Deloitte Access Economics Employment Forecasts

Consistent with very modest growth in the broader economy, the Australian labour market has hit a bump in the road, underscoring the urgent need for productivity-enhancing economic reform.

Releasing the August 2025 edition of the Employment Forecasts report, Deloitte Access Economics Partner and lead author, David Rumbens, said: “Total jobs growth has slowed at the mid-point of 2025. In the months of May and June employment growth was close to zero as the jobs market hit a flat patch.

“Additionally, the number of unemployed Australians now sits at 659,600 people – the highest level since late 2021 – which has seen the unemployment rate increase to 4.3%. The recent jobs flat patch has seen overall annual employment growth moderate to 2.0% (286,300 workers), still solid but below the pre-pandemic average.

“Those overall numbers mask some sectoral imbalances. Non-market sector employment – covering health care, education, and public administration – continues to expand strongly, accounting for more than two thirds of total employment gains in the year to March quarter 2025.”

Deloitte Access Economics expects the Australian labour market to ease through 2025 before stabilising.

The number of employed Australians is expected to rise over coming years, though at a slower rate compared to post-pandemic. Overall, the pace of employment growth is expected to ease gradually from 2.3% (324,600 workers) in 2024-25 to 1.5% (218,800 workers) in 2025-26 as public spending growth slows and net overseas migration trends downward.

Rumbens added: “Contained inflation, declining interest rates, and gradual real wage gains are expected to strengthen parts of the market sector, particularly across industries exposed to the willingness and capacity of households to spend. Overall, market sector employment is expected to grow by 0.9% (86,500 workers) in 2025-26.

“However, the non-market sector is expected to remain a key pillar of employment growth in the year ahead, underpinned by ongoing government support with employment set to grow by 3.0% (135,000 workers) in 2025-26.”

How does that play out by broad worker classification?

• The focus on non-market employment plays well for the human services workforce which is expected to notch up another financial year of solid growth. The human services workforce is expected to grow by a further 2.8% (148,500 workers) in 2025-26, following growth of 4.3% (222,700 workers) in 2024-25.
• Growth in white collar employment is expected to nudge upward by 1.5% (81,200 workers) in 2025-26, supported by a rebound in finance and ongoing gains to office-based public admin roles, alongside sustained demand in knowledge-based industries. While modest, this is a noticeable improvement on 2024-25, where the white collar workforce grew by just 1.0% (53,500 workers) in what was the slowest year for white collar jobs growth since the pandemic-induced slowdown of 2019-20.
• Despite an increasing focus on residential construction, broader weakness across the industrial, retail, and wholesale sectors is anticipated to constrain the blue collar workforce in the year ahead, which is expected to decline by 0.2% (8,400 workers) in 2025-26.

CBD employment growth to bounce back

Challenging economic conditions and persistent uncertainty have constrained revenue growth and hiring across many Australian firms. This has meant that CBD employment growth has been particularly weak for financial and service-based industries.

However, the combination of lower inflation, falling interest rates, and solid government spending means total CBD employment growth is now expected to shift up to 2.1% (33,500 workers) in the financial year ahead, outpacing employment growth across the broader economy.

Rumbens added: “CBD employment growth is expected to be strongest along the Eastern seaboard, with Melbourne leading as financial sector hiring rebounds across the financial year. By comparison, Perth, Canberra, and Adelaide may see lower rates of growth.

“Overall employment growth in Victoria is expected to be above the national average in 2025-26, but the state’s weaker fiscal position highlights the need for a stronger private sector contribution to underpin a more sustainable economic recovery.”

Current labour market challenges are less about job creation and more about productivity.

Rumbens added: “Since the pandemic, labour market resilience has not been matched by similar economic growth, leading to a significant decline in labour productivity. Since its peak in March 2022, total labour productivity has fallen by 5.7% – the equivalent of around $150 billion in foregone annual real GDP.”

“In this context, the government has leaned into the economic policy discussion with the upcoming Economic Roundtable aiming to enhance productivity, bolster economic resilience, and strengthen fiscal sustainability.”

The focus should be on high-impact, long-term reforms, particularly those that will benefit future generations, including:

1. Big changes to the tax system: One of the most significant levers to drive investment, productivity and a more efficient allocation of resources in the economy is the tax system. Tax reform can be positive for the economy, positive for the budget, and positive for Australians.
2. Avoid regulatory burden and leverage the Artificial Intelligence wave: The government plays an important role in addressing AI adoption gaps, further targeted funding and well-designed regulatory regimes could help build further interest in AI solutions among Australian businesses.
3. Introduce market discipline and better organise a fragmented care workforce: The care sector requires better market discipline that rewards providers with high-quality and efficient care without adversely affecting consumers.
4. Overhaul Australia’s existing apprenticeship system: As a share of the working age population, apprenticeship commencements are at their lowest point on record. It’s time to do more to encourage and maintain participation in the system.

Employment Forecasts is released quarterly and provides forecasts and commentary for each industry and occupation, plus white collar, blue collar and human services employment. There are three levels of data available: state, city and CBD. Employment Forecasts is particularly useful in the analysis of property market demand.