The official unemployment rate fell to 3.4 per cent in July from 3.5 per cent the month before.
However, the Australian Bureau of Statistics estimates that 40,900 jobs were lost last month.
This is the first fall in employment since October 2021, following the easing of restrictions after the Delta lockdowns in late 2021.
It was a fall in the participation rate that caused the unemployment rate to decline.
The proportion of Australians either in work or actively looking for a job fell from a record high of 66.8 per cent in June to 66.4 per cent last month.
