SYDNEY: Australia’s jobless rate fell to its lowest level in 13 years last month as employment jumped, raising expectations that the central bank will push up interest rates by early next year.
A stronger-than-expected 80,600 rise in new jobs in August reversed falls over the previous two months and brought labour market data more into line with other figures suggesting an economic rebound after a slowdown in growth in the first half 2003.
The unemployment rate tumbled to 5.8%, seasonally adjusted, in August – its lowest level since January 1990 and well down on July’s 6.2%.
“It’s coming down to a question not of if, but when, the Reserve Bank will move policy from such an expansionary stance,” said Westpac senior economist Andrew Hanlan.
The Australian dollar rallied more than a quarter US cent on the news, while interest rate markets weakened to factor in a tightening in the 4.75% cash rate.
Australia’s strengthening labour market is in sharp contrast to the United States', where the economy is also in recovery but has so far failed to produce jobs.
Analysts said that Australia, considered an “old economy”, had avoided many of the excesses of the tech boom of the late 1990s when the United States created too many jobs.
“There was a huge amount of employment created and that has yet to unwind fully,” said Su-Lin Ong, senior economist at RBC.
The seasonally adjusted rise in August employment in Australia was more than double expectations and included a 63,500 rise in full-time jobs.
Employment had previously fallen in five of the past six months.
“I think the best description is that it’s payback time,” said Michael Blythe, the chief economist at Commonwealth Bank. “We had some unbelievably weak employment numbers over the last few months and we’ve seen a move back to normality on the back of these figures,” he said.
Forward indicators of Australian employment are pointing to a steady increase in jobs over the rest of 2003, while other recent economic indicators have also been positive.
“The domestic economy in Australia is very strong. We have seen it in relation to retail trade, the consumer confidence figures...and business confidence,” said Australia’s Treasurer Peter Costello.
However, analysts are concerned that strong jobs growth could fuel already strengthening domestic demand, and feed the appetite of confident consumers to borrow at near 30-year low interest rates and stoke a red-hot housing market. – Reuters