Australian Employers Unexpectedly Hire Extra Workers

By Jacob Greber

Nov. 6 (Bloomberg) -- Australian employment unexpectedly surged in October, a sign record income-tax cuts, lower interest rates, government cash handouts and exports to China may help the economy sidestep a global recession.

The number of people employed gained 34,300 after dropping a revised 3,300 in September, the statistics bureau said in Sydney today. The median estimate of 14 economists surveyed by Bloomberg News was for a decline of 10,000 jobs. The jobless rate held at 4.3 percent as more people looked for work.

Shipments of natural resources such as coal and iron ore, which helped boost the nation's trade surplus in September, may underpin economic growth even as the U.S., the U.K. and Japan are threatened by recessions. Reserve Bank Governor Glenn Stevens has cut borrowing costs by 2 percentage points since early September in the most aggressive round of rate reductions since the economy was last in a recession in 1991.

Australia is well placed ``to withstand the global downturn,'' Craig James, a senior economist at Commonwealth Bank of Australia in Sydney, said ahead of today's report. ``Significant stimulus is being applied to the economy and more is likely in coming months.''

The Australian dollar rose to 67.79 U.S. cents at 11:44 a.m. in Sydney from 67.62 cents before the report was released. The two-year government bond yield gained 2 basis points, or 0.02 percentage point, to 3.89 percent.

Full-Time Jobs

The number of full-time jobs declined 9,200 in October, the second straight monthly drop. Part-time employment increased 43,500 from September, today's report showed.

The government is spending part of its budget surplus by giving pensioners, home buyers and families A$10.4 billion ($7.1 billion) in handouts to support economic growth. The payments are in addition to the biggest income-tax cuts in history, which took effect in July, that will add A$5.1 billion to consumer spending in the 12 months through June 2009.

Telstra Corp., Australia's largest phone company, reaffirmed today its forecast for earnings and sales to climb this year, adding that a recession is unlikely.

Still, there are signs hiring will slow in coming months. Jobs vacancies advertised in newspapers and on the Internet plunged 5.9 percent in October, the biggest drop since February 2001, according to an Australia & New Zealand Banking Group Ltd. report.

The government yesterday predicted the unemployment rate will rise to 5 percent by the June quarter of 2009 and 5.75 percent the following year as fallout from the global financial crisis buffets the economy.

Economy Slows

Treasurer Wayne Swan said economic growth will slow to 2 percent in the year through June 2009, which would be the weakest expansion in eight years.

Reports this week showed house prices fell by the most since 1978, building approvals had the biggest drop in two years and retail sales contracted at the fastest pace since 2005.

``Global economic conditions have changed dramatically in recent months as the global financial crisis has entered a dangerous new phase,'' Swan, 54, said yesterday.

In an effort to cushion Australia's economy, Stevens and his board cut the benchmark interest by three-quarters of a percentage point this week to a 3 1/2-year low of 5.25 percent, adding to a 1 percentage point reduction in October and a quarter-point adjustment in September.

Companies that have announced job cuts in Australia include Fairfax Media Ltd., Boeing Co., Ford Motor Co., Starbucks Corp. and ANZ Bank. Qantas Airways Ltd., the nation's biggest airline, will fire 1,500 workers.

The participation rate, which measures the labor force as a percentage of the population aged over 15, rose to 65.3 percent from 65.1 percent, today's figures showed.

The unemployment report was compiled by the statistics bureau using a sample of businesses that was reduced by 24 percent in July. The bureau, which reduced the survey because of budget cuts, has said that will increase the volatility of the figures.

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