Treasurer Jim Chalmers expects unemployment to rise further, arguing the uptick is "unsurprising" amid global uncertainty.
Australia's unemployment rate rose to 4.3 per cent in June, according to the latest data from the Australian Bureau of Statistics, released on Thursday.
Speaking against the backdrop of economic slowdowns and trade tensions as he attends a G20 meeting of finance ministers and central bank governors in South Africa, Chalmers urged Australians to keep perspective.
"Unemployment has been really quite outstandingly low for some time now — 4.3 (per cent) in historical terms would be seen as quite a good outcome," he told ABC radio on Friday.
"When it comes to this tick up in unemployment, it is modest, it is unwelcome, but it's also unsurprising."
He said cost-of-living pressures, coupled with high interest rates, had resulted in a small lift, but overall, the economy "kept ticking over," unlike other countries.
Asked whether Treasury anticipated unemployment would rise as high as 5 per cent, he said not quite.
"We're not expecting unemployment to go that high. We think somewhere around the middle floors in our current forecast, but obviously there's a lot of uncertainty in that," Chalmers said.
However, signs of a tougher jobs market could help set the scene for lower interest rates in the months ahead.
Ex-Reserve Bank of Australia economist Luke Hartigan said the June outcome met the central bank's year-end unemployment forecast.
"This just adds information to say that some modest reduction in interest rates is warranted," the University of Sydney economics lecturer told the Australian Associated Press.
After its July meeting, the RBA disappointed mortgage-holders and shocked market economists by opting to hold the cash rate at 3.85 per cent in a split decision.
Trump tariffs weighing on employers' minds globally
The unpredictable nature of US President Donald Trump's tariffs, which have changed regularly, has contributed to global uncertainty and is weighing on employers, Chalmers said.
Asked if he believed the policy uncertainty was affecting decisions on whether to hire workers, Chalmers said: "That's certainly the feedback that we get around the place, speaking with CEOs and meeting with company boards.
"There is a real sense that this volatility and unpredictability and uncertainty is really a defining and an ongoing feature of the global economy."
Over the weekend, Trump announced a 30 per cent tariff on major trading partners Mexico and the European Union, set to kick in on 1 August.
Chalmers said the "new normal" requires a "shift" in thinking, with "more collaboration, more secure supply chains and more reliable markets" the best pathway forward.
With additional reporting by the Australian Associated Press.
