Australia’s unemployment rate rose to the highest since 2009, underscoring the challenge newly-installed Prime Minister Kevin Rudd faces as he crafts a re-election pitch centered on economic management.
The jobless rate climbed to 5.7 percent in June, the highest since September 2009 and up from a revised 5.6 percent a month earlier, the statistics bureau said in Sydney today, as more people sought work. The number of people employed advanced by 10,300 from May -- when employers cut a revised 700 workers - - as full-time jobs declined by 4,400 and part-time employment increased by 14,800, the report showed.
Central bank Governor Glenn Stevens has reduced the benchmark interest rate by 2 percentage points since late 2011, including a quarter-point cut in May to a record-low 2.75 percent. Rudd, who ousted Julia Gillard last month, is ditching the optimism of his predecessor and selling himself as the best leader to steer Australia through a downturn, today repeating his declarations that “the China resources boom is over.”
“No political leader wants to see unemployment drifting up,” said Stephen Walters, JPMorgan Chase & Co.’s chief economist in Australia, who noted the jobless rate is still below the peak reach during the global financial crisis in 2008-2009. “Rudd was in charge then too. He’s been here before and he did get a lot of credit for swift action during the onset of the GFC and presided over an unemployment rate falling back. So he’s got a fair bit of credibility there.”
Benchmark 10-year government bond yields dropped 9 basis points to 3.75 percent, heading for the biggest drop since June 25. The Australian dollar maintained gains on prospects the U.S. Federal Reserve will hold off on reducing stimulus, trading at 92.65 U.S. cents, a 1 percent climb from yesterday.
Traders are pricing in about a 60 percent chance of a quarter percentage point rate cut to 2.5 percent at next month’s policy meeting, according to swaps data compiled by Bloomberg.
Australia’s participation rate, a measure of the labor force in proportion to the population, gained to 65.3 percent in June from 65.2 percent a month earlier, it showed.
“We’re seeing a labor market that is still in pretty good shape, we’re still generating jobs, the disappointment of course is we’re not generating enough jobs to stop unemployment from rising,” said Michael Blythe, chief economist in Sydney at Commonwealth Bank of Australia. “That shallow uptrend in unemployment that’s been in place for a while is continuing, consistent with an economy that’s running below trend.”
Rudd, who faces an election due by Nov. 30, has already boosted the government’s standing. Labor rose to its highest level on a two-party preferred basis in almost nine months and is tied on 50 percent with the Liberal-National coalition, a Newspoll published July 9 in The Australian showed.
“The truth is in 2013 -- the China resources boom is over,” Rudd said in a speech in Canberra today. “The new economic challenge that Australia faces today: how to protect our jobs and living standards given that global growth is sluggish.”
China’s exports and imports unexpectedly declined in June, underscoring the severity of the slowdown in the world’s second-biggest economy as Premier Li Keqiang reins in credit growth. Overseas shipments fell 3.1 percent from a year earlier, the most since the global financial crisis, data from the General Administration of Customs showed in Beijing yesterday.
“It’s gone from a cult view of cranky, contrarian hedge fund managers to almost main-stream that the China slowdown is very much underway and we might not have seen the bottom yet,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney.
Elsewhere in Asia, the Bank of Japan today refrained from adding to unprecedented monetary stimulus and raised its assessment of the world’s third-biggest economy, signaling confidence in a recovery. Governor Haruhiko Kuroda’s board stuck with an April pledge to expand the monetary base by 60 to 70 trillion yen ($709 billion) per year, a statement released in Tokyo showed. The Bank of Korea held its interest rate unchanged for a second straight month.
In Greece, unemployment probably rose to a new record 26.9 percent in April from a month earlier, economists forecast before data today. The nation is in a sixth year of an economic slump deepened by austerity measures tied to the country’s bailouts from the euro area and International Monetary Fund.
In the U.S., fewer Americans probably filed claims for unemployment benefits last week, economists predicted before the Labor Department data today. Jobless claims likely decreased by 3,000 to 340,000 in the week ended July 6, a Bloomberg survey showed.
Australian industry has been squeezed by a currency that held above $1 from mid-June last year to May 10, the longest stretch above parity with the greenback since the Aussie was freely floated in 1983. The local dollar has declined 12 percent in the past three months, the worst performer among group of 10 currencies.
The depreciation came too late for Ford Motor Co., which announced May 23 it would end production in the country after nine decades, with the loss of 1,200 jobs. General Motors Co.’s Holden division said in April it will cut about 500 jobs in Australia, citing the currency’s strength.
“Relying on the lower dollar alone to boost competitiveness is insufficient for the great economic task that lies ahead,” Rudd said today. “ That is why Australia must embrace today a new national competitiveness agenda.”
Job advertisements dropped 1.8 percent in June, the fourth straight monthly fall, Australia & New Zealand Banking Group Ltd. said in a July 8 report. Help-wanted notices declined in Western Australia, the center of the nation’s mining industry, as an investment boom wanes.
The unemployment rate was 10 percent or higher in 10.3 percent of the nation’s approximately 1,400 regions in the three months through March, up from 8.1 percent a year earlier, according to a separate government report released this month. More than 64 percent of regions recorded a higher jobless rate over the 12 months through March, the data showed.
Stevens, in the statement accompanying the July 2 decision to leave rates unchanged, said the RBA’s board “judged that the inflation outlook, as currently assessed, may provide some scope for further easing, should that be required to support demand.”