Global pundits had predicted that in November, the Australian economy would add 5,000 jobs and the unemployment rate would ease higher to 5.9% from the previous level of 5.8%. However, the Wonder Down Under surprised the world with a gain of 31,200 jobs, and the unemployment rate went down to 5.7%.
That’s good news for the nation and the world, which is looking to Australia and Asia to lead everyone out of the recession. But the bad news is, the surge in jobs growth is almost certain to lead to yet another interest rate hike in early 2010.
The Australian economy has added almost 100,000 jobs in the past three months, many of them full-time positions. The reading of aggregate hours worked also rose, lending even more credibility to the claim that the overall business cycle here has turned positive, even though job gains are not universal. South Australia, Tasmania, and Queensland all continued to lose more jobs than they gained.
Analysts say the jobs report, which several described as “stunning,” was a vindication of the RBA’s decision to initiate rate hikes before other developed economies. But they also point out that in itself, it makes the case for a fourth rate hike in February or March 2010, when the RBA next meets following their traditional summer break. A fourth hike at that time would take the cash rate to 4.0%.
Higher interest rates, of course, raise costs for mortgages, credit cards, and other loans. It also makes the Australian dollar a more attractive target for international investors, strengthening the currency and making Australian exports more expensive for purchasers overseas. The Australian dollar strengthened against its U.S. counterpart by US$0.50 on release of the jobs data.
Economists warn, however, that further jobs could still be lost, and some predict the unemployment rate could rise as high as 6.0% or slightly more. Importantly, they also predict that the stronger jobs market could lead to rising business investment, further boosting the Australian economy.
Source: heraldsun.com.au
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