relief. Economists moved their calls the same day, Bloomberg reported. By the Board's parliamentary hearing on 18 September, ABC News put pricing for a September hike at 95%, with 37% for another in November.
The unemployment puzzle: why 4.6% doesn't stop the hike
The August labour force report (ABS, 24 September) took unemployment to 4.6% in both seasonally adjusted and trend terms. That is the highest in the post-COVID era. On its face that argues for patience, and some commentators said so. The Board's own framework reads it differently, for three reasons.
First, the Governor had already named the range. At a CEDA event in Sydney on 22 September, Bullock said that "between 4.5 and 5 will probably take enough heat out of the labour market that eases pressure on inflation." In other words, higher unemployment is the mechanism the Board is relying on, not a sign that policy has gone too far. At 4.6%, the rate has only just entered her range.
Second, the rise came from more people looking for work. Employment rose by 39,000, ahead of expectations. Unemployment rose by 28,000 because the labour force grew by about 67,700, lifting participation to 67.1%, just below its record. Part-time jobs rose 46,000 and full-time jobs fell 6,000. Hours worked rose 14 million in the month. Rising unemployment from new job seekers eases wage pressure more slowly than rising unemployment from layoffs.
Third, the ABS attached a caveat. It changed its Supplementary Survey collection model in August. It says the effect is probably within normal sampling variability, but it still points users to trend data. A Board looking for a reason to ignore a single month's move has one.
Put those together and the jobs report changes the case for November more than the case for September. The Board is also weighing a cash rate that the August minutes said already sat "at the top of the range" of estimates of the neutral rate. That is why pricing for a follow-up hike, not for Tuesday, is where the 4.6% print could show up.
Three scenarios and what each means for AUD
A currency responds to changes in the expected path of the policy rate, not to the rate itself. With about 90% of a hike priced, the move on Tuesday shifts the path by only the remaining 10% or so. The larger variable is November, which sits near even odds for a second increase to 4.85%. ANZ and Citi both forecast that outcome.
| Scenario | What it looks like | Rate path | Channel to AUD |
|---|---|---|---|
| Hike, door left open | 25bp to 4.60%; conditional-tightening clause kept; unanimous | Priced for September; November odds hold or rise | Supports the interest-rate factor at the margin. Mostly priced, so the move shows up in the swap curve before spot |
| Hike, door closed | 25bp to 4.60%; language says policy is now restrictive enough, or cites the labour market easing | November odds fall | Lowers the expected path even though the rate rose. The "hawkish" decision can leave the Aussie weaker |
| Hold at 4.35% | Board cites unemployment at 4.6% and waits for the 30 September CPI | The ~90% priced for September comes out | The largest repricing of the three. It removes the rate support that the last month of pricing added |
A split vote would amplify any of these. A hike with dissent in favour of holding would read as the door closing, and a hold with dissent in favour of hiking would soften the surprise. The press conference matters more than usual here, because the Governor's answer on November is the only guidance about the path between now and the November SMP.
The Aussie through the five factors
Interest rates. A move to 4.60% would widen Australia's policy rate advantage over the United States. The Federal Reserve raised its target range to 3.75–4.00% on 16 September (see our Fed, BoE and BoJ post). The differential only helps the Aussie to the extent it is unexpected, though, and most of it already is expected. Deputy Governor Andrew Hauser told the parliamentary committee that "we're probably rather closer now to a more sensible level of long-term global real interest rates." That framing suggests the Board sees higher rates as a lasting setting rather than an emergency.
Growth. GDP grew 0.4% in the June quarter and 2.1% over the year (ABS, 2 September). The ABS described households as cautious, with imports meeting much of the demand. That's soft enough to argue that rates are biting, and firm enough that the Board need not stop.
Risk sentiment. The Aussie remains a high-beta currency to global equity sentiment. Bullock raised the AI investment cycle herself at CEDA, saying "some people think it's a bubble, some people don't," and calling it a risk the Bank is watching. A sharp risk-off move around the decision can outweigh the rate signal, as it often does.
Commodities. The July CPI showed the Middle East oil shock still passing through to Australian prices. Oil is also the input the Board cannot control. Bullock told the committee "the Middle East shock has made us poorer, and we can't respond by letting inflation get out of control." For how iron ore and energy feed the currency more broadly, see what drives the Australian dollar.
Positioning. When pricing is this one-sided, the usual pattern around a delivered hike is a muted spot move. Any repricing tends to happen in the next meeting's odds rather than in the level.
What would change the picture
- The statement drops or softens the conditional-tightening clause. This is the clearest single signal that 4.60% is intended as the peak.
- The Governor describes 4.6% unemployment as meaningful easing, rather than as the band she named on 22 September. That would move November odds lower.
- The August monthly CPI on 30 September. It lands the morning after the decision, so the Board decides without it. A second flat trimmed mean would strengthen the case for November. A clear fall would undercut it just as the Board had hiked.
- The US side of the differential. September payrolls on Friday 2 October feed Fed pricing, and AUD/USD responds to the gap between the two policy paths, not to either one alone.
The RBA publishes its reasoning in the minutes two weeks after each meeting, and the ABS release calendar sets the data the Board will have. For the background on how the Bank reads inflation, see Australian inflation, the RBA and the dollar. For more on how we build these notes, see about pip theory.
Educational macro context only — not investment advice.