(Updates with economist’s comment in fourth paragraph.)
June 9 (Bloomberg) -- Australian employers added fewer workers than economists forecast in May and full-time jobs declined for a second month, sending the nation’s currency lower as investors reduced bets on interest-rate increases.
The number of people employed rose by 7,800, the statistics bureau said in Sydney today. That was lower than the median estimate for a 25,000 increase in a Bloomberg News survey of 25 economists. The jobless rate held at 4.9 percent.
The local dollar touched the lowest level in two weeks as traders bet there is a less-than-50-percent chance Reserve Bank of Australia Governor Glenn Stevens will increase the developed world’s highest borrowing costs this year. Stevens kept rates unchanged at 4.75 percent for a seventh month this week, the longest pause since 2007, saying households are increasing savings as consumers show caution in spending and borrowing.
“It is clear that the economy has lost momentum,” said Craig James, a senior economist at Commonwealth Bank of Australia, the nation’s biggest lender. “For the Reserve Bank, the safest place is on the interest-rate sidelines.”
The number of full-time jobs fell by 22,000 in May after dropping 57,200 in April, today’s report showed, the biggest two-month decline in more than two years. Part-time employment rose 29,800 last month and Australia’s participation rate, which measures the labor force as a percentage of the population over 15 years old, held at 65.6 percent, it showed.
The Australian dollar fell to $1.0578 as of 12:45 p.m. in Sydney from $1.0623 yesterday in New York. Investors see a 4 percent chance Stevens will raise rates by a quarter percentage point next month and gauge there is about a 32 percent chance of an increase by the end of the year, interest-rate swaps show.
The data “reinforced the downward pressure on the currency brought about by a less hawkish than hoped for RBA statement earlier in the week,” Mitul Kotecha, head of global foreign- exchange strategy in Hong Kong at Credit Agricole SA, wrote in a report after the release. “The combination of the RBA statement and weak jobs data has resulted in a major headwind against further near-term Australian dollar appreciation.”
Stevens said in a June 7 statement after holding rates that the decision reflects “softened” prices for raw materials and an unemployment rate that’s been little changed near 5 percent. Consumer prices that were boosted by natural disasters earlier this year aren’t expected to accelerate much above the RBA’s inflation target range of 2 percent to 3 percent, he said.
“The weather-affected prices should fall back later in the year, though substantial rises in utilities prices are still occurring,” Stevens said. “The bank expects that, as the temporary price shocks dissipate over the coming quarters, CPI inflation will be close to target over the next 12 months.”
Loans provided by Australian banks and finance companies were flat in April from the previous month, the RBA said in a May 31 report. Australia’s household savings rate climbed to 11.5 percent from 9.7 percent in the previous quarter, the highest level since 2009, a government report showed June 1.
Qantas Airways Ltd., Australia’s biggest carrier, said last week it expects to cut about 5 percent of cabin crew in its first buyout program in three years.
About 350 of the carrier’s 7,000 flight attendants will likely accept a package, the airline said in a June 3 statement.
Further weighing on consumers, the government said last month it will end 23 years of spending growth to help ease inflation pressure and support the return to a budget surplus.
The government said in its budget last month that economic growth will accelerate to 4 percent in the year to June 30, 2012, from 2.25 percent in the current fiscal year. The government also predicted unemployment will fall to 4.5 percent by mid-2013.
The RBA increased rates by 175 basis points from October 2009 through November. In contrast, the U.S. Federal Reserve has held its benchmark rate near zero since December 2008. That divergence contributed to a 28 percent increase in the local dollar versus the U.S. currency in the past 12 months.
The Australian dollar reached $1.1012 on May 2, the highest since exchange controls were scrapped in 1983.
Australia added 30,900 new positions in the first five months of this year, the weakest job growth since 2009 and the second-weakest in a more than a decade, as manufacturing, services and construction lag behind a mining industry that is expanding to meet Chinese demand for raw materials.
“Private investment is picking up, led by very large capital spending programs in the resources sector, in response to high levels of commodity prices,” Stevens said in the June 7 statement. “Outside the resources sector, investment intentions have been revised lower recently.”
Two coal-seam gas projects, expected to cost more than A$30 billion, are proceeding near the Queensland port of Gladstone. Santos Ltd., Australia’s third-largest oil producer, and BG Group Plc, the U.K.’s third-biggest gas producer, will start hiring the first of more than 10,000 construction workers needed for the two projects later this year.
Australian job advertisements dropped in May by the most in two years, declining 6.5 percent from April, according to an Australia & New Zealand Banking Group Ltd. report this week. The country recorded its biggest annual job gain on record last year.
--With assistance from Daniel Petrie in Sydney. Editors: Cherian Thomas, Garfield Reynolds
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