Rate cut case diminished as jobs rise

by Adam Smith11 May 2012

A shock fall in the jobless rate could stifle hopes for another RBA rate cut.

ABS figures released yesterday show Australia's unemployment rate fell to 4.9% in April. The fall came as economists had predicted a rise in the jobless rate to 5.3%.

But the unexpected rise was driven by part-time workers. The economy added 26,000 part-time jobs in April. Full-time work fell, meanwhile, with the economy shedding 10,500 full-time jobs.

Nevertheless, economists have predicted that the rise may stay the RBA's hand. Citigroup economist Josh Williamson has told News Ltd that the rise in employment may deter the Reserve from making any further cuts to the cash rate in the near future.

"The likelihood of a follow-up near-term rate cut has diminished following the fall in unemployment. The RBA will go back to watching the domestic inflation data and European developments," Williamson said.

Related stories:

Jobless fears the key to coming rate cuts