A New South Wales Minister is blaming the carbon tax for unemployment rates, after Illawarra topped the unemployment figures this year.

The Acting Minister for the Illawarra Andrew Constance says "when you have things like the carbon tax there, it's going to knock business confidence in those areas which have those traditional industries which are directly affected."

Illawarra residents are now the least employed in the country, with a jobless rate of 10.2 per cent. A local Labor MP has called the Coalition member Mr Constance’s claims “complete rubbish”.

Labor MP Stephen Jones says government compensation and assistance for the steel industry has negated the effect of the tax and it's the high dollar that's crippling the local manufacturing and tourism industries.