Treasurer Josh Frydenberg has called for greater flexibility in the labour market to drive the jobs recovery, with 458,000 people going back to work in the past three months cutting the jobless rate to 6.8 per cent despite Victoria's strict lockdown.

The economy created 111,000 new jobs in August, many of them sole traders back in work, boosting the number of employed to 12.6 million, still short of the 13 million employed before COVID-19.