Australia’s unemployment rate will rise to the highest level since 2009 as industries outside of mining struggle with an elevated currency, the Organization for Economic Cooperation and Development said.
The nation’s jobless rate will climb to 5.7 percent in 2013 from 5.4 percent this year, the OECD said in its economic outlook released in Paris yesterday. That would match a level reached in September 2009 and is higher than the average in the past decade of 5.2 percent.
“Mining expansion will continue, but some other sectors are having to adjust to the high level of the exchange rate and raise their productivity, which can be expected to weigh on the labor market,” the OECD said in the report. “Faster fiscal consolidation will also weigh somewhat on demand.”
Prime Minister Julia Gillard’s government plans a A$46 billion ($45.5 billion) swing to a budget surplus in the fiscal year beginning July 1 to provide the Reserve Bank of Australia with more scope to lower borrowing costs.
The central bank has cut the benchmark interest rate by a percentage point to 3.75 percent in the past six months to support demand as a 41 percent gain in the currency since 2008 hurts non-resource exporters, tourism and education.
Australia’s unemployment rate fell last month to 4.9 percent, the lowest level since April 2011, from 5.2 percent in March, a government report showed this month. Core inflation slowed to a 13-year low in the first quarter as the currency’s strength contained prices.
“In the absence of inflationary pressures, the accommodating monetary stance which accompanies this budget- tightening should help limit the risk of weakening employment,” the OECD said.
The report showed inflation in Australia and neighboring New Zealand staying contained and below the top end of each central bank’s target range.
Australia’s consumer price index will increase 1.8 percent this year and 2.8 percent in 2013, while the CPI in New Zealand will gain 1.7 percent this year and 2.6 percent next, the OECD said in the report.
The RBA aims to keep the inflation within a 2 percent to 3 percent range, and its counterpart across the Tasman Sea is required to keep price gains within 1 percent and 3 percent.
The Reserve Bank of New Zealand has held its key rate at 2.5 percent for the past 14 months to bolster growth after the deadliest earthquake in eight decades struck the nation’s second-biggest city, Christchurch, in February 2011.
The OECD forecasts New Zealand’s economic growth will improve to 2.8 percent in 2013 from 1.9 percent this year, bolstered by low interest rates and earthquake rebuilding. The expansion is being held back by a strong exchange rate, falling commodity prices and the withdrawal of fiscal stimulus, it said.
In New Zealand, “delaying monetary tightening is appropriate in light of the fiscal contraction and risks to global growth, though as reconstruction accelerates, capacity pressures will bear close watching,” according to the OECD report.
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