Australian Job Ads Fall by Record Amount Amid Company Pessimism

By Jacob Greber

March 10 (Bloomberg) -- Australian advertisements for job vacancies tumbled in February by a record amount and business confidence held near a two-decade low, stoking speculation the economy is in its first recession since 1991.

Jobs advertised in newspapers and on the Internet dropped 10.4 percent from January and 39.8 percent from a year earlier, according to an Australia & New Zealand Banking Group Ltd. report released in Melbourne today. National Australia Bank Ltd.’s business sentiment index rose 10 points to minus 22, the 14th straight month pessimists have outnumbered optimists.

Slumping global demand for exports, rising unemployment and a decline in consumer spending will cause the economy to shrink 1 percent in 2009, National Australia said today, revising a previous forecast of a 0.25 percent contraction. Gross domestic product dropped last quarter for the first time in eight years, increasing pressure on the central bank to resume cutting the benchmark interest rate from a 45-year low of 3.25 percent.

“We see no fast recovery in Australian activity,” said Alan Oster, chief economist at National Australia Bank in Melbourne. “The path of growth is more U-shaped than V-shaped, with recovery not really getting under way until 2010.

“We also are very concerned about prospects for both private consumption spending and business investment in the current climate” of falling share and housing markets, he added.

The nation’s currency fell to 63.26 U.S. cents at 11:37 p.m. in Sydney from 63.55 cents just before today’s reports were released. The two-year government bond yield dropped 3 basis points to 2.52 percent. A basis point is 0.01 percentage point.

Companies Firing

Vacancies advertised in newspapers and on the Internet averaged 161,583 a week last month, the lowest number since November 2005, and 41 percent below the April 2008 record of 275,326, today’s ANZ report showed.

“New labor demand continues to contract across Australia in the early part of 2009,” said Warren Hogan, head of economics at ANZ Bank in Sydney.

“This in turn suggests that the current downturn in the economy is likely to last throughout 2009, with little prospect of a meaningful recovery before 2010.”

Companies including BHP Billiton Ltd., the world’s biggest miner, and manufacturer Pacific Brands Ltd., are firing workers after the economy shrank 0.5 percent in the fourth quarter from the previous three months as exports slumped.

National Australia’s Oster expects the jobless rate will rise to 6.5 percent by the end of this year and 7.5 percent by late 2010.

Interest Rates

Employers probably cut 20,000 jobs last month and the unemployment rate rose to 5 percent from 4.8 percent, according to a Bloomberg survey of economists. Jobs figures will be released on March 12.

The Reserve Bank of Australia, which pared its overnight cash rate target by a record four percentage points between September and February, will cut the benchmark rate by another one point during the third quarter, before lowering the rate to 2 percent late this year, National Australia’s Oster said.

His bank’s business conditions gauge, a measure of hiring, sales and profits, fell 9 points to minus 20, the lowest since June 1992.

A measure of forward orders tumbled 7 points to minus 27 and employment declined 10 points to minus 27, the report showed. Exports gained 7 points, “but remained at a historically very low level” of minus 26 points, Oster said.

Today’s survey also suggests the gain in business confidence last month was primarily driven by retail, wholesale and transport businesses after the government said it will distribute A$42 billion ($27 billion) in cash grants to families and infrastructure.

“Those sectors are the ones most likely to benefit from the next round of government cash handouts,” Oster said.

“The most startling deterioration over recent months has been in mining, especially small mining, in the face of the global downturn.”

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