Australia economic outlook improves after positive payrolls report

Central bank ready to shift to a neutral policy stance as full-time payrolls rise most since 1991

PUBLISHED : Friday, 14 March, 2014, 1:06am
UPDATED : Friday, 14 March, 2014, 6:05pm

Australian employers boosted full-time payrolls last month by the most in more than 22 years, sending the country's currency higher and underscoring the central bank's shift to a neutral policy stance.

The number of people employed full-time rose by 80,500, the biggest increase since August 1991 and the second-largest on record, the statistics bureau said. Overall employment climbed 47,300 as part-time jobs dropped. The jobless rate held at 6 per cent.

Central bank governor Glenn Stevens reduced the benchmark interest rate by 2.25 percentage points since late 2011 to a record-low 2.5 per cent and signalled a period of steady borrowing costs. The job data and a stronger housing market indicate businesses are beginning to invest in an economy that policymakers predict will accelerate.

"Labour demand has started to heal," said Katrina Ell, an economist at Moody's Analytics. "Improved domestic demand, thanks to earlier rate cuts, is picking up the slack from mining."

The Australian dollar rose to 90.61 US cents in Sydney from 90.16 US cents before the data was released yesterday. Australia's participation rate, a measure of the labour force in proportion to the population, gained to 64.8 per cent in February from a revised 64.6 per cent a month earlier, it showed.

Queensland led the employment gain with 30,700 jobs created last month, while New South Wales added 13,900 workers.

The Reserve Bank of Australia last month raised its inflation and growth forecasts, reflecting the lower currency. Cheap mortgages have driven up home prices and spurred a pickup in construction approvals.

"Some forward indicators have stabilised and then improved a little of late, which is promising," Stevens said. "But even with this, and with a slightly better growth outlook, the labour market will probably remain soft for a while yet, given that it lags changes in activity."

The central bank's record-low benchmark rate helped drive a 14.1 per cent gain in Sydney home prices in the 12 months to February. Approvals to build new homes grew 6.8 per cent in January from a month earlier, government figures showed.

Coles supermarkets will create 4,300 jobs in Australia this financial year as part of an investment of more than A$300 million (HK$2.1 billion) in the country, the company said.

Woolworths, Australia's largest retailer, is also building up its new Masters hardware chain with Lowe's.