By Jacob Greber and Gemma Daley
May 7 (Bloomberg) -- Australian employers unexpectedly added workers in April and the jobless rate dropped, driving the local currency to a seven-month high on signs the nation’s economy is skirting the worst of a global recession.
The number of people employed climbed 27,300 from March, the statistics bureau said in Sydney today. The median estimate of 19 economists surveyed by Bloomberg was for a decline of 25,000. The jobless rate fell to 5.4 percent from 5.7 percent.
Bonds yields rose on speculation the Reserve Bank of Australia’s record round of interest-rate cuts may be close to an end. A New Zealand report today showed that nation’s unemployment rate increased less than expected and U.S. figures yesterday revealed companies cut fewer jobs in April, adding to evidence the global contraction may be abating.
“We’re starting to see signs the global economy is recovering,” said Savanth Sebastian, an economist at Commonwealth Bank of Australia in Sydney. “The fundamentals for the Australian economy were very sound before this global economic crisis. Employers are a lot more hesitant in culling staff.”
Central bank Governor Glenn Stevens said this week that the effect on the economy of six interest-rate cuts since early September, which have taken the benchmark to a 49-year low of 3 percent, and government spending are “yet to be observed.”
Supermarket chains Woolworths Ltd. and Aldi are among companies that have announced plans to hire more workers in Australia.
Rate Expectations
The Australian dollar jumped to 75.57 U.S. cents at 12:11 p.m. in Sydney from 74.72 cents before the report was released. The two-year government bond yield climbed 11 basis points, or 0.11 percentage point, to 3.47 percent.
Traders now expect Australia’s benchmark interest rate will be higher in a year, according to a Credit Suisse Group index based on swaps trading.
Traders forecast the overnight cash rate target will be 8 basis points higher in 12 months, the index showed at 12:19 p.m. today in Sydney. Earlier today, they expected it to be 13 basis points lower and at the start of April, they forecast 37 basis points in reductions.
Reports yesterday showed Australian retail sales surged 2.2 percent in March from February, more than four times the increase that economists had forecast, and the trade surplus widened to the second highest on record as farm exports jumped.
Full-Time Jobs
The number of full-time jobs gained 49,100 in April and part-time employment decreased 21,800, today’s report showed.
“These are extraordinary numbers,” said Brian Redican, senior economist at Macquarie Group Ltd. in Sydney. “Things are not as bad in the economy as some people thought.”
To underpin the economy, Prime Minister Kevin Rudd is spending almost A$90 billion ($66 billion) on infrastructure, bond-market guarantees and cash handouts to consumers.
The central bank also moved to stoke domestic demand after the economy shrank in the fourth quarter for the first time in eight years. Policy makers cut the benchmark rate by a record 4.25 percentage points between September and April.
“The stance of monetary policy, together with the substantial fiscal initiatives, will provide significant support to domestic demand over the period ahead,” Governor Stevens said on May 5, when he left the rate unchanged.
Aldi said in February it will hire 2,600 people along Australia’s eastern coast this year as it opens as many as 30 new supermarkets. Woolworths, Australia’s biggest retailer, has said it expects to add 7,000 workers and reaffirmed its forecast for an increase in annual profit of as much as 12 percent.
Outlook May Worsen
Still, some executives expect Australia’s jobless rate will rise in coming months and the central bank will need to cut borrowing costs again.
Advertisements for job vacancies tumbled to a record low in April, falling 7.5 percent from March and 49.9 percent from a year earlier, according to a Australia & New Zealand Banking Group Ltd. report released in Melbourne on May 4.
“We will see unemployment increase,” Westpac Banking Corp. Chief Executive Officer Gail Kelly said today. “It’s dreadful to think about it, but unemployment could get as high as 8.5 percent by the end of 2010,” she told Australian Broadcasting Corp. “I think there are more cuts to come in interest rates.”
Unlike his counterparts in the U.S., Europe and Japan, Governor Stevens has scope to lower borrowing costs further. The Federal Reserve’s benchmark rate is close to zero, the Bank of England’s is the lowest since its creation in 1694 and the European Central Bank trimmed its rate by a quarter point to 1.25 percent on April 2. Japan’s rate is 0.1 percent.
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net; Gemma Daley in Canberra at gdaley@bloomberg.net
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