November and December 2025 data for the Australian labor market does not show a re-tightening but a "solid" finish to the year, according to a Friday report by Westpac (ASX:WBC, NZE:WBC).

Due to re-emerging inflation pressures and a lack of further interest rate support, Westpac also expects a "flatter" employment growth and for the unemployment rate to rise gradually during the year.

However, the uncertainty of the recent "pause" in labor market softening during the most volatile time of the year for labor market data will remain a challenge for the Reserve Bank of Australia over the months ahead as it tries to draft a policy to curb inflation, the report said.

Westpac expects the unemployment rate to rise to 4.2% from 4.1% and sees an over 40,000 increase in employment during the month.