Australia’s unemployment rate unexpectedly dropped to a one-year low as payrolls rose for a second straight month, driving the local currency higher and reducing bets on interest-rate cuts next month.
The jobless rate fell in April to 4.9 percent, matching the lowest level since December 2008, from 5.2 percent in March, the statistics bureau said in Sydney today. Economists forecast a rise to 5.3 percent. Payrolls advanced by 15,500 after a revised 37,600 gain, compared with the median estimate for a 5,000 decline in a Bloomberg News survey of 22 economists.
The currency rebounded above $1.01 and stocks increased as investors pared bets that Reserve Bank of Australia Governor Glenn Stevens will lower borrowing costs after he slashed the benchmark by half a point to 3.75 percent last week. Prime Minister Julia Gillard is cutting spending for the first time in at least four decades and says the central bank has scope to ease monetary policy further if needed.
“The drop in the unemployment rate is obviously significant, given it’s under 5 percent,” said Celeste Tay, a Singapore-based economist at 4cast Ltd. who predicted a 15,000 gain. “This raises the bar for a rate cut next month at the margin, though the government’s fiscal tightening means it’s still a good possibility.”
Traders bet there’s a 61 percent chance the RBA will lower rates at its June 5 meeting, a Credit Suisse Group AG index showed. The Australian dollar bought $1.0121 at 5:01 p.m. in Sydney from $1.0061 prior to the data. Australia’s S&P/ASX 200 Index of stocks closed 0.5 percent higher in Sydney.
Twenty-four of 27 economists surveyed by Bloomberg News predict the central bank will keep borrowing costs unchanged next month. Three, including Goldman Sachs Group Inc. (GS:US) and Australia & New Zealand Banking Group Ltd. (ANZ), expect a quarter- point reduction.
The number of full-time jobs declined by 10,500 in April to 8.06 million, the biggest drop since November, while part-time employment rose by 26,000 to a record 3.44 million, today’s report showed.
Domino’s Pizza Inc. (DPZ:US) said it plans to hire 1,000 new employees across Australia. Chief Executive Officer Don Meij said in a March 12 statement there had been “a recent surge in demand for value pizzas.”
Australia’s participation rate, a measure of the working- age population, dropped to 65.2 percent in April from 65.3 percent a month earlier, it showed.
Job gains were led by the southern state of Victoria, a hub of manufacturing, with 23,200 jobs that defied the sustained strength of the currency above parity with the U.S. dollar. Western Australia, the center of the nation’s mining investment boom, added 6,800 jobs, the report showed. In contrast, New South Wales, Australia’s most populous state, lost 23,800 positions.
Australia’s economy is being driven by a resource bonanza as China and India, two countries that account for more than a third of the world’s population, increase demand for minerals and energy.
Rio Tinto Group said last month that it has begun a four- month recruitment drive to hire 6,000 workers for A$22 billion of projects in Western Australia, the Northern Territory, Queensland and New South Wales.
The mining boom has underpinned Australia’s currency. The so-called Aussie has risen more than 30 percent in the past three years and stayed above parity with the U.S. dollar since Dec. 20.
A report in Beijing today showed China’s exports and imports rose less than estimated in April as weakness in Europe and a domestic slowdown weighed on trade. The world’s most populous nation is Australia’s biggest trading partner.
Australia’s economy faces headwinds after the government announced this week it will cut spending for the first time in at least 42 years as Gillard ends four years of budget deficits, giving the central bank flexibility to lower interest rates.
The underlying cash surplus will be A$1.54 billion ($1.55 billion) in the 12 months to June 30, 2013, the government said May 8. Expenditures are forecast to fall to A$364.2 billion next year, the first drop in figures dating back to 1971. The A$44.4 billion deficit this year is the third-largest on record and 3 percent of gross domestic product.
Gillard is under pressure to revive parts of the economy not benefiting from the biggest mining investment boom in more than a century. The budget papers released May 8 show the unemployment rate is predicted to rise to 5.5 percent in the next two years.
“What we can do as a government is to get fiscal policy in the right shape to give the Reserve Bank the maximum room to move should they choose to do so,” Gillard said in an interview in Canberra yesterday. “That’s been one of the drivers as to why we want to bring the budget back to surplus.”
Today’s jobs data contrasts with reports in the past month showing the economy struggling to gain traction, with core inflation slowing to a 13-year low, export and house prices slumping, and consumer confidence weaker.
Bond investors’ inflation expectations touched the lowest this year. The gap between yields on 10-year inflation-linked bonds and benchmark government notes shrank to as little as 2.37 percentage points, the least since Nov. 10. The so-called breakeven rate shows estimates for annual average inflation over the lifetime of the debt.
Australian help-wanted notices dropped in April by the most in almost a year. Jobs advertised in newspapers and on the Internet declined 3.1 percent last month, the most since May 2011, according to an ANZ bank report this week.
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