Helped by its massive natural resources, Australia has weathered the global financial crisis better than other Group of 20 economies. In 2012, its economy grew 3.1 per cent, compared with 1.6 per cent in the United States and 1.1 per cent in Canada.
Surprise Australian jobs slide revives risk of rate cut, hammers currency
December employment falls 22,600 instead of a forecast rise, reviving risk of rate cut and pushing the aussie to its lowest level since 2010
Australian employers shed jobs at the fastest pace in nine months last month while full-time positions suffered their biggest drop since mid-2011, an unexpected blow that hammered the Australian dollar to its lowest level in more than three years.
Investors reacted by reviving the prospect of another cut in interest rates from the Reserve Bank of Australia, which has been signalling it would rather not ease again from the record low of 2.5 per cent.
Market odds on a move by June narrowed to near one-in-two from one-in-four ahead of the jobs figures.
In a report littered with unwelcome milestones, the Australian Bureau of Statistics found employment fell 22,600 last month, confounding forecasts for a modest rise of 7,500.
Full-time jobs fared even worse by diving 31,600.
While unemployment did stay at 5.8 per cent for a third consecutive month, it was only because the participation rate fell to its lowest since April 2006.
"We had hoped things were getting better, but this just re-establishes the poor trend that lasted for most of 2013," said Michael Turner, a strategist at RBC Capital Markets. "This probably won't be enough on its own to get the RBA over the line for a cut. But if the jobless rate were to start rising again, it might not have much tolerance for a rate above 6 per cent."
The central bank has shown a preference for any further easing in policy to come through a lower Australian dollar rather than a decline in borrowing costs that could add fuel to an already hot housing market.
It would have found some comfort, therefore, in the currency's rapid fall yesterday, as it sank almost 1 US cent to 88.05 US cents, the lowest since August 2010.
The drop in jobs was also likely to generate a lot of gloomy media headlines that could threaten the recent recovery in consumer confidence and spending.
The news about employment has been worrisome for a while, with several high-profile companies announcing future redundancies, including Qantas Airways and carmaker Holden, a unit of General Motors.
Yet there are statistical straws in the wind suggesting companies are rediscovering an appetite for hiring.
A quarterly survey of 2,600 employers by recruitment business Hudson out earlier this week showed about 23 per cent of firms expected to raise their headcount this year, compared with just 11 per cent that planned reductions.
Australia's largest online job site, Seek, reported a rise of 3.2 per cent in the number of new job advertisements in November, the largest increase since April 2011. As a result, new advertisements rose faster than new applicants for the first time in a year.
Another positive is that it is becoming cheaper to employ more people. A moderation in wage growth and improving productivity led to a 0.4 per cent fall in real unit labour costs in the year to September.
"Jobs growth can continue to run at around a 1 per cent per annum pace in the period ahead," said Michael Workman, a senior economist at CBA.