Australia’s Worst Jobs Growth in 15 Years Increases Prospect of Rate Cuts

Australia is headed for its worst year of jobs growth in 15 years, boosting prospects central bank Governor Glenn Stevens will extend interest-rate cuts into 2012 as inflation pressure eases.

Payrolls gained 44,700 through the first 11 months of this year, on pace for the smallest growth since 1996 after a record 362,300 increase in 2010, government data released today showed. The report contrasted with figures yesterday showing the biggest six-month gain in economic growth since March 2007.

The only Group of 10 economy to avoid the 2009 global recession is ending the year with signs of slower growth as Europe’s fiscal crisis and a stronger currency weigh on tourism, retailers and manufacturers. The nation’s unemployment rate advanced last month to 5.3 percent, matching the highest level this year.

“There are clear signs that Aussie businesses are reining in hiring,” said Savanth Sebastian, a Sydney-based economist at Commonwealth Bank of Australia (CBA), the nation’s largest lender. “Jobs growth is now going backwards, adding to data showing sluggish retail spending, a weak housing market and lackluster activity in manufacturing, services and construction sectors.”

The Reserve Bank of Australia could enter 2012 with an economy showing increased spare capacity that will reduce consumer-price pressures. Stevens two days ago cited “considerable turbulence” in financial markets and an increased chance of a “further material slowing in global growth” after the RBA’s first back-to-back rate reductions since 2009.

Rates Expectations

Traders are pricing in a 32 percent chance Stevens will lower borrowing costs by a half percentage-point at the RBA’s next policy meeting on Feb. 7, interbank cash-rate futures showed today. He reduced rates to 4.25 percent from 4.5 percent on Dec. 6.

Payrolls fell by 6,300 in November from a month earlier, the statistics bureau said in Sydney today. The median estimate in a Bloomberg News survey of 22 economists was for a 10,000 advance.

The Australian dollar dropped 0.4 percent, the most in a week, to $1.0252 from yesterday in New York and $1.0285 before the data were released.

The number of full-time jobs plunged by 39,900 in November, and part-time employment rose by 33,600, today’s report showed. Australia’s participation rate, a measure of the working-age population, fell to 65.5 percent in November from 65.6 percent a month earlier, it showed.

Goldman Sachs Group Inc. (GS)’s economists were the only forecasters in the Bloomberg survey predicting an employment decline in November.

Job Cuts

Australia’s unemployment rate is “still very low,” Assistant Treasurer Bill Shorten told Bloomberg Television in an interview after the data. “I’m sure there would be plenty of European and North American jurisdictions that would like some of these numbers.”

Macquarie Group Ltd. (MQG), Australia’s biggest investment bank, reduced headcount by 3 percent in the six months to Sept. 30, the first reduction in 2 1/2 years. Chief Financial Officer Greg Ward told reporters Oct. 28 that the bank expects to find “ongoing efficiencies” as it focuses on costs.

The RBA last month cut its forecasts for economic growth and inflation for the next two years as turmoil abroad makes domestic consumers wary about spending.

Reflecting those expectations, the currency has fallen 7.5 percent since it reached $1.1081 on July 27, the highest level since it was freely floated in 1983.

Housing Market Weakens

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.

Australian job notices were unchanged in November after declining the previous four months, according to an Australia & New Zealand Banking Group Ltd. (ANZ) report released this week.

Data last week showed Australian home-building approvals plunged in October for a second straight month and retail sales growth slowed. The number of permits granted to build or renovate houses and apartments fell 10.7 percent from September, when they dropped a revised 14.2 percent, the Dec. 1 report showed. Retail sales in October gained 0.2 percent, half the increase economists estimated.

Even so, Australia’s economy grew faster than estimated last quarter on consumer spending and mining-driven investment.

Gross domestic product rose 1 percent in the three months ended Sept. 30, after growing a revised 1.4 percent the prior quarter, the fastest pace in four years, a Bureau of Statistics report released in Sydney yesterday said. The median of 24 estimates in a Bloomberg News survey was for 0.8 percent growth.

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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