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Australian employment growth supports argument

Wednesday, January 16, 2008

SYDNEY (Thomson Financial) - Australian employment rose for the fourteenth straight month in December, the longest period of jobs growth for 27 years, as unemployment fell to near 33-year lows reflecting strong economic growth and supporting the argument for higher interest rates, economists said Thursday.

The number of employed people rose a seasonally adjusted 20,100 to 10.6 million in December, with full-time employment jumping by 6,300 to 7.6 million and part-time employment growing by 13,800 to just over 3 million people, the Australian Bureau of Statistics (ABS) said earlier today.

The unemployment rate fell to 4.3 percent from 4.5 percent in November, compared with the market's consensus forecast for a rate of 4.4 percent. Unemployment reached a 33-year low of 4.2 percent in September.

"The Australian job market is in spanking good health. Not only is the country experiencing the longest period of job gains in 27 years, but unemployment is again edging closer to a landmark three-point-something result," said Craig James, chief equities economist at CommSec.

"The latest employment figures confirm the strength of the Australian economy, keeping the Reserve Bank poised to lift interest rates in February."

Many economists expect the Reserve to raise interest rates by 25 basis points in February, adding to the cumulative 50 basis points increases in August and November last year as the central bank attempts to rein in inflation which has been at the top end of its target range.

While recent economic data supports the case for a rate hike, the Reserve's decision has been complicated by the credit market crisis, which is threatening to tip the US economy into recession. A recession in the world's biggest economy could lead to slower growth in the rest of the world, including Australia.

"The central bank still has the tricky issue of weighing up what has been in the main a still overall strong domestic economy against an increasingly uncertain world, coupled with rate tightness in the system (that is) yet to flow through," NAB Capital in a note.

So far, the Reserve's rate hikes in August and November appear to have had little impact on consumer spending.

November retail sales rose a seasonally adjusted 0.8 percent from October, compared with the market's consensus forecast for a 0.5 percent increase, the ABS said last week.

The consumer spending spree came after the Reserve raised interest rates at the beginning of the month and fuel prices increased more than 6 percent.

Posted by MOHAMED SAID at 9:44 PM  

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