OECD Employment Outlook 2026: Australia
Table of contents
These country notes provide an overview of the labour market situation in each country based on data from OECD Employment Outlook 2026. This edition has a special focus on geographic disparities in jobs and incomes.
The OECD labour market remains resilient, with employment and labour force participation rates at record highs (72.1 and 76.7% in Q1 2026 on average across countries, respectively) and unemployment low by historical standards (4.9% in May 2026). However, there are increasing signs of weakening, including rising unemployment in many countries, slowing employment growth, and easing labour shortages. Due to the new surge in energy prices, real wages are expected to fall in many countries.
Labour market conditions in Australia remained solid over 2025. Both the employment rate and the labour force participation rate held steady between Q1 2025 and Q1 2026, at approximately 77% and 81% respectively, placing Australia among the strongest performers across the OECD area on both measures. The unemployment rate, at 4.4% in May 2026, continues to sit below the OECD average of 4.9%. Nevertheless, signs of labour market moderation have emerged: whereas OECD-wide unemployment has remained relatively stable over the same period, Australia’s rate edged up by 0.3 percentage points (p.p.) in May 2026 compared to May 2025, as labour market conditions gradually loosened from an exceptionally tight starting point that continues to exceed pre‑COVID‑19 levels.
Young labour market entrants in Australia have fared relatively well compared to other OECD economies. Young college graduates face lower unemployment than the working-age population as a whole, unlike in the European Union and Canada. Young non-college graduates, instead, still face higher unemployment than the working-age population, but the gap has remained broadly stable over the past decade and is narrower than in other countries.
Real wage growth in Australia has marginally contracted over the past year, in contrast to the OECD median which remained in modest positive territory over the same period. The cumulative picture is more concerning: since Q1 2021, prior to the surge in energy prices, real hourly wages in Australia have fallen by approximately 5%, representing one of the steepest declines among OECD countries, well above the slight gains recorded at the OECD median level over the same period. This sustained erosion of purchasing power points to persistent pressures on household incomes, even as the labour market has remained broadly solid. These pressures are compounded by a decline in the real minimum wage between April 2025 and April 2026, placing Australia among only 11 OECD countries where this occurred and further weighing on the incomes of the lowest-paid workers.
Regional disparities in labour market outcomes are large across the OECD. In over half of OECD countries, employment rates across small regions vary by more than 20 p.p. These disparities do not simply reflect differences in who lives where, but also in the economic opportunities that regions have to offer, and they translate directly into disparities in living standards.
Regional disparities in employment rates in Australia are somewhat narrower than in most OECD economies, with the gap between regions in the top and bottom quintiles standing at 8.7 p.p., against an OECD average of 11.4 p.p. among countries where data are available. Even so, where people live continues to shape employment prospects considerably. In 2024, the unemployment rate in Queensland Outback stood at 6.4%, more than twice that of the best-performing region, Warrnambool and South West, at 2.9%.
Since the early 2010s, regional disparities in employment rates in Australia have narrowed by close to 25%, a pace of convergence substantially faster than in most OECD countries, driven by improving labour market conditions in previously low-employment regions. These disparities nonetheless translate into significant differences in household incomes. The median disposable income in the highest-income region, North Outback, is approximately twice that of the lowest-income region, South East Tasmania, pointing to persistent gaps in living standards despite the convergence observed in labour market outcomes.
Employment protection legislation shapes job security, labour market dualism and firms’ ability to adjust to economic fluctuations and structural change. Updated OECD indicators show large cross-country differences in dismissal regulations and notably restrictions on temporary contracts.
According to the OECD’s updated EPL indicators, Australia ranks among the OECD countries with lower levels of regulatory protection against dismissals of regular workers (individual and collective), with a score below the OECD average, reflecting a relatively flexible framework for adjusting permanent employment.
Restrictions on temporary contracts are similarly limited, with Australia ranking 8th in the OECD on this dimension and scoring also below the OECD average, pointing to a comparatively open regime for fixed-term and agency work arrangements. The strictness of regulation for temporary contracts has nonetheless increased between 2019 and 2025, reflecting the introduction in 2023 of limitations to two consecutive contracts of two years in cumulative duration.
Moreover, the 2023 reform also enables employees, unions and user firms to seek equal pay orders for temporary agency workers from the Fair Work Commission. By raising the cost and complexity of repeated recourse to temporary arrangements, these measures are designed to narrow the gap in conditions between permanent and temporary workers and reduce labour market dualism.
Contact
Michele TUCCIO (✉ michele.tuccio@oecd.org)
Theodora XENOGIANI (✉ theodora.xenogiani@oecd.org)
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The full book is available in English: OECD (2026), OECD Employment Outlook 2026: Geographic Disparities in Jobs and Incomes, OECD Publishing, Paris, https://doi.org/10.1787/7e710f54-en.
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