KPMG tips big rise in Aussie unemployment


KPMG has forecast that Australia’s unemployment rate will rise to 4.5% in 2023. The firm expects factors such as high inflation, higher interest rates and falling real wages to result in the loss of about 150,000 jobs by the end of next year.

KPMG has forecast that official interest rates will peak at 3.35% in early 2023:

The firm expects Australia will undergo a “cyclical trough” next year as house prices experienced a “peak-to-trough” decline in the mid-teens, and real wages go backwards by 1.1 per cent.

“The slowdown in domestic demand momentum will inevitably weigh on the labour market. We expect the unemployment rate to rise to 4.5 per cent in 2023,” KPMG chief economist Brendan Rynne said…

KPMG is forecasting the Reserve Bank of Australia will stop its interest rate hiking cycle at 3.35 per cent in early-2023, with a “sharp moderation” in economic momentum coming in the second half of the year.

A 1% rise in the nation’s unemployment rate looks optimistic given: 1) the aggressiveness of the Reserve Bank’s monetary tightening; and 2) record immigration flows next year.


Regarding the second point, the primary reason why Australia’s unemployment rate has cratered to its lowest level in nearly half a century is because Australia lost around 400,000 temporary migrants over the pandemic.

Had immigration continued at its pre-COVID level, Australia’s civilian population aged over 16 would be roughly 420,000 larger than it is currently. In turn, both unemployment and underemployment would be significantly higher and the employment to population ratio would be much lower (due to an increase in the denominator).

Indeed, Professor Bill Mitchell estimates that Australia’s unemployment rate would have been 6% in August had immigration continued at its pre-pandemic level:


The following graph shows the evolution of the actual unemployment rate since January 1980 to August 2022 and the dotted line is the ‘What-if’ rate, which is calculated by assuming the most recent peak participation rate (recorded at August 2022 = 66.8 per cent), the extrapolated working age population (based on growth rate between 2015 and April 2020) and the actual employment since April 2020.

It shows what the unemployment rate would have been given the actual employment growth had the working age population trajectory followed the past trends…

So instead of an unemployment rate of 3.5 per cent, the rate would have been 6 per cent in August 2022, given the employment performance since the pandemic…

What-if unemployment rate

As we know, the Albanese Government has embarked on the largest immigration program in this nation’s history announcing at last month’s Jobs & Skills Summit that it would target record permanent and temporary migration via:

  • Lifting Australia’s permanent non-humanitarian migrant intake by 35,000 to a record high 195,000;
  • Lifting temporary migration to record levels by:
    • Expanding work rights for international students via:
      • Uncapping the number of hours international students can work while studying for another year; and
      • Extending the length of post-study work visas by two years.
    • Committing to clear the ‘backlog’ of “nearly one million” visas awaiting approval.

Already, international students have returned in extremely large numbers, with work visas also running hot. Thus, labour supply is set to rocket, which will necessarily send the unemployment rate higher (other things equal):

International students boom

In short, Albo’s ‘Big Australia’ mass immigration policy will kill the jobs boom for ordinary Australians, while also leaving them desperately short of rental accommodation.


With friends like the ‘Labor’ Party, Australian workers sure don’t need enemies.

About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.