Australia’s unemployment rate rose to 4.6% in August from 4.5% in July, marking its highest level in the post-COVID period. The participation rate climbed to 67.1%, near the record high. RBA governor Michele Bullock has said an unemployment rate between 4.5% and 5% would help cool the labour market and ease inflation pressures. Some economists say the increase in unemployment is not enough to stop the central bank raising rates next week.

Reserve Bank of Australia Governor Michele Bullock said in a Sydney speech that the labour market remains “a bit too tight”, adding to upward pressure on wages, business costs and inflation. She said unemployment would likely need to rise to between 4.5 and 5 per cent to take enough heat out of the labour market to ease inflation pressures. Most of the big four banks expect the RBA to lift rates next week, with ANZ also factoring in a September increase. Commonwealth Bank has also raised fixed-rate mortgage pricing, including its two-year fixed home loan rate.

ASIC commissioner Simone Constant said Australia’s private credit industry needs to urgently fix poor lending practices. ASIC estimates the sector has grown 500% over the past decade and has faced intensified scrutiny over the past 18 months. Morgan Stanley again capped withdrawals at 5% on its nearly $US7 billion ($9.5 billion) private credit fund after investors sought to redeem 11.4% of shares, stoking concerns about liquidity risk.

The Middle East conflict has pushed crude oil above $US105 a barrel and widened the diesel “crack spread” to $69 from $24, boosting refinery margins. Australia, which imports about 80% to 90% of its diesel, is particularly exposed to price swings that are cutting into farmers’ profitability. Higher transport costs are also feeding inflation pressures, with the risk that cost increases spread more quickly through supply chains to the wider economy.

Fresh signs of disruptions to Saudi crude supply sent oil prices sharply higher, with Brent futures up 2.6% to $US108.39 a barrel and WTI futures up 4% to $US105.45. The move weighed on US equities, extending losses across the major indexes. The Dow fell 0.6%, while the S&P 500 and Nasdaq Composite slipped 0.5% and 0.8%, respectively.

Reserve Bank of Australia deputy governor Andrew Hauser said inflation is the economy’s “one big problem,” with markets fully pricing a September cash-rate increase to 4.6%, a 15-year high. Traders are also factoring in what is seen as a near certainty of two more hikes by February. Analysts say current inflation pressures are being driven largely by supply disruptions linked to the U.S.-Iran conflict and a surge in AI spending by major U.S. technology companies. They argue rate rises are poorly suited to addressing those supply-side forces.

Wall Street snapped a slide on Friday, with the S&P 500, Dow and Nasdaq each up about 1%. After August inflation came in hotter than expected, markets lifted the probability of a 25-basis-point Fed rate increase this week to about 90%. Separately, an attack on a Saudi oil pipeline threatened roughly 4% of global crude supply, potentially pushing oil prices higher and adding to inflation pressure.

Australian shares are set for a modest rebound after falling to a six-week low on Tuesday, with ASX futures up 0.2% this morning. The earlier decline followed reports that Iran-backed Houthis attacked Saudi energy facilities. Markets are pricing a roughly 70% chance of an interest rate hike later this month. Central bank officials say inflation remains the main challenge, with high living costs and rising rates continuing to squeeze households.

Reserve Bank of Australia Deputy Governor Andrew Hauser said the public is angry about elevated inflation and warned interest rates could rise further if price pressures remain high. The cash rate is currently 4.35%, and headline inflation rose to 3.5% in the year to July. The RBA projects inflation will not return to its target range until early 2028. The central bank’s board is scheduled to meet at the end of September to decide whether to hold or move rates.