Aust. job ads surge, rates seen on hold


Australian Treasurer Peter Costello remains cautious about the global outlook

By CNN's Geoff Hiscock
Asia business editor

SYDNEY, Australia (CNN) -- A surge in Australian job advertisements last month has reversed a 19-month downward trend in the employment market and given further weight to the view that the Australian economy is in good shape.

Releasing its monthly survey of advertisements in major newspapers Monday, the Australia New Zealand bank said the number of job ads jumped by 12.5 percent in January from the previous month.

Analysts now rate the chances of the central Reserve Bank of Australia cutting interest rates after it meets on Tuesday as virtually zero.

With the Australian economy on track for about 3.25 percent growth this year, economists suggest the bank's next rate movement is likely to be a quarter percentage point rise mid-year.

The ANZ, one of Australia's big four commercial banks, said the increase in job advertisements was the largest since April 1997 and the fifth largest in the history of its survey.

'Potential turning point'

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"The sharp increase in the number … potentially represents a major turning point in the outlook for employment," ANZ chief economist Saul Eslake said in a statement.

Eslake said an improvement in the jobs market was consistent with optimism suggested by other recent surveys of business confidence, and the strong increases in economic activity in the June and September quarters of 2001.

He said if the January surge was validated by the next month's results, then there would be "solid grounds" for expecting a better outlook for jobs this year.

"In particular, there may now be a good chance that the unemployment rate will be lower than the 7 percent forecast for the June (2002) quarter," Eslake said.

Cheap currency, low rates

The good jobs data comes at a time when Australia is benefiting from a cheap currency, strong domestic consumption and relatively low interest rates.

In its weekly outlook for Australia, HSBC said Monday it expected the Reserve Bank to leave the official cash rate unchanged at 4.25 percent this week.

HSBC chief economist John Edwards cited the strength of the Australian housing sector, business and consumer optimism, the pickup in U.S. activity and increasing business confidence in Germany as reasons why the Reserve Bank would not cut rates again.

But he warned that the recent downturn in Australian exports and in building approvals, along with uncertainty about the strength and timing of global economic recovery, meant it was too early for the bank to start increasing rates.

"By mid-year, however, it (the central bank) will need to discuss the first rate rise," he said.

Caution on global recovery

There is near-universal caution among Australian commentators about the strength of the global economy.

National Australia Bank chief economist Alan Oster said late last month that beyond mid-2002, the "critical assumption" for Australia's relatively strong economic outlook remained a return to growth in the U.S. and the world economy.

Australian Treasurer Peter Costello echoed this sentiment last week, telling CNN television he was still worried about the U.S. and Asia, and did not expect to see signs of a sustained global recovery until the second or third quarters of this year.

The expectation among analysts for Australian growth this year ranges from 3.25 percent (NAB forecast) to 3.8 percent (HSBC forecast).