Australia's unemployment rate has risen to 4.5%, adding weight to the argument that the Reserve Bank will halt raising interest rates.

About 16,000 jobs fell out of the economy in July, the Australian Bureau of Statistics reported on Thursday.

The result was down substantially from the 76,300 increase in June and wrong-footed forecasters, who had been tipping a rise in employment of 15,000.

Consensus expectations were for the unemployment rate to hold steady at 4.4%.

"The majority of the fall in employment came from males, which fell by 11,000 people," said Sean Crick, ABS head of labour statistics.

"There were 10,000 fewer males employed part-time, and 1000 fewer in full-time employment in July.

"Female employment recorded a smaller fall of 5,000, with females employed part-time falling by 22,000 but full-time rising by 17,000."

The participation rate edged down 0.2 percentage points to 66.9%.

While Australia's relatively low unemployment rate is a bright spot in an economy hampered by the Middle East oil shock and persistently low productivity growth, the Reserve Bank has been looking for the labour market to soften in order for inflation to get back under control.

Inflation is still too high and, while the economy is softening, more of a slowdown is needed to get inflation back to target, the bank's deputy governor Andrew Hauser said on Wednesday.