SYDNEY (AFP) — Australia's unemployment rate dropped to a fresh 33-year low of 4.0 percent in February, according to official data released Thursday, which economists said could keep interest rates high.
The Australian Bureau of Statistics said the seasonally-adjusted unemployment rate fell from 4.2 percent in January as the number of full-time jobs in the economy jumped.
The unemployment rate, which came in below market expectations of 4.2 percent, is the lowest since data was collected in its current form in 1975.
ANZ economist Alex Joiner said the strong labour market would concern the Reserve Bank of Australia because it meant household incomes and retail spending were likely to remain robust, fuelling inflation.
"It is this type of strength in the economy that the Reserve Bank raised interest rates in February and March to head off and they would be expecting to see some softer labour force numbers in coming months," Joiner said.
Core inflation was 3.4 percent in calendar 2007, well above the central bank's target range of two to three percent.
JPMorgan economist Helen Kevans said the jobs data could contribute to wage pressure, worsening the inflation outlook and adding to the case for another rate hike.
"Owing primarily to the deteriorating inflation outlook, JPMorgan forecasts that the RBA will hike interest rates by 25 basis points in May," Kevans said.
Separate data released Thursday showed consumers were pessimistic that recent hikes -- which have taken interest rates to a 12-year high of 7.25 percent -- would curb inflation.
The Melbourne Institute Survey found consumers expected inflation to rise to 4.6 percent, up from an expectation of 4.5 percent in February.
Only 11.8 percent of the 1,200 respondents believed inflation would fall within the Reserve Bank's target band.
"The latest inflationary expectations, coupled with the strong consumption observed for the December 2007 quarter, suggests that the spate of interest rate hikes had yet to run its course," Melbourne Institute research fellow Sam Tsiaplias said.
But AMP Capital Investors chief economist Shane Oliver said jobs figures were a lagging indicator about the state of the economy, and that low consumer confidence figures released Wednesday presented a more accurate snapshot.
He said the consumer confidence figures, which were at a near-15 year low for March, could actually signal the end of rising interest rates in Australia.
"The collapse in consumer confidence to its lowest level since 1993 is one of several indicators telling us that the economy is likely to slow significantly and further interest rate hikes are unnecessary," he said.
"In fact the next move should be a rate cut."
The jobs figures showed the number of unemployed fell by 17,800 to 456,000, while the number in employment rose by 20,600 to 10.65 million.
Full-time employment increased by 47,700 to 7.63 million, while part-time job numbers decreased 11,000 to 3.03 million.
The bureau had given the seasonally-adjusted unemployment rate as 4.1 percent in January but subsequently revised it up 0.1 points to 4.2.
Australian shares closed down 2.3 percent on Thursday, led by falls in the financial sector, dealers said.
Worries that the tight jobs market could support high interest rates had partly contributed to the fall, they added.
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