Job ads polish rosy Australian picture


The slowdown in Australian housing construction is being offset by other building activity

By Geoff Hiscock
CNN Asia Business Editor

SYDNEY, Australia (CNN) -- Job advertisements in major Australian newspapers rose 23.6 percent in April, the highest on record, the ANZ Bank reported Monday.

The figure was heavily skewed by the Easter holiday break falling in March, but even after smoothing for this distortion the jump was about 7 percent.

"This is still a very healthy increase," ANZ Bank chief economist, Saul Eslake said.

The bank's monthly survey of job ads is regarded as a key leading indicator of the health of the economy.

Eslake said if the trend in jobs growth continued, Australia's unemployment rate could drop below the 6 percent level before the end of the year -- something that has happened for only three months in the last 20 years.

Rates tipped to rise

"The rise in the number of jobs advertisements ... is also a strong pointer to an increase in the official cash rate at this week's meeting of the Reserve Bank board," Eslake said.

Australia's benchmark interest rate has been steady at 4.25 percent since early December, but there is a widespread expectation the central bank will lift rates by a quarter of a percentage point after it meets Tuesday.

Any increase will be announced Wednesday.

Australia's economy has been one of the standout performers among industrialized economies in the past 12 months, and is continuing to grow at about 4 percent a year.

Various surveys in the past month show that business confidence is high, investment is expected to increase from mid-year, and consumer confidence rose for the fifth straight month in March to reach its highest level since 1999.

Building approvals in March jumped a surprisingly strong 7.6 percent over February, offsetting a slowdown in the residential housing sector.

The ANZ Bank said the number of job advertisements rose by 1.9 percent in April to be 6.2 percent higher than in April last year.

Eslake said the survey had shown itself to be a "surprisingly reliable" leading indicator of turning points in the interest rate cycle.

'Compelling' case

"The upward trend in job advertisements over the past eight months is strongly suggestive of a rise in cash rates over the remainder of the year," he said.

HSBC chief economist John Edwards said in a report Monday that "the case for a rate rise is clearer and more compelling today than it has been for more than a decade".

"Last week's March exports, buildings approvals and retail trade numbers were only the latest evidence that the Australian economy is doing very well indeed," he noted.

Edwards said the expectation was for a rise of 0.25 percentage points on Wednesday, leading to a total 1 percentage point increase by the end of the year and a peak of 6 percent by mid-2003.

Australian Treasurer Peter Costello will release the country's 2002-03 budget next week, with the underlying cash surplus tipped to be about $540 million (Aust. $1 billion).