[SYDNEY] Australian employment surged past all expectations in December, shoving the jobless rate down to a four-month low of 6.1 per cent and suggesting the economy was healthy enough to soldier on without another cut in interest rates.
The Australian dollar jumped half a US cent after the Australian Bureau of Statistics reported net employment rose 37,400 in December, 10 times the forecast of 3,800.
The unemployment rate also came a surprise as analysts had tipped 6.3 per cent. Adding to the strength, all the job gains came in full-time work which leapt 41,600.
The only caveat was that the series was plagued with survey problems last year that have led investors to be wary of reading too much into one month's numbers. "The size of the gains will reawaken doubts on credibility,"said Michael Blythe, chief economist at Commonwealth Bank. "But all the rise in employment was full-time and the unemployment rate fell even though participation rose. It's hard not to see that as positive." The currency market clearly took it that way and lifted the local dollar to US$0.8211, from US$0.8142. Investors also somewhat scaled back expectations for a further cut in interest rates, though bill futures remain fully priced for an easing to 2.25 per cent by mid-year.
The Reserve Bank of Australia (RBA) has kept rates at 2.5 per cent since last cutting in August 2013 and so far has shown little inclination to ease further, in part because of concerns lower borrowing costs would heat up the housing market.
Leading indicators have also been pointing to an improvement in the demand for labour. Job adverts in newspapers and on the web rose for a seventh straight month in December to the highest in over two years, according to a survey from ANZ.
Likewise, the government's own survey of vacancies showed an increase of 2.8 percent in the three months to November, taking them to a two-year peak.
That was echoed in Thursday's figures which showed annual growth in employment accelerated to 1.9 per cent in December, surpassing growth in the workforce for the first time in months.
Yet wages growth is running at around the slowest annual pace in over a decade which, combined with steep falls in petrol prices, make for a very benign outlook for inflation.
Data due next week might well show inflation slowed to below the floor of the RBA's 2-3 per cent target band last quarter. "The big fall in global energy prices means lower than previously expected inflation in 2015 provides the scope for lower interest rates," said ANZ chief economist Warren Hogan, in a change of house view on Thursday. "As such, we have now factored into our forecasts two 25 basis point cuts over the first half of 2015." ANZ had previously forecast rates to remain unchanged all year. Hogan also predicted 10-year bond yields would fall to 2.10 per cent, from already historic lows around 2.60 per cent.