Australian employers unexpectedly cut payrolls in May, underscoring the likelihood interest rates will remain at a record low for an extended period.
The number of people employed fell by 4,800, the statistics bureau said in Sydney today. That compares with the median estimate for a 10,000 increase in a Bloomberg News survey of 27 economists. The jobless rate held at 5.8 percent.
Government plans to cut spending and increase charges have weighed on consumer sentiment. The Reserve Bank of Australia has this year flagged a period of rates stability after reducing the benchmark to a record-low 2.5 percent as it seeks to avoid a growth gap emerging as mining investment wanes.
“The federal budget hit confidence and had a negative spillover to the labor market,” Katrina Ell, an economist at Moody’s Analytics in Sydney, said before the report. “We’re hoping the impact will be temporary.”
The number of full-time jobs advanced by 22,200 in May, and part-time employment fell by 27,000, today’s report showed. Australia’s participation rate, a measure of the labor force in proportion to the population, dropped to 64.6 percent in May from 64.7 percent a month earlier, it showed.
The Australian dollar traded at 93.78 U.S. cents at 11:39 a.m. in Sydney, from 93.89 cents before the data was released.
“There has been some improvement in indicators for the labor market in recent months, but it will probably be some time yet before unemployment declines consistently,” RBA Governor Glenn Stevens said in a June 3 statement announcing rates were unchanged. “Monetary policy remains accommodative.”
Consumer confidence in May fell to its lowest level since August 2011, prior to the central bank’s most recent easing cycle, after the government’s budget flagged spending cuts and a new tax on high-income earners.
Australia’s economy grew at the fastest pace in two years in the first quarter as surging exports and home building showed record-low borrowing costs are sustaining the 22-year expansion. First-quarter gross domestic product advanced 1.1 percent in the three months through March from the previous quarter, government data showed June 4. Compared with a year earlier, the economy expanded 3.5 percent.
Loose monetary policy has boosted Australian household spending. Coles supermarkets and Woolworths Ltd. are among companies adding employees.