Australian Employment Rises Three Times Forecast Pace

By Jacob Greber

Sept. 11 (Bloomberg) -- Australian employers hired almost three times as many workers in August as economists forecast, adding to evidence a mining boom is helping offset weaker domestic demand.

The number of people employed rose 14,600 last month, the statistics bureau said in Sydney today. The median estimate of 25 economists surveyed by Bloomberg News was for a 5,000 gain. The jobless rate fell to 4.1 percent from 4.3 percent.

Australia's currency rose on speculation the lowest unemployment rate in five months reduces the central bank's scope to cut borrowing costs again this year. Governor Glenn Stevens reduced the benchmark last week for the first time in sevens years and said policy makers were now questioning whether to cut again or hold.

``This reinforces the idea that while the Reserve Bank is looking to make policy less restrictive, they're not about to race to an expansionary footing,'' said Andrew Hanlan, a senior economist at Westpac Banking Corp. in Sydney.

The Australian dollar rose to 80.05 U.S. cents at 12:35 p.m. in Sydney from 79.61 cents before the report was released. The two-year government bond yield climbed 7 basis points, or 0.07 percentage point, to 5.60 percent.

The S&P/ASX 200 Index of stocks narrowed its losses. It was down 1.1 percent to 4,850.10 at 12:36 a.m. in Sydney, up from a low of 4,834.2 before the report.

Full-Time Jobs

The number of full-time positions rose 7,500 in August and part-time jobs increased 7,200. About half of the nation's 21 million people are employed. The August employment gain followed a revised increase of 18,700 jobs in July.

Demand for skilled labor at companies including BHP Billiton Ltd., which is expanding mines to meet Chinese orders for iron ore, is helping generate new jobs in the states of Western Australia and Queensland, where unemployment fell in August to 2.8 percent and 3.3 percent respectively.

By contrast, Australia's most populous state, New South Wales, saw an increase in its jobless rate to 4.9 percent from 4.7 percent. The rate was 4.3 percent in Victoria, 4.4 percent in South Australia and 4 percent in Tasmania.

Concern that demand for skilled labor would stoke wage increases and inflation was a key reason central bank policy makers increased borrowing costs twice this year to a 12-year high. They reduced the benchmark rate by a quarter point to 7 percent on Sept. 2.

Rate Outlook

``In the near term, the question will be do we hold here or go down a bit more'' on interest rates, Stevens told parliament's economics committee in Melbourne this week.

Investors reduced bets that Stevens will cut the benchmark again on Oct. 7, according to a Credit Suisse Group index based on trading in interest-rate swaps. They forecast an 80 percent chance of a reduction, the index showed at 12:15 p.m. in Sydney, down from 90 percent before the report was released.

There are signs that businesses reliant on household spending are starting to review hiring plans. Fairfax Media Ltd., Boeing Co., Ford Motor Co., Starbucks Corp. and Australia & New Zealand Banking Group Ltd., all announced job cuts in Australia last month. Qantas Airways Ltd., the nation's biggest airline, will fire 1,500 workers.

``Don't get too excited -- the unemployment rate has fallen because the participation rate dropped slightly,'' said Katie Dean, a senior economist at Australia & New Zealand Banking Group Ltd. in Melbourne. ``Moreover, the leading indicators of employment suggest that the jobless rate will rise gradually.''

Business Confidence

Job-vacancy advertisements fell 4.9 percent in August, the biggest drop in more than seven years, according to an ANZ Bank report released on Sept. 8. Businesses confidence is also close to the lowest level since the 2001 terrorist attacks in the U.S.

The participation rate, which measures the labor force as a percentage of the population aged over 15, fell to 65.2 percent in August from 65.3 percent in July, today's figures showed.

Gross domestic product rose 0.3 percent in the three months through June 30, the smallest gain since the fourth quarter of 2004, as consumers cut spending by 0.1 percent, a report showed last week.

The jobless rate will rise ``a bit'' over the next year to 18 months, Governor Stevens said this week. ``The rate of employment growth will slow. It is starting to do that already,'' he said.

Today's unemployment report was compiled by the statistics bureau using a sample of businesses that has been cut by 24 percent. The bureau, which reduced the survey because of budget cuts, has said it will increase the volatility of the figures.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net