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  • Jul 31, 2014
  • Updated: 8:11am
BusinessEconomy
AUSTRALIA

Boost in Australian jobs eases pressure for rate cut

PUBLISHED : Friday, 14 June, 2013, 12:00am
UPDATED : Friday, 14 June, 2013, 3:49am

Australia unexpectedly boosted payrolls last month and unemployment declined as the job market withstood a weaker domestic outlook, prompting traders to push back bets on an interest-rate cut.

The number of people employed rose by 1,100, the statistics bureau said, after rising a revised 45,000 in April. May's increase compares with the median estimate for a drop of 10,000 in an survey of economists. The jobless rate fell to 5.5 per cent from a revised 5.6 per cent.

The data underscores the resilience of the world's 12th-largest economy, which has been driven by investment in resources to meet Chinese demand.

Reserve Bank of Australia governor Glenn Stevens has cut rates by 2 percentage points in the past 20 months, including a 0.25 percentage point reduction in May to a record-low 2.75 per cent.

The central bank is seeking to revive industries outside mining, where investment is predicted to peak this year.

The "jobs data was undeniably better than feared", said Scott Haslem, Sydney-based chief economist for Australia at UBS, who also noted a swing to part-time over full-time jobs that indicates underlying weakness. The unemployment rate "is no smoking gun for the RBA in July and we keep our 25 basis point call for a cut in August".

The Australian dollar traded at 94.60 US cents in Sydney yesterday, compared with 94.42 before the data's release.

Traders are pricing in a 37 per cent chance the central bank will next month lower rates by 0.25 percentage point to 2.5 per cent, down from 47 per cent before the report.

The number of full-time jobs declined by 5,300 in May, and part-time employment rose by 6,400, the report showed. The participation rate, a measure of the labour force in proportion to the population, dropped to 65.2 per cent from 65.3 per cent a month earlier, it showed.

"We've come down a tick this month, but broadly we suspect the trend is toward a higher unemployment rate," said Michael Turner, a debt strategist at Royal Bank of Canada.

Industry has been squeezed by a currency that held above US$1 from mid-June last year to May 10, the longest stretch above parity with the US dollar since the Aussie was freely floated in 1983.

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