Australia Jobless Rate Jumps Most in 18 Years as Recession Hits

April 9 (Bloomberg) -- Australia’s unemployment rate jumped by the most in 18 years in March, adding to signs the nation is in its first recession in almost two decades.

The jobless rate rose to a five-year high of 5.7 percent from 5.2 percent, the statistics bureau said in Sydney today. The number of people employed dropped 34,700 from February. The median estimate of 22 economists surveyed by Bloomberg was for a decline of 25,000.

Miners including Rio Tinto Group and Iluka Resources Ltd. are among companies firing workers as the global recession saps demand for raw materials. Australia’s currency fell on speculation today’s report will prompt the central bank to extend a record round of interest-rate cuts that have taken the benchmark to a 49-year low of 3 percent.

“The weak economy is going to impact on the labor market and that will put pressure on the Reserve Bank to cut rates further,” said Brian Redican, senior economist at Macquarie Group Ltd. in Sydney. “Full-time employment has declined 100,000 since November.”

The number of full-time jobs dropped 38,900 in March and part-time employment increased 4,200 today’s report showed.

The Australian dollar fell to 70.77 U.S. cents at 11:50 a.m. in Sydney from 70.92 cents before the report was released. The two-year government bond yield dropped 6 basis points, or 0.06 percentage point, to 2.86 percent.

Rio, Caterpillar

With the Organization for Economic Cooperation and Development forecasting the steepest economic contraction in more than 50 years across its member nations, demand for resources has slowed from the world’s biggest shipper of iron ore and coal, forcing mining companies to fire workers.

Rio Tinto will cut 705 jobs at projects in Queensland state, the world’s third largest mining company said on April 7.

Iluka, the world’s biggest zircon producer, said the same day it will curtail production of the material by 20 percent this year, cutting 135 jobs at its Western Australia operations.

Caterpillar Inc., the world’s largest construction and mining equipment maker, will fire 280 workers in Burnie, Tasmania, the Age newspaper reported on April 7.

Jobs advertised in newspapers and on the Internet dropped in March for an 11th month, slumping 8.5 percent from February, a report showed on April 6. Advertisements fell a record 44.6 percent from a year earlier.

More than half of Australia’s mining and resource companies will fire staff in the next 12 months after the economy shrank 0.5 percent in the fourth quarter, the first decline in eight years, according to a survey of 118 companies released last month by the Australian Mines and Metals Association. The central bank says the economy will contract this year.

Interest Rates

To stoke domestic demand, Reserve Bank of Australia Governor Glenn Stevens cut the benchmark interest rate by a record 4.25 percentage points to 3 percent between September and this week. The government also is spending A$42 billion ($30 billion) on cash handouts to households and on infrastructure.

Australia’s mortgage rates are now at “very low levels by historical standards” and, along with a surge in government spending, will provide a significant boost to the economy, Stevens said on April 7.

Home-loan approvals rose in February for a fifth month and consumer confidence jumped in April by the most since August last year, reports showed yesterday, stoking speculation the Reserve Bank’s cycle of interest-rate cuts may be nearing an end.

Traders have reduced bets on the size of future rate cuts, according to a Credit Suisse Group index based on swaps trading.

Traders forecast the overnight cash rate target will be 4 basis points lower in 12 months, the index showed at 11:50 a.m. today in Sydney. Prior to this week’s rate decision, they were tipping 49 basis points in cuts, and at the start of April they expected 64 basis points. A basis point is 0.01 percentage point.

The participation rate, which measures the labor force as a percentage of the population aged over 15, was unchanged at 65.5 percent, today’s report showed.