Australia Posts Worst Back-to-Back Job Growth Since ’97: EconomyMichael Heath
Australia’s unemployment rate rose as the nation posted its worst back-to-back years of job growth since the 1997 Asian financial crisis, throwing up an obstacle in Prime Minister Julia Gillard’s re-election bid this year.
Payrolls advanced 148,300 last year after a 49,800 gain in 2011 for a two-year increase that was the weakest since 1996-1997, government data compiled by Bloomberg show. Unemployment rose to 5.4 percent last month as the number of workers fell by 5,500 and may keep climbing after the economy slowed in the second half of 2012.
Rising joblessness compounds the challenge to Gillard, Australia’s first female leader, who trails in opinion polls. She has credited the government’s economic stewardship for the Reserve Bank of Australia’s decision to lower the benchmark interest rate to a half-century low in a nation where about 90 percent of homeowners have adjustable mortgage rates.
“We’re looking at slower employment growth on the path ahead unless we see some sort of near-term traction from the rate cuts in terms of incentivizing spending, but we’re yet to see that,” said David de Garis, a senior economist at National Australia Bank Ltd. in Melbourne, who predicts unemployment could rise as high as 5.75 percent by mid-year.
The Australian dollar declined after the data, buying $1.0499 at 2:32 p.m. in Sydney compared with $1.0567 before the release. The yield on 10-year government debt was 3.31 percent compared with 3.36 yesterday.
Gillard’s opponent, Liberal-National coalition leader Tony Abbott, seized on today’s data, citing it as further evidence of poor economic management after Treasurer Wayne Swan said last month the government was unlikely to meet its budget surplus pledge for this fiscal year.
“A government which can’t get its own spending under control can’t deliver the kind of strong economic management that is necessary if we’re to have strong jobs growth,” Abbott told reporters in Sydney today.
Even so, the December decline in employment was the first drop in four months after employers added 40,400 jobs in the September-to-November period.
“Employers aren’t keen to hire unless they have to, given the global uncertainties,” said Savanth Sebastian, an economist in Sydney at a unit of Commonwealth Bank of Australia. “But while jobs are being lost in some industries, clearly they are being created in other industries.”
Gillard’s government has been boosted by a rebound in the commodity prices that drive Australia’s economy. The price of iron ore has surged from a three-year low of $86.70 in September as China rolls out infrastructure projects.
Increased confidence provided by a rebound in iron ore prices is reflected in the decision by Fortescue Metals Group Ltd. to resume work on its Kings deposit in the Pilbara region in the north of Western Australia state.
Gillard’s ruling Labor party narrowed the gap against the opposition coalition in the first opinion poll of 2013. Labor rose 3 percentage points to 49 percent on a two-party preferred basis, with the coalition falling 3 points to 51 percent, according to a Newspoll survey published Jan. 15 in the Australian newspaper.
Today’s jobs report showed the number of full-time jobs declined by 13,800 in December, and part-time employment rose by 8,300. Australia’s participation rate, a measure of the labor force in proportion to the population, held at 65.1 percent in December, it showed.
The MSCI Asia Pacific Index of equities climbed 0.2 percent as of 11:45 a.m. in Tokyo.
Elsewhere in Asia today, a report showed Singapore’s exports fell in December from a year earlier, and Sri Lanka’s central bank left its benchmark borrowing cost unchanged.
In Europe, the Netherlands will release unemployment data and Switzlerland reports producer prices for December.
In the U.S., the number of building permits issued in December probably rose 0.5 percent to a 905,000 annual rate, economists predicted before government data today. Permits are a proxy for future construction. A separate report may show fewer Americans filed applications for unemployment benefits last week, a survey of economists showed.
The Australian dollar has risen about 9 percent since June 1 last year, hurting industries including tourism and manufacturing.
Building-materials company Boral Ltd. announced this week it will cut about 700 jobs in Australia to save about A$90 million ($95 million) annually. BlueScope Steel Ltd., Australia’s largest steelmaker, said this week it will cut production and jobs at its Western Port facility near Melbourne to lower costs amid weaker demand.
Resource investment to meet Chinese demand and foreign investment funds seeking a haven spurred gains in the local currency, which has stayed above parity with the U.S. currency for more than six months, its longest stretch above that threshold on record.
The RBA lowered the cash rate to 3 percent on Dec. 4, matching the level reached from April-October 2009 that was the lowest since 1960. Traders are pricing in a 42 percent chance the central bank will reduce the overnight cash rate target by a quarter percentage point Feb. 5 to a record-low 2.75 percent, swaps data compiled by Bloomberg show.
China’s economy is set to exit a seven-quarter slowdown as the government rolls out infrastructure projects and limited inflation lets officials hold off from tightening monetary policy.
The National Bureau of Statistics will report tomorrow that China’s gross domestic product expanded 7.8 percent in the fourth quarter from a year earlier, according to the median estimate of 53 economists surveyed by Bloomberg News. That’s up from a three-year low of 7.4 percent in the previous period.