Australia's official unemployment rate has dropped to 3.5 per cent, with an estimated 88,400 jobs added to the economy last month.

This is a steep fall from the 3.9 per cent unemployment rate seen for the previous three months, and sets a fresh record low jobless rate since the Australian Bureau of Statistics (ABS) jobs numbers became monthly in 1978.

"This is the lowest unemployment rate since August 1974, when it was 2.7 per cent and the survey was quarterly," ABS head of labour statistics Bjorn Jarvis said.

"The 3.4 per cent unemployment rate for women was the lowest since February 1974 and the 3.6 per cent rate for men was the lowest since May 1976."

In further positive news for the economy, the fall in unemployment occurred despite another increase in the number of people looking for work, with the participation rate rising to a record high of 66.8 per cent.

Even with more jobseekers, there were almost as many vacant positions (480,000 in May) as people still looking for work (494,000 in June).

Unemployment fell in every state or territory except Western Australia and is lowest in the ACT (3.1 per cent), Victoria (3.2 per cent), New South Wales (3.3 per cent) and Western Australia (3.4 per cent, up from 3.1 per cent in May).

South Australia and Tasmania have the highest unemployment rates in the country at just 4.3 per cent, with Queensland steady at 4 per cent and the Northern Territory at 3.7 per cent. 

Economic log jam

Unemployment is now at levels where a shortage of available workers is forcing some businesses to restrict their operations.

At Ross Transport in Port Kembla, south of Sydney, around 20 per cent of its 60-strong truck fleet is stuck parked at the depot because there are not enough drivers.

"Tomorrow alone, we could probably take on 10 drivers and two mechanics just like that," manager True Ross-Sawrey said.

The family-owned company, which has been around since 1975, has never found it so difficult to find staff.

"Having trucks parked up in the yard is just pushing money down the drain," Ms Ross-Sawrey added.

She is one of many business owners offering higher wages to attract and retain staff.

'We normally do increases every year of 3 per cent," Ms Ross-Sawrey said.

The company transports items like building materials and non-refrigerated goods across the eastern states.

Ms Ross-Sawrey said staff shortages in transport are one of the factors driving supply chain issues.

"It just means the capacity [freight] that we can take every day is significantly reduced," she explained.

"So people are waiting longer to get their products, which is obviously affecting our customers and, ultimately, the consumer."

Coming out of retirement

The super-tight labour market and prospects of higher wages, combined with the surging cost of living, mean more people like 66-year-old Rosemarie Paglinawa are coming back to work.

Ms Paglinawa rejoined the workforce through the help of a recruitment agency after two years off following back and shoulder surgery.

"I am really excited about coming to work every day, because I really like it," Ms Paglinawa said.

Ms Paglinawa works about 22 hours a week at Value Fresh preparing fruit and vegetables.

The 66-year-old has some advice for others thinking about getting back on the job.

"For those who are injured or stopped working, I advise you to come back to work so your strength will be back and you exercise," she said.

"You will not get old."

Her boss, Hellen Swirski, said it had never been harder to find staff.

The company currently has about five vacancies and is also finding it tough to retain workers in a competitive job market.

"With the pandemic, it's ongoing, you know the floods now, people can't even get to work," Ms Swirski said.

Ms Swirski believes increased overseas migration will be key to solving the labour shortage plaguing many businesses in Australia.

"The overseas migration that used to be here, I think that has something to do with not being able to find enough workers," she said.

Bad news for mortgage borrowers

Other than confirming a severe labour shortage for businesses, the only clear negatives in the data were a slight rise in underemployment — from a post-global financial crisis low of 5.7 per cent to 6.1 per cent — and a very slight decrease in hours worked.

Mr Jarvis said the fall in hours worked was mainly due to the latest COVID-19 Omicron wave and a bigger-than-recent winter flu outbreak.

"There [were] around 780,000 people working fewer hours than usual due to illness in June 2022, almost double the usual number we see at the start of winter," he observed.

The other negative from these figures will be for borrowers: Economists say it makes another half-a-percentage-point rate rise even more likely when the RBA meets again on the first Tuesday in August.

"The labour market is now tighter than the RBA expected at any point in 2022, which presents upside risk to their wage and inflation forecasts," noted BIS Oxford Economics analyst Sean Langcake.

Should that happen, this would make it three 50-basis-point rate rises in a row, with the cash rate target surging from emergency lows of just 0.1 per cent at the start of May to 1.85 per cent by early August.

A few analysts, such as Deutsche Bank's Phil Odonaghoe, are expecting the RBA to be even more aggressive.

"In light of the beat on US CPI in June and the surprise decision by the Bank of Canada to hike rates by 100 basis points overnight, we reiterate our call for a 75-basis-points hike by the RBA at the August meeting."

That would mean a total of 2 percentage points of rate increases in the four months since the RBA made its first move in May.