Australia Adds Three Times as Many Jobs as Expected

By Victoria Batchelor

July 10 (Bloomberg) -- Australia added three times as many jobs as economists forecast in June as mining companies, led by BHP Billiton Ltd. and Rio Tinto Group, expanded to meet Chinese demand for commodities.

Employers hired 29,800 workers following May's 25,600 decline that ended a record 18 months of job gains, the statistics bureau said in Sydney today. The jobless rate fell to 4.2 percent from 4.3 percent.

The local currency rose on optimism the nation will weather a global slump that has sent New Zealand and the U.K. to the brink of recession. Record exports are underpinning Australia's economy as consumers cut spending in the face of the highest interest rates in 12 years and rising fuel prices.

``This is a clear sign the economy still has life in it, buoyed by a resources boom,'' said Sally Auld, co-head of economics at Australia & New Zealand Banking Group Ltd. in Sydney. ``If it wasn't for mining, Australia's economy could be in as bad shape as New Zealand and the U.K.''

The Australian dollar climbed to 96.92 U.S. cents at 1:07 p.m. in Sydney from 95.55 cents before the report was released. The two-year government bond yield fell to 6.65 percent from 6.69 percent yesterday.

The median estimate of 25 economists surveyed by Bloomberg News was for a 10,000 jobs increase in June.

The number of full-time positions increased 24,000 and part-time jobs rose 5,800. About half of the nation's 21 million people are employed.

IMF Report

The International Monetary Fund said today the strength of the mining industry will add to pressure on consumer prices. The fund said the central bank should be prepared to raise interest rates ``quickly'' if domestic demand doesn't slow enough.

The Reserve Bank of Australia raised its benchmark rate to 7.25 percent in March, the fourth increase since August 2007. Eighteen of 25 economists surveyed on June 30 said the bank will keep borrowing costs unchanged this year as economic growth cools and helps damp the fastest inflation since 1991.

``Today's firm employment report underlines it's premature to be talking about interest-rate cuts, but it doesn't build the case for another increase,'' said Matthew Johnson, senior economist at ICAP Australia Ltd. in Sydney. ``The economy is slowing, so I suspect we'll see soft employment numbers over coming months.''

Reports yesterday showed consumer confidence slumped in July to the lowest level since 1992 and home-loan approvals fell by the most in eight years in May. Those figures sent the Australian dollar to the lowest level in almost three weeks.

Rate Expectations

Traders have assigned 24 percent odds on the Reserve Bank raising its benchmark rate by a quarter point in the next 12 months, according to a Credit Suisse Group index based on trading in interest-rate swaps. The probabilities were 28 percent yesterday and 72 percent a week ago.

Prior to the May jobs decline, employers had added extra workers every month from October 2006, the longest run of gains since the government began publishing monthly figures in 1978. The nation's jobless rate fell to 4 percent in February, the lowest in more than three decades.

Australia, the world's largest shipper of coal, iron ore and wool, may earn 12 percent more this financial year from commodity exports than forecast three months earlier because of higher prices, the government said on June 23.

BHP Billiton, the world's largest mining company, approved a $1.9 billion expansion in May of its Worsley alumina project in Western Australia. Rio Tinto plans to boost output by 26 percent at its Queensland Alumina Ltd. refinery.

Job Cuts

Some companies are shedding workers to cut expenses.

Insurance Australia, an auto and home insurer, announced yesterday it would cut 600 jobs to help lower annual costs by A$130 million. The Sydney-based company also said it will report the first loss in six years and sell businesses in the U.K.

Goodyear Tire & Rubber Co., the U.S.-based tire maker, said last month it will close a Melbourne factory and fire 600 workers.

The participation rate, which measures the labor force as a percentage of the population aged over 15, rose to 65.3 percent in June from 65.2 percent in May, today's report showed.

To contact the reporter on this story: Victoria Batchelor in Sydney at vbatchelor@bloomberg.net.