Australia | Apr 12 2007
By Rudi Filapek-Vandyck
Any fears by currency traders that a less than fantastic labour market update by the Australian Bureau of Statistics this morning could potentially undermine the Australian dollar’s strength against the US dollar now that Fed officials have started to re-emphasise their tightening bias, proved futile – again.
Australia’s unemployment rate has fallen to a three-decade low point of 4.5%. Whether this will prove enough to lure the Reserve Bank into another tightening at one of the upcoming monthly meetings remains yet undecided, but the figure undeniably supports the RBA’s ongoing tightening bias.
The only soft element in today’s March 2007 labour market data release was that employment only rose by 10.5k last month after a 23.2k rise in February. Consensus was for a figure of 15k. A larger than expected loss of part-time jobs was responsible for the difference.
All the other elements in the report were strong, if not above expectations. Due to a 0.1ppt pullback in the participation rate to 64.8% from 64.9% Australia’s unemployment rate returned to 4.5%, a level not seen since Q2 1976.
Economists at Westpac formulated it as follows: “Overall, the fall in the unemployment rate will support already robust consumer confidence and leave the RBA focussed on potential inflation risks from the persistently tight labour market. Additionally, continued strong full-time jobs growth will underpin strong household incomes growth, a further support for household spending which we know ended 2006 and began 2007 with stronger momentum.
And with regards to the AUD: “the stronger than expected unemployment rate adds to the general feeling of optimism”.
Nothing has changed, really, it’s the same picture that appears over and over again.