SYDNEY: Australian unemployment eased in August, official data showed on Thursday (Sep 10), providing a lift to the government with the economy hit by a China growth slowdown as it moves away from a massive resources investment boom.
However, analysts suggested the ongoing weakness in the wider economy, and with the global outlook remaining weak, the central bank might still need to cut interest rates in the new year.
The Australian Bureau of Statistics said the jobless rate dipped to 6.2 percent last month from 6.3 percent – matching expectations – thanks to a better-than-expected jump in new posts. The Australian dollar, which has been struggling at six-year lows in recent weeks, strengthened on the back of the data, gaining a quarter of a US cent to 69.70 US cents.
“Generally the picture is still of companies hiring, which contrasts with the weak GDP result,” Barclays’ chief economist for Australia Kieran Davies told AFP. “This survey is showing a strengthening in business conditions, so I think that companies are feeling more confident to put more staff on and historically that also signals a pick up in non-mining (capital expenditure).”
Data last week showed the economy expanded at its slowest pace in two years during the April-June quarter with exports dragged by weakening growth in key trading partner China.
Australia has struggled to transition from mining-driven growth as an unprecedented boom in resources investment ends, with non-mining industries failing to fill the gap. Thursday’s figures showed the proportion of adults in work or looking for work, measured by the participation rate, softened to 65.0 percent from 65.1 percent in July, after surging in June.
The unemployment rate has hovered around a decade-high of 6.0 percent over the past year, while spending by firms in non-resources industries has yet to fill the gap left by the mining sector. At the same time, tumbling commodity prices have hit government revenue. To boost growth in the non-mining sectors, the central bank cut interest rates over the past four years to a record low of 2.0 percent.
The relative stability in the unemployment rate in recent months meant the Reserve Bank of Australia was likely to adopt a wait-and-see stance, St George Bank senior economist Janu Chan told AFP. But ANZ’s head of Australian economics Justin Fabo said with the domestic and global economies still soft, there is the chance of another rate cut possibly next year.
