Australia’s surging job market, capping its strongest quarter since 2006, signals the government may need to retreat from a campaign pledge to slow population growth as the central bank tries to control inflation.
The number of people employed rose 49,500 in September from a month earlier, almost 2 ½ times the median estimate in a Bloomberg News survey and the most since January, the statistics bureau said yesterday in Sydney. Full-time employment jumped 112,500 in the past two months, the biggest back-to-back increase since 1988.
“Clearly the latest jobs data sends a wake-up call to the government,” said Craig James, a senior economist at Commonwealth Bank of Australia in Sydney. “If we want to restrain wage pressures and keep interest rates low then labor supply needs to increase and that means more migrants.”
Prime Minister Julia Gillard campaigned before the Aug. 21 election for reduced population gains and dropped her predecessor’s endorsement of a “Big Australia” policy that envisioned a surge of more than 50 percent in citizens in the coming four decades. Since her win, job gains that may presage a jump in wages threaten to force the central bank to raise interest rates further.
Net immigration dropped 25 percent to 241,400 in the year ended March 31 from 320,400 recorded for the year earlier, a statistics bureau report showed last month.
In the past year, immigration has fallen at the fastest rate on record, which is “certainly not a desirable outcome,” James said.
Under the baseline scenario of a Treasury report in February, the population is forecast to expand 1.2 percent a year to 35.9 million by 2050. Paring that rate by one-third would cut the average annual economic growth rate to 2.3 percent from 2.7 percent, according to the Treasury. Net migration is the “key” variable influencing the outcomes, the study said.
The report yesterday showed the nation’s jobless rate held at 5.1 percent last month, while the labor participation rate, which measures the percent of the population over 15 years old that has a job or is looking for one, was 65.6 percent, compared with 65.4 percent in August.
“We haven’t quite got the unemployment rate down to a point where it triggers wage pressure and concerns about inflation,” said Stephen Roberts, a senior economist at Nomura Australia Ltd. in Sydney. “But it’s only a matter of time before we get there.”
Reserve Bank of Australia Governor Glenn Stevens kept the benchmark rate unchanged at 4.5 percent this week, while saying that higher borrowing costs will likely be needed “at some point.”
Traders in futures contracts are betting on a 60 percent chance the RBA will raise its key rate by a quarter percentage point next month, compared with the U.S. Federal Reserve’s policy of holding its rate near zero. That divergence helped fuel the Australian currency to a record against the U.S. dollar late yesterday.
The currency was at 98.15 U.S. cents at 10:51 a.m. in Sydney from 98.25 in New York yesterday, when it touched 99.18, the strongest since exchange controls were ended in 1983.
The RBA forecasts economic growth will accelerate as demand from China spurs investment spending by companies such as Chevron Corp., which is building the A$43 billion ($42 billion) Gorgon liquefied natural gas project in Western Australia.
That state’s jobless rate climbed for a third straight month, to 4.6 percent in September, yesterday’s report showed.
“This suggests that the ramp-up of Gorgon LNG and other major mining projects is yet to really impact,” said Joshua Williamson, a senior economist at Citigroup Inc. in Sydney. “But as the ramp-up builds momentum over the next 12 months this will drive the unemployment rate sharply lower in W.A., putting pressure on labor costs and the costs of materials.”
The region will need an additional 500,000 workers over the next 10 years as BHP Billiton Ltd., the world’s biggest mining company, and Xstrata Plc, the top thermal coal exporter, develop projects, according to the state’s chamber of commerce and industry in Perth.
“The economy has been growing continuously for almost 20 years” and “is therefore approaching full capacity,” RBA Deputy Governor Ric Battellino said in a speech today in Brisbane. “The resources boom that began about 2005, and which abated for a time during the global financial crisis, is reemerging, adding to the pressure on capacity.”
Gillard, campaigning to win Labor a second straight term in office in the Aug. 21 vote, in a July 20 speech warned against “hurtling down the track towards a big population” and said the current growth model is “irresponsible.” By contrast, former Prime Minister Kevin Rudd said “I believe in a big Australia” in an October 2009 speech.
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