Financial Times FT.com

Australian jobless rate remains at 30-year low

By Virginia Marsh in Sydney

Published: April 7 2005 12:04 | Last updated: April 8 2005 05:40

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Employment in Australia was unexpectedly strong last month, keeping the country's jobless rate at a near 30-year low of 5.1 per cent.

All but 5,400 of the 57,800 new jobs were part-time, but economists said Thursday’s data still underlined the continuing tightness in the labour market and kept alive the prospect of a further increase in interest rates.

The figures came a day after the central bank surprised many by deciding against raising rates after increasing them to 5.5 per cent in March, its first move in over a year.

“[The employment figures] are a super-strong result. This no doubt will keep the Reserve Bank jittery about labour shortages and potential wage pressures,” said Craig James at Commonwealth Securities, adding there was a strong chance the bank would hike rates again as early as next month.

But some economists were more cautious, saying the signals coming from the economy remained mixed, with key data, such as the first quarter inflation figures, still to be released.

Some said it might also be politically difficult for the Reserve Bank to raise rates until July, because the timing of the May and June meetings would be too close to the May 10 delivery of the federal budget.

“RBA governor Ian Macfarlane is well aware of the political consequences of announcing rate rises [around budget time],” said John Edwards, chief economist at HSBC in Australia.

The centre-right coalition, which said in its re-election campaign last October that it would keep interest rates lower than the opposition Labor party would, came under fire after the RBA raised rates last month, while data at the time showed the economy had slowed significantly at the end of last year.

Australian households have become increasingly sensitive to interest rate rises because of the sharp increases in mortgage and credit card debt since the late 1990s.