Australia Unemployment Falls, Driving Bets of Second Rate Rise

Oct. 8 (Bloomberg) -- Australia’s jobless rate fell for the first time in five months as employment unexpectedly surged, driving the currency to a 14-month high as traders bet the central bank will raise interest rates again next month.

The number of people employed jumped 40,600 from August, cutting the jobless rate to 5.7 percent from 5.8 percent, the statistics bureau said in Sydney today. The median estimate of 20 economists surveyed by Bloomberg was for a decline of 10,000.

Australia became the first Group of 20 nation to raise interest rates this week. Twenty-one of 23 economists surveyed by Bloomberg yesterday say Reserve Bank Governor Glenn Stevens will increase the benchmark by another quarter point to 3.5 percent next month.

“It really is quite surprising to see such strength so quickly,” said Brian Redican, a senior economist at Macquarie Group Ltd. in Sydney, one of only two analysts surveyed by Bloomberg to forecast a gain in employment. Today’s report “is supportive of a fairly quick tightening of monetary policy.”

The number of full-time jobs gained 35,400 in September and part-time employment increased 5,200, today’s report showed. Hours worked rose 0.9 percent to 1.52 billion, the highest level in seven months.

Since the collapse of Lehman Brothers Holdings Inc. in September 2008, Australia’s unemployment rate has risen to 5.7 percent from 4.3 percent. By contrast, the U.S. jobless rate jumped to 9.8 percent from 6.2 percent in the same period.

Currency Rises

The Australian dollar rose to 90.14 U.S. cents at 12:09 p.m. in Sydney from 89.30 cents just before the report was released. The two-year government bond yield surged 18 basis points to 4.52 percent. A basis point is 0.01 percentage point.

The nation’s benchmark S&P/ASX 200 stock index climbed 1.5 percent, taking this year’s gain to 28 percent.

Woolworths Ltd., Australia’s biggest retailer, is among companies that have announced plans this year to boost hiring. The company reported in August a 16 percent increase in profit in the six months through June 28.

The government is also stoking demand for workers as it spends A$22 billion ($19.8 billion) on roads, ports, schools and hospitals. An index published Oct. 7 by the Australian Industry Group showed the nation’s building industry expanded in September for the first time in 18 months.

The nation’s single biggest investment project, the A$43 billion Gorgon natural-gas venture in Western Australia, will create as many as 10,000 jobs when construction starts early next year, Chevron Corp. said on Sept. 14. Chevron and its partners say they will sell A$300 billion of gas to China, India and Japan in the project’s first 20 years.

Economy Outperforms

Australia’s economy has outperformed most other developed nations, expanding 1 percent in the first half of the year, and is forecast by the International Monetary Fund to grow 2 percent in 2010. By contrast, the U.S. economy will expand 1.5 percent next year, Japan by 1.7 percent and the euro region by just 0.3 percent, the fund said last week.

Growth in Australia has been stoked by A$20 billion in government cash handouts to consumers and the central bank’s decision to slash borrowing costs between September 2008 and April to the lowest level in half a century.

Australia and Israel are the only central banks to raise interest rates since the height of the global financial crisis. Israel is not a member of the G-20. Governor Stevens said this week the justification for a benchmark rate an “emergency” level of 3 percent “has now passed.”

“The risk of serious economic contraction” in Australia has passed, Stevens said in a statement on Oct. 6.

“Unemployment has not risen as far as had been expected. The board’s view is that it is now prudent to begin gradually lessening the stimulus provided by monetary policy.”

Confidence Soars

Recent reports showed retail sales, approvals to build private homes, bank mortgage lending and property prices all jumped in August. Advertisements for job vacancies rose in September for a second straight month, gaining 4.4 percent, an Australia & New Zealand Banking Group Ltd. survey showed this week.

Consumer confidence jumped last month to the highest level in more than two years and business sentiment climbed in August to the highest level in almost six years.

Investors have a 92 percent expectation Stevens will raise the overnight cash rate target on Nov. 3 by another quarter point, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange at 12:14 p.m. Prior to today’s report, they tipped a 68 percent chance of an increase.

The participation rate, which measures the labor force as a percentage of the population aged over 15, rose to 65.2 percent in September from 65.1 percent, today’s report showed.