However, the number of employed people only rose by 7,000 through the month in seasonally adjusted terms (23,000 by trend).
ABS head of labour statistics Kate Lamb said it's important to remember a drop in unemployment doesn't necessarily mean a large increase in employed people.
"The fall in the unemployment rate in September mainly reflected a higher proportion of people moving from being unemployed to not in the labour force," she explained.
The number of full time employed Australians decreased, in both seasonally adjusted (down 39,900) and trend (down 600) terms.
The employment to population ratio dropped slightly to 64.4%, back to the average level over the past twelve months, but still close to a record high.
For the fourth month in a row, the underemployment rate (people in the work force who want more hours, part-time staff who want to be full-time or want more part-time hours for example) remained at 6.4%.
A 3.6% unemployment rate was slightly below forecasts from Australia's major banks, but without a substantial increase in the number of employed Australians, likely still lends itself to no rate hike in November.
Adam Boyton, head of Australian economics at ANZ, said the drop in the number of hours worked, the fall in full time employment and the drop in the participation rate more than offset the drop in the unemployment rate.
"For the RBA we’d see this as a result broadly in line with expectations," he said.
The Aussie dollar immediately dropped following the release to 63.15 US cents compared to 63.35 beforehand, which suggests investors think the data points away from a rate hike.
Australians will now turn their attention to the quarterly CPI data, due for release on October 25th, as the next indicator about which way the RBA will go on Melbourne Cup Day.
Is the labour market softening?
In September, the number of hours worked dropped 0.4%, after a 0.5% decline in August.
Through the year to September, both the number of hours worked and the number of employed people rose by 2.9%, which Ms Lamb says is the first time since December '22 growth in hours worked has not outpaced employment.
"The recent softening in hours worked, relative to employment growth, may suggest an easing in labour market strength, though it also follows particularly strong growth over the past year," she said.
"As seen in the Job vacancies data, demand for workers has fallen slightly, but the labour market continues to be relatively tight and resilient."
How the data compared to predictions
"Unemployment drops to 3.6%, but no large rise in employed Aussies" was originally published on Savings.com.au and was republished with permission.