AUSTRALIAN IMMIGRATION NEWS

Australia's unemployment rate hits 31 year low

Thursday, 8 February 2007

Australia’s unemployment rate hit an unexpected dip in figures last month sparking discussions that a lack of suitable labors will eventually generate wage and price pressures.

The jobless rate fell to 4.5 percent from 4.6 percent in December, the lowest since May 1976. Government figures on Thursday showed employment fell by 3,600, seasonally adjusted, in January, while analysts had looked for a 5,000 gain. Still, that came after two very strong months and December was revised to show an even larger 46,000 increase.

The dip in the jobless rate surprised analysts who expected it to remain steady at 4.6 per cent. The 4.5 per cent rate was the lowest since 1976, when the jobs figures were compiled quarterly.

ANZ senior economist Mark Rodrigues said the fall in employment in January was largely concentrated in NSW and South Australia.

"Most other states and territories posted flat to small increases in employment," he said. However, he said the low unemployment rate was a better indication of the state of demand for labour than total employment.

He said low unemployment reinforced the strength and tightness of the labour market, and would leave the Reserve Bank of Australia (RBA) pushing a tightening bias on interest rates when it released its statement on monetary policy on Monday.

He said the current condition of the labour market would not provoke the RBA into raising rates without an accompanying rise in wage inflation, which to date has not occurred.

"Medium term, we expect recent slower demand in the economy to catch up with the labour market, reducing pressure on the RBA to maintain a restrictive setting for monetary policy," Mr Rodrigues said.

The data came just a day after the Reserve Bank of Australia (RBA) left interest rates unchanged at 6.25 per cent following its monthly board meeting.

"This will set the scene for interest rate cuts at the end of 2007 and early in 2008,” said Rodrigues.