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In February 2026, the International Monetary Fund (IMF) warned that Australia faced risks on both sides. Inflation could remain stubborn, while weaker growth could push unemployment higher. It backed an RBA that responds to the data and called for tighter control of government finances.
August’s jobs figures put that balancing act in sharper focus.
The unemployment rate rose to 4.6 per cent. On the ABS trend measure, 9,300 more Australians were unemployed than in July and 58,300 more than a year ago, while full-time employment fell by 6,300 in the seasonally adjusted figures.
While the unemployment number is up, it does not mean the jobs market has collapsed yet. Total employment rose by 39,500, part-time employment increased, and hours worked were up. The ABS also cautions against reading too much into one month’s movement, but it would be just as careless to ignore the rise in unemployment.
The question now is whether Australia can bring inflation down without pushing more people out of work.
The RBA has reason to remain concerned. Its August assessment put underlying inflation at 3.6 per cent, above its 2–3 per cent target. That rules out declaring victory or assuming rate cuts are around the corner.
However, it does not make another rate rise the obvious next move. Higher rates slow borrowing and spending; they cannot build homes, fill skills shortages or directly reverse an overseas energy shock. If inflation remains high while the labour market softens, the RBA needs to establish what is keeping prices up before making mortgages and business loans more expensive again.
My view is that the RBA should hold at its next meeting. Give the recent rate rises more time to work and look for evidence that August’s rise in unemployment is continuing. A further hike should require convincing signs that broad spending is still driving inflation, not simply another headline.
Most importantly, the government cannot leave this entire problem with the RBA. The IMF supported fiscal restraint alongside reforms to lift productivity and ease housing supply constraints. Those are harder tasks than calling for the central bank to be tough, but they matter if Australia wants lower inflation without relying on weaker employment to get there.
It is easy to demand another rate hike when someone else bears the cost in their mortgage repayments, their business or their job. The IMF did not tell Australia to raise rates again. It warned that policymakers must stay alert to both inflation and a weakening economy. August’s figures are a reason to take both sides of that warning seriously.
Best and Worst Sectors
Healthcare was the best-performing sector so far this week, rising more than 0.8 per cent as the market looked for earnings less exposed to a slowing Australian economy. Gains in CSL, Cochlear and Fisher & Paykel also helped the sector.
Consumer Discretionary also gained over 0.8 per cent as lower oil prices offered some relief to the outlook for household spending. The rise in major retailers also suggested investors were willing to buy consumer stocks despite the risk of another RBA hike.
Information Technology rounded out the top 3, up over 0.6 per cent, as renewed global enthusiasm for AI and a strong Nasdaq fed into Australian growth stocks. This lifted the sector even as higher interest rates threatened valuations.
At the other end of the market, Utilities was the worst sector so far this week. It fell more than 4 per cent as the prospect of another RBA rate rise made dividend-paying utilities less attractive relative to cash and bonds. Investors also rotated toward growth stocks as market sentiment improved.
Communication Services was the second-worst sector, dropping just over 2 per cent as pressure on its major names increased, with Telstra facing renewed scrutiny over its emergency call network this week.
Energy rounded out the worst performers this week, falling over 1 per cent as oil retreated on hopes of progress in Middle East diplomacy. This led to reduced earnings outlooks for producers such as Woodside and Santos.
Best and Worst Stocks
Ramelius Resources led the ASX Top 100 this week. It climbed more than 10 per cent as its new production outlook put FY30 gold output at 560,000 to 610,000 ounces, about 11 per cent above its previous plan.
Washington H. Soul Pattinson followed, rising over 7 per cent as its full year results showed higher investment cash flow and a larger fully franked dividend after the Brickworks merger.
Cochlear rounded out the leading performers, gaining over 6 per cent as buyers continue to drive the reversal after the stock suffered one of its worst falls in history.
At the other end, Telix Pharmaceuticals was the weakest performer, falling more than 11 per cent. Investors sold the stock after its proposed ITM merger raised concerns about the deal’s cost and dilution from issuing new shares.
Xero followed, falling over 5 per cent as investors weighed weaker margins and Melio integration costs against high growth expectations, with elevated rates adding pressure on the valuation.
Origin Energy rounded out the worst performers, falling over 5 per cent, with its fall coinciding with oil retreating below US$100 and weakness across energy and utility shares.
All Ordinaries Index update
The sellers regained control of the All Ordinaries Index this week. After a promising start, the index fell more than 1 per cent on Thursday, closing around 0.3 per cent lower so far this week. However, what caught my attention was where buyers stepped in during the selloff.
Last week, the All Ords fell to 8,835 points before buyers turned it around and pushed the index into positive territory. That reversal came on weekly volume of just under 11 billion. Since 2000, volume has reached roughly that level on four other occasions: shortly after the GFC low, near the March 2011 peak, at the COVID low, and around the March 2026 tariff selloff low.
These led to significant moves, though not always in the same direction. That makes this Thursday’s price action especially interesting: buyers returned at 8,837 points, almost exactly where they defended the market last week.
Does that mean a major rally is coming? It’s too early to tell, but if the All Ords keeps holding around 8,835, the case for a rebound gets stronger. After such an unusually high-volume week, I’ll be watching this level closely.
Good luck and good trading.
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Dale Gillham is the Chief Analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of the award-winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online at ww.wealthwithin.com.au.
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