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Biggest Australia Jobs Gain Since 2010 Augurs Interest Rate Pause: Economy
Australia added the most workers in 14 months in January and the jobless rate unexpectedly declined, spurring investors to increase bets the central bank will extend an interest-rate pause.
Payrolls rose by 46,300 last month, the most since November 2010, after a revised drop in December of 35,600, the statistics bureau said in Sydney today. That compares with the median estimate for an increase of 10,000 in a Bloomberg News survey of 25 economists. The jobless rate fell to 5.1 percent.
Stocks fell as traders boosted the odds Reserve Bank of Australia Governor Glenn Stevens will keep the benchmark borrowing cost unchanged March 6 after he unexpectedly paused at 4.25 percent rather than cut last week as resource investment drives growth. The central bank lowered the rate at back-to-back meetings last quarter as Europe’s sovereign debt crisis weakened prospects for global growth.
“This strong report is likely to wipe out any remaining expectations of an RBA rate cut next month,” said Annette Beacher, head of Asia-Pacific research at TD Securities Inc. in Singapore.
Investors priced in a 37 percent chance Stevens will lower rates by a quarter percentage point to 4 percent at the next meeting March 6, down from 60 percent before the report, a Credit Suisse Group AG Index showed. The Australian dollar was little changed at $1.0684 at 1:22 p.m. in Sydney from $1.0683 before the data were released. The S&P/ASX 200 Index fell 1.6 percent to 4,186.4.
Asian stocks also fell today as a delay in a second bailout for Greece revived concern Europe will struggle to contain its debt crisis. The MSCI Asia Pacific Index slipped 0.5 percent to 126.65 as of 10:05 a.m. in Tokyo.
The number of full-time jobs climbed 12,300 in January, and part-time employment jumped 34,000, today’s report showed. Australia’s participation rate, a measure of the working-age population, gained to 65.3 percent in January from 65.2 percent a month earlier, it showed.
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.
Today’s report showed 86 percent of new jobs last month were created in Queensland and Western Australia, two states where concentrations of mining and energy projects are already operating or gearing up. Those states each added 20,000 workers in January and have led the nation with a combined 49,500 new jobs in the past six months, the report showed.
Evans’s Rate Call
Elsewhere in Asia, a report today showed Singapore’s economy shrank less than initially estimated last quarter as a surge in pharmaceutical production supported manufacturing at year-end. Gross domestic product fell an annualized 2.5 percent from the previous three months.
In China, non-financial outbound investment rose 59.9 percent in January from a year earlier to $4.376 billion, the Ministry of Commerce said in Beijing today.
In the U.S., a report today may show that wholesale prices rebounded in January after an unexpected decline in December, according to the median estimate in a Bloomberg News survey of economists. Prices may have increased 0.4 percent from December after slipping 0.1 percent in November.
American data on jobless claims and housing starts are also due today, along with the Bloomberg Consumer Comfort Index and the business outlook report from the Federal Reserve Bank of Philadelphia.
Elsewhere around the world, Israel reports fourth-quarter economic growth and Italy gives the December trade balance.
In Australia, a A$456 billion ($489 billion) pipeline of resource projects is spurring companies such as BHP Billiton Ltd. (BHP) to increase hiring and helping cushion a slump in manufacturing and services hit by a stronger local currency.
“The RBA is expecting double-digit increases in business investment in each of the next couple of years,” Deputy Governor Philip Lowe said in a speech today in Sydney before the employment report. “It is not an exaggeration to say that this is a once-in-a-century investment boom.”
More than 25,000 new workers will be needed to complete mining, natural gas and transportation projects in Queensland by late-2012, according to the industry-funded group Construction Skills Queensland.
BG Group Plc (BG/), Santos Ltd. (STO) and ConocoPhillips (COP) are moving ahead with more than $50 billion of liquefied natural gas projects on the central Queensland coast. Arrow Energy Ltd., owned by Royal Dutch Shell Plc (RDSA) and PetroChina Co. (857), plans a fourth LNG development on Queensland’s Curtis Island.
The resources boom has underpinned Australia’s currency. The so-called Aussie has risen about 5 percent this year and reached a six-month high of $1.0845 last week after the RBA unexpectedly kept the nation’s benchmark borrowing cost unchanged at its Feb. 7 meeting.
Stevens reduced the overnight cash rate target by a quarter percentage point on Nov. 1 and again on Dec. 6 as inflation pressures eased and risks to global growth increased. Australia’s benchmark rate is the highest among major developed economies, compared with near-zero rates in the U.S. and Japan, the European Central Bank’s 1 percent and the U.K.’s 0.5 percent.
Australia’s “growth has been around trend and inflation is consistent with the target, and there are reasonable prospects for this to continue,” Lowe said today. “We also have much more flexibility to deal with unfolding events than almost any other developed economy.”
Still, the local dollar’s strength is hurting Toyota Motor Corp. (7203)’s Australian division, the country’s largest car exporter, which announced last month it would cut more than a 10th of the employees at its assembly plant after a 21 percent decline in 2011 production. General Motors Co.’s local unit has also announced job cuts.
Qantas Airways Ltd., Australia’s largest carrier, today said it will cut about 500 jobs after posting an 83 percent drop in first-half profit on higher fuel prices and costs from the two-day grounding of its fleet.
Westpac and Australia & New Zealand Banking Group Ltd., the nation’s second- and third-biggest lenders, will fire as many as 1,460, according to the Finance Sector Union.
“Looking ahead, these labor market reports are expected to soften somewhat as official employment data start to capture the announced job losses in the banking industry, manufacturing and now airlines,” Beacher said.
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