Business

Australia's unemployment rate rises to 10-month high

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Media captionThe BBC's Nick Bryant reports on how the buoyant resources industry could be masking problems in other parts of the economy.

Australia's unemployment rate rose unexpectedly to a 10-month high in August.

Joblessness jumped to 5.3% from 5.1% in July, according to the country's statistical bureau.

The Australian dollar fell half a cent against the US dollar after the figures were released.

The figures come a day after statistics showed that the economy grew in the second quarter, after a contraction in the first three months of the year.

'Rising trend'

Analysts say that the lack of job creation is of major concern, despite the return to economic growth.

"Today's jobs figures highlight that the slightly better-than-expected June quarter gross domestic product report is old news," said Shane Oliver, chief economist at AMP Capital Investors.

"Quite clearly all the talk of job losses seen over the last few months is now turning into reality."

Some major companies in Australia have announced job cuts in the past month, blaming the strength of the Australian dollar and tough economic climate globally.

Mr Oliver said the rising trend in unemployment was now unmistakable.

Thursday's data showed that 9,700 jobs had been lost in August. Many economist were expecting 11,000 jobs to have been created.

The unemployment rate is now at the highest it has been since last October when it hit 5.4%.

Rate cut?

Some analysts say the figures will persuade the Reserve Bank of Australia (RBA) to hold the key interest rate at its current level.

"Today's numbers are weak and is just another reason for the RBA to hold rates," said Spiros Papadopoulos from National Australia Bank.

RBA Governor Glen Stevens also said this week that it was best to hold policy steady in uncertain economic times.

However, the jobs numbers cast a shadow over Wednesday's gross domestic product report, which showed the economy unexpectedly grew by 1.2% in the second quarter.

Some investors said the RBA would have to reconsider its position before the year is over.

"The pace of deterioration in this would be of concern for the (bank)," said Grant Turney from ANZ.

"They can't still characterise the unemployment rate as unchanged. This will reinforce market pricing for rate cuts."

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