Victoria’s unemployment rate has climbed to 5.1 per cent, the highest of any Australian state, prompting business groups to blame the Allan government’s taxes, regulation and proposed workplace laws for weakening confidence and investment.

Australian Bureau of Statistics figures for June show Victoria’s seasonally adjusted unemployment rate rose by 0.2 percentage points from 4.9 per cent. The national rate remained at 4.4 per cent, while New South Wales recorded the lowest state rate at 4 per cent. Western Australia was at 4.2 per cent, Queensland and South Australia at 4.3 per cent and Tasmania at 4.9 per cent.

Victoria also recorded the highest underemployment rate among the states at 7.3 per cent. Underemployment measures people who have work but want and are available for additional hours. The national rate rose to 6.5 per cent.

The figures place Victoria 0.7 percentage points above the national unemployment rate and intensify scrutiny of the state’s economic direction ahead of the November election.

However, the monthly data does not show that Victoria lost jobs in June. The number of employed Victorians increased by 0.4 per cent to about 3.81 million, while the employment-to-population ratio rose to 64.2 per cent. The participation rate also increased by 0.3 percentage points to 67.6 per cent, indicating more people were entering or actively looking for work.

An unemployment rate can rise even while employment grows when the number of people seeking work increases faster than the number finding jobs.

Nationally, employment rose by 76,300 people in June, including 29,300 additional full-time workers and 47,000 additional part-time workers. The national participation rate reached 67 per cent, while the employment-to-population ratio rose to 64 per cent.

The ABS has also urged caution when interpreting short-term changes. It adjusted the weighting of one incoming survey group in Victoria and New South Wales after finding its labour-force characteristics differed considerably from the rest of the sample. The agency said it remained confident in the estimates but recommended using trend data to assess underlying conditions. Victoria’s trend unemployment rate was 5 per cent, slightly below the seasonally adjusted figure.

Despite those qualifications, business groups say Victoria’s comparatively weak result reflects growing concern about the cost and complexity of operating in the state.

Business Council of Australia chief executive Bran Black said the government’s “anti-business policies are anti-worker policies”, arguing that high taxes, regulation and rising public debt were affecting investment and living standards.

Australian Industry Group Victorian head Tim Piper said employers believed the state was more exposed to wider economic shocks because of government regulation and declining business confidence. He pointed to the proposed work-from-home right, new workplace surveillance protections and continuing concerns surrounding major construction projects.

The criticism has centred heavily on the Equal Opportunity Amendment (Work from Home) Bill, introduced by Premier Jacinta Allan on June 16.

The Bill would give eligible employees whose duties can reasonably be performed remotely a legal right to work from home for two days each week. Regular casual and part-time employees would also be covered, with entitlements expected to operate on a proportionate basis.

Employers would be able to refuse arrangements where working from home was not reasonable, but disputes could proceed through conciliation at the Victorian Equal Opportunity and Human Rights Commission and ultimately be heard by the Victorian Civil and Administrative Tribunal.

The government intends the changes to begin on September 1, although businesses with fewer than 15 workers would receive a delayed commencement until July 2027.

The legislation has not yet passed Parliament. As of July 23, it remained at the second-reading stage in the Legislative Assembly. That means the proposed right was not operating during the June labour-force survey and cannot, by itself, explain the latest increase in unemployment.

Business groups argue, however, that policy announcements can influence future hiring and investment decisions before legislation formally begins.

A Victorian Chamber of Commerce and Industry survey found 77 per cent of participating businesses already permitted employees to work from home, but 80 per cent expected the proposed law to negatively affect their operations.

The Chamber said 47 per cent were more likely to start, expand or invest outside Victoria, 42 per cent were more likely to employ people interstate and 44 per cent were less likely to hire additional Victorian staff.

It also reported that 47 per cent would become less willing to employ younger or inexperienced workers who required closer supervision, training and mentoring. About 92 per cent anticipated additional expenses involving legal advice, equipment, insurance, cyber security and compliance.

The Chamber has called for changes including clearer grounds for refusing a request, stronger protections for small businesses, defined responsibility for home-office costs and safeguards against employees adding the statutory entitlement to more generous existing arrangements.

Chief executive Sally Curtain said businesses were not opposed to flexibility but feared the Bill would introduce uncertainty and legal disputes into arrangements already being negotiated successfully between employers and employees. The published survey release did not specify its sample size or methodology, meaning its percentages should be read as a measure of sentiment among respondents rather than the views of every Victorian employer.

The government rejects the argument that protecting hybrid work is anti-business.

It says working from home saves eligible workers an average of $5,308 a year and more than three hours in weekly commuting time. It also argues that flexible arrangements help businesses retain employees, reduce absenteeism and increase participation among parents and people with caring responsibilities.

Labor has separately announced plans to strengthen workplace surveillance protections, requiring employers to notify and consult workers before introducing monitoring technology and limiting the use of biometric data and artificial intelligence.

The proposed framework would require surveillance to have a legitimate purpose, place restrictions on covert monitoring and ensure significant employment decisions based on automated systems receive human review. No legislation had been introduced when the policy was announced on July 20.

Business groups say the combination of employment regulation, property taxes, payroll taxes and compliance costs risks making Victoria less competitive than other jurisdictions.

Their concerns are compounded by the state’s financial position. The 2026–27 Budget forecasts net debt reaching $175.6 billion this financial year and $199.3 billion by 2029–30. The government expects net debt to peak as a share of the economy before declining gradually over the forward estimates.

The Budget had forecast Victoria’s unemployment rate would average 4.75 per cent in both 2025–26 and 2026–27, with employment growth slowing from 1.5 per cent to 1.25 per cent. June’s monthly rate of 5.1 per cent is above that forecast, although a single monthly result is not directly comparable with a full-year average.

Opposition Leader Jess Wilson described the result as a “wooden spoon trifecta”, arguing Victoria was carrying the nation’s highest unemployment alongside high debt and taxes.

She said the figures showed the need for a change of government and policies intended to reduce regulation, restrain public spending and make Victoria more attractive to private investment.

The Allan government said regional Victoria remained comparatively strong and argued Labor’s record should be measured over a longer period rather than through one monthly figure.

Its Budget documents show Victorian employment increased by 21 per cent between September 2020 and March 2026, compared with 17 per cent across the rest of Australia. More than 646,000 additional Victorians found work over that period, according to the government’s figures.

The government has also warned that the Coalition’s proposal to save $22 billion over a decade through a back-office public-service hiring freeze could remove economic activity and undermine services. The opposition says the policy would rely on natural attrition and would not affect frontline workers.

The June figures therefore present two competing pictures of Victoria’s labour market.

The state continues to add jobs and has a high workforce participation rate, but a growing number of people are unable to find sufficient work. Its unemployment and underemployment rates are now above those of comparable states, giving business groups and the opposition evidence for their argument that Victoria’s economic policy settings require change.

The data does not prove that the proposed work-from-home or surveillance laws caused unemployment to rise. Neither policy was operating during the survey period.

But the result will strengthen demands for the Allan government to demonstrate that its workplace reforms can protect employees without discouraging the businesses responsible for creating their jobs.

I can monitor Victoria’s monthly employment figures and alert you when the next ABS data is released. Want me to set that up?

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