ASX 200 hits all-time highs as weak jobs data boosts RBA rate cut prospects
Australia's unemployment rate unexpectedly jumps to 4.5%, sending the ASX 200 to record highs as markets bet on November rate cuts.
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KEY POINTS
- Australia's unemployment rate hit 4.5% in September, the highest since November 2021. Jobs creation of 14,900 fell short of expectations, with employment growth at 1.3% failing to keep pace with 2.0% population growth.
- The weak jobs data sent the ASX 200 surging 1.32% to a record 9,109 points, with rate-sensitive sectors like Financials and Real Estate leading gains as November rate cut odds jumped to 70%.
- The S&P/ASX 200 Financials Index hit all-time highs despite Commonwealth Bank trading 11% below its June peak, indicating strong performance from other major banks and Macquarie.
Australia's unemployment rate unexpectedly jumped to 4.5% in September, up from 4.3% in the previous month and above market expectations. This marks the highest unemployment rate since November 2021, strengthening the case for further interest rate cuts by year-end.
The key numbers from the September jobs report include:
Total jobs created: 14,900 (8,700 full time and 6,300 part time) vs. market expectations of ~20,000
Participation rate rose 0.1 percentage points to 67.0%, still below the record high of 67.2% set earlier this year
Underemployment rate climbed 0.2 percentage points to 5.9%, indicating more people are working fewer hours than desired
The data suggests Australia's labour market isn't creating jobs fast enough to absorb its largely migration-driven workforce. Employment growth sits at just 1.3% year-over-year, well below the ~2.0% annual population growth rate.
"The unemployment rate has broken out of the low 4s range seen throughout 2024-1H25 and is now at or slightly above the peak of the RBA forecasts," warns AMP economist My Bui, adding that "while the upcoming inflation reading on 29 October is still very important, we continue to see two more rate cuts this cycle (in November 2025 and February 2026)."
ASX 200 rallies to all-time highs
The S&P/ASX 200 was up 0.53% (9,026 pts) heading into the 11:30 am AEDT jobs report. By 12:36 pm, it had surged 1.32% to a record 9,109.
S&P/ASX 200 intraday chart (Source: TradingView)
The weak employment data pushed the probability of a November rate cut back to ~70% and sent the Aussie 10-year yield down 7 basis points to 4.16%.
Australia government 10-year yield (Source: TradingView)
Rate-sensitive sectors led the rally, with Real Estate and Financials posting solid gains.
S&P/ASX 200 sector as at 2:45 pm AEDT, Thursday 16 October 2025 (Source: Market Index)
Notably, the S&P/ASX 200 Financials Index hit fresh all-time highs even as Commonwealth Bank (its largest constituent) remains 11% below its June 2025 peak. This suggests the other Big Four banks and Macquarie (up 6.1% today) are doing the heavy lifting.
Where to from here?
Most economists and market commentators believe today's labour force report strengthens the RBA's case for a 25 basis point rate cut at the November meeting.
The data puts the RBA in an awkward position, similar to the Fed when the US labour market began weakening against sticky inflation. On 17 September, the Fed cut rates by 25 basis points, citing that it was "attentive to the risks to both sides of its dual mandate and judges that downside risks to employment have risen."
Despite the initial surge, the market has already faded from session highs, currently up 0.79% versus the 1.32% peak.
Overall, the report reinforces a Goldilocks scenario for markets, where economic data remains in the "not too cold, not too hot" zone. The main drivers ahead will be US-China trade developments, Q3 earnings season on Wall Street, and Australia's inflation reading on 29 October.
