The jobless rate has soared to 6.4 per cent, its highest level in 12 years and higher than the United States unemployment rate of 6.2 per cent.
Economists had expected the unemployment rate to remain at six per cent in July. But the latest official labour figures released on Thursday showed number of people in employment fell by 300, when a 12,000 increase was forecast.
Full-time employment rose by 14,500 but this was offset by a 14,800 drop in part-time workers.
The government had forecast the jobless rate rising to 6.25 per cent this financial year, arguing this was a projection inherited from the previous Labor government.
Reserve Bank governor Glenn Stevens said this week, after leaving the cash rate unchanged at a record low of 2.5 per cent, that there had been some improvement in the outlook for the labour market but it would probably be some time before unemployment declined consistently.
Only South Australia recorded a fall in the jobless rate in July, easing to 7.2 per cent from 7.3 per cent.
The rate rose to 5.9 per cent from 5.7 per cent in NSW and jumped to seven per cent from 6.6 per cent in Victoria.
In Queensland, it increased to 6.8 per cent from 6.3 per cent, and in Western Australia it was up to 5.2 per cent from five per cent.
The Tasmanian rate also increased to 7.6 per cent from 7.3 per cent, in the Northern Territory it rose to 4.8 per cent from 4.5 per cent, and in the ACT it was 3.9 per cent from 3.8 per cent.
How does Australia compare with other countries?
Austria and Germany have the lowest unemployment rates for the European Union, according to European Commission's June 2014 figures, while Spain and Greece have the highest.
Austria: 5.0 %
Germany: 5.1 %
Finland: 8.8 %
Ireland: 11.8 %
Spain: 24.5 %
Greece: 27.3 %
According to the figures from the UK government unemployment is at 6.5%, while the US government says the unemployment rate is at 6.2%. New Zealand government figures show the jobless rate to be at 5.6%.
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