Australian Employers Probably Cut Jobs as Recession Looms

By Jacob Greber

Jan. 14 (Bloomberg) -- Australian employers probably cut workers for a second month in December as slower domestic growth threatens to tip the economy into its first recession since 1991.

Employment fell 20,000 after declining 15,600 in November, according to the median estimate of 17 economists surveyed by Bloomberg News. The jobless rate rose to 4.5 percent, the highest in almost two years, the survey predicts. The figures will be published tomorrow at 11:30 a.m. in Sydney.

Rio Tinto Group and Australia & New Zealand Banking Group Ltd. are among companies firing workers amid mounting evidence Australia will follow the U.S., Europe, U.K. and Japan into a recession. A decline in employment will increase pressure on central bank Governor Glenn Stevens to extend the biggest round of interest-rate cuts in almost two decades.

“It only appears to be a matter of time before employment succumbs to deteriorating business confidence and sales,” said Brian Redican, a senior economist at Macquarie Group Ltd. in Sydney.

“The increase in the unemployment rate will be the key factor driving further falls in official interest rates.”

Governor Stevens and his board reduced the benchmark lending rate last year by three percentage points to a six-year low of 4.25 percent and said last month that monetary policy was now “expansionary” to stoke business and consumer confidence.

Investors have a 100 percent expectation Stevens will cut the overnight cash rate target by three quarters of a percentage point on Feb. 3, according to a Credit Suisse Group index based on swaps trading.

Mining Jobs

Rio Tinto, the world’s third-largest mining company, said last month it will eliminate 14,000 jobs, reduce capital spending by more than half and sell “significant assets” as global demand for metals wanes.

Qantas Airways Ltd., Ford Motor Co., Fairfax Media Ltd., and Telstra Corp. are among companies that have announced plans to fire workers.

“There are signs of a slowdown in the job market with employers not willing to hire new staff,” said Craig James, a senior economist at Commonwealth Bank of Australia.

Employers may also be shedding staff amid concern the local economy is on the brink of a recession after gross domestic product expanded 0.1 percent in the third quarter of last year from the previous three months, the weakest pace in eight years.

Advertisements for job vacancies slumped for an eighth month in December to levels indicating the economy will enter a recession in the next nine months, according to an ANZ Bank report published on Jan. 12.

The government last month started distributing A$8.9 billion ($6 billion) in handouts to pensioners and families, encouraging them to spend the cash to support the flagging economy.

The participation rate, which measures the labor force as a percentage of the population aged over 15, probably fell to 65 percent in December from 65.1 percent, the survey showed.

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