Australia's jobless rate dropped to a fresh 48-year low in July even as employment broke a super-strong run with the first fall this year, a mixed report that might hint at some cooling in the red-hot labour market.

Figures from the Australian Bureau of Statistics out on Thursday showed the jobless rate dipped to 3.4%, when analysts had looked for it to hold at 3.5%. That was the lowest rate since August 1974 and only added to evidence the labour market was drum-tight.

Yet net employment also surprised by falling 40,900 in July, missing forecasts of a 25,000 increase and the first drop since October last year.

Further clouding the picture, the number of unemployed also fell 20,200 and unexpectedly took the participation rate down to 66.4%, from 66.8%.

All this statistical noise limited the market impact with the local dollar down just a fraction to $0.6927, while futures continued to wager the Reserve Bank of Australia (RBA) would keep raising interest rates undeterred.

Bjorn Jarvis, head of labour statistics at the ABS, noted July coincided with winter school holidays and worker absences associated with COVID-19 which dragged down hours worked.

"During the pandemic, it has not been uncommon to see larger-than-usual changes or slowing in employment and hours around school holidays," said Jarvis.

There were also signs of strength in measures of underemployment and underutilisation which fell to the lowest since 1982, and these tend to correlate well with rising wages.

Data out Wednesday showed wage growth rose modestly in the June quarter to 2.7%, far behind inflation at 6.1%. Yet, that was still an eight-year high and pay growth granted in the private sector did accelerate to 3.8%.

Business surveys have shown firms struggling hard to find suitable labour and willing to pay to retain staff.

The RBA has emphasised that its liaison with business shows pay and bonuses are on the way up and rising labour costs will only add to inflationary pressures.

Seeking to cool the economy, the central bank has already lifted interest rates by 175 basis points since May to reach 1.85% and markets are priced for a peak around 3.6% by April next year.

"Labour demand indicators remain firm, which suggests the fall in employment in July will be short lived," said Sean Langcake, head of macroeconomic forecasting for BIS Oxford Economics.

"All signs point to a very tight labour market."