Jobless rate rises in Australia but still envy of the world
The federal government has played down an unexpected spike in the jobless rate above five per cent, saying Australia’s labour market is still the envy of the world.
THE federal government has played down an unexpected spike in the jobless rate above five per cent, saying Australia’s labour market is still the envy of the world.
The opposition says the rise in the unemployment rate to 5.1 per cent in July – the highest level since November last year – is another sign of the economy losing momentum.
Still, it will keep financial markets looking for an interest rate cut by the end of the year, economists say.
“We still see this as an improbable outcome, barring the advent of a major financial crisis involving the collapse of a major institution,” NAB Capital chief economist Rob Henderson said.
Share prices defied another turbulent session in overseas markets, finishing with only tiny losses and despite the weaker than expected labour force report.
The Australian dollar dropped around one US cent below 103 cents, while interest rate futures – that try to predict moves in the official cash rate – were factoring in a more than 70 per cent chance of a 50 basis point cut by the Reserve Bank in September.
The rise in the jobless rate to 5.1 per cent came after four months of holding at 4.9 per cent, and where economists had expected it to stay for at least another month.
But Jobs Minister Chris Evans said Australia’s labour market remains the “envy of the world”.
“Australia’s unemployment rate remains one of the lowest rates in the industrialised world and stands in stark contrast to our peers,” Senator Evans said in a statement.
“Australia’s labour market – like the Australian economy – remains resilient, particularly in the context of the chronic unemployment problems besetting so many other advanced economies.”
The number of people employed in full-time work dropped by a seasonally adjusted 22,200 in July, and were all but offset by a rise of 22,100 part-time workers.
Economists had expected a 10,000 increase in total employment.
Opposition treasury spokesman Joe Hockey said he was more concerned that the number of people unemployed rose by 18,000.
“This adds to a raft of other economic data that suggests economic activity has cooled in recent months,” he said in a statement.
Business and consumer confidence levels are weak, retail sales and house prices are soft, dwelling construction approvals are falling and demand for credit is subdued.
At the same time, Mr Hockey said households were facing increased financial stress from a rising cost of living, higher interest rates, and new or increased taxes.
He said the government must act now to restore consumer and business confidence and “immediately rescind the flood levy, and cancel its plans to introduce the carbon and mining taxes”.
Weak consumer demand was reflected in the latest results from up-market department store David Jones which posted a 10.3 per cent drop in sales in the June quarter.
“We are facing an extremely difficult trading environment,” David Jones chief executive Paul Zahra said in a statement.
Local shares had dropped over 1.5 per cent at the opening after US stocks plummeted more than four per cent and European share losses tipped over five per cent in some cases.
Renewed worries over eurozone debt problems were fuelled by rumours that France, and possibly its banks, were about to have their credit rating downgraded, talk that immediately denied by ministry officials.
Treasurer Wayne Swan said Australian banks were in a “very, very strong position” that stood the local economy in very good stead.