Unemployment jumps to 4.5% — the highest since late 2021

Labour MarketA downside surprise across the board

April’s Labour Force Survey delivered a downside surprise across the board. Employment contracted by 18.6k against expectations of a 10–15k lift, the participation rate edged down a tenth to 66.7%, and the jobless rate jumped two-tenths to 4.5% — the highest reading since the Delta wave of late 2021.

The print warrants caveats. This year’s survey window fully captured the Easter long weekend, a calibration quirk that adds holiday-driven softness the seasonal adjustment process cannot fully strip out. Past episodes of this overlap have typically been followed by a May rebound.

• The youth cohort (15–24) explained the entire downside surprise. Employment in that group collapsed 56.4k and youth unemployment lifted 0.9ppt. Moves of that scale in this segment are historically noisy and should partially reverse next month.
• Beneath the seasonal noise, the result was still genuinely weaker than expected: three-month employment growth has slipped from 1.6%yr to 1.5%yr and the employment-to-population ratio dropped 0.2ppt to 63.7%. Card data shows essentials crowding out services.
• Westpac sees the broader softening landing in H2 once the Middle East shock and prior hikes fully transmit, with unemployment forecast to reach a 5% quarter-average by early 2027 — well above RBA and Treasury projections.

Consumer ConfidenceConfidence rises 2.3pts

New Home LoansBorrowing pulls back in the March quarter

• The value of new home loan commitments fell in the March quarter according to the latest ABS lending indicators — the first quarterly decline in over a year. The pullback spans both owner-occupier and investor segments, reflecting the bite of higher borrowing costs after the RBA’s recent tightening cycle.
• First home buyer lending also softened in the quarter, easing back from elevated levels late last year. Average loan sizes have plateaued nationally, with declines in Sydney and Melbourne offsetting continued gains in the mid-sized capitals where supply constraints remain acute.
• The data points to credit-led demand cooling at the margin — even before this week’s softer labour market print and the Budget’s housing tax changes.

Foreign ExchangeAUD slips to 0.71 on the jobs surprise

• The Aussie retreated to the 0.71 handle on Friday, giving back recent gains after the much weaker-than-expected April jobs print prompted traders to dial back conviction on further RBA tightening. The pair is on track for a second straight weekly decline.
• The implied probability of a June hike to 4.60% has collapsed in OIS pricing following the release. After three consecutive moves higher, markets are now leaning toward a pause as the Board digests the first clear sign of labour market deterioration.
• The Melbourne Institute survey of consumer inflation expectations cooled to 5.6% in May, retracing from April’s three-year peak of 5.9% — some relief on the second-round narrative, though still uncomfortable relative to the RBA’s target band.
• Crude prices remain a structural headwind for the disinflation story. The Iran conflict keeps a premium embedded in front-end energy contracts, leaving the AUD caught between a softening domestic growth profile and stubbornly elevated imported cost pressures.

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Sources: Westpac Economics — April 2026 Labour Force Survey, ABS, ANZ-Roy Morgan, Melbourne Institute. This summary is for informational purposes only and should not be considered financial advice. Always consult a professional before making investment decisions.