Australian employment rise defies predictions

Australian employers unexpectedly added workers in April, holding the unemployment rate at a 28-year low.

Employment rose 6900, the eighth monthly gain, the Australian Bureau of Statistics said yesterday. The median forecast in a Bloomberg News survey of 21 economists was for 10,000 fewer jobs.

The jobless rate stayed at 5.1 per cent.

Rising employment and A$21.7 billion ($23 billion) of income tax cuts announced in this week's Budget will drive retail spending.

The central bank, which last raised interest rates in March, said last week it was watching for signs of wage pressures sparked by increased jobs.

"Any time the Government provides consumers with money in their pocket, it has been better for retailers," said John Fletcher, chief executive of Coles Myer, Australia's largest retailer.

Coles, which said yesterday its sales in the 13 weeks ended April 24 rose 8.8 per cent to A$8.7 billion, hired workers as it opened 11 stores.

Australian bond yields rose as the report increased speculation the central bank might not be finished raising interest rates.

"The next move in interest rates is up, though it's likely to be afew months away," said Michael Blythe, chief economist at Commonwealth Bank of Australia, the nation's second-largest lender.

Employers hired 39,100 extra workers in April and part-time positions fell 32,200.

Australia's 5.1 per cent jobless rate compares with 5.2 per cent in the US in April, 11.8 per cent in Germany last month and 4.5 per cent in Japan in March.

 

Rising employment may drive wages higher as companies pay more to attract or retain skilled workers.

"The unemployment rate here is around 5 per cent and that's pretty close to full employment, so there is a lot of wage pressure," Gerry Harvey, chairman at Harvey Norman, Australia's largest furniture and electronics retailer, said last month. "It's an ongoing problem.

"The upside is that everyone gets more money so people spend more in our shops."

Alan Kindl, managing director of Noni B, a women's clothing retailer with 180 stores, said: "The tax cuts are good for the economy. They were a surprise, so should boost the confidence of consumers.

"We shouldn't be surprised to see interest rates rise eventually, given rates are still historically at very low levels."

The labour force participation rate was unchanged in April at 64.5 per cent.

Thirteen of 22 economists surveyed last week forecast the central bank would refrain from raising interest rates again this year. Nine forecast an increase by the end of the year.

- BLOOMBERG