Australia is creating new jobs at the breathtaking pace of one every 30 seconds, piling on an extra 140,000 in the first five months of this year, confirming talk of a "V-shaped" recovery and driving unemployment down to the interest-rate sensitive zone of 5 per cent.
After an extra 36,400 full-time jobs were created in May, 26,900 of them brand new jobs and 9,400 by converting previously part-time positions, Australia's official unemployment rate fell to 5.2 per cent. When calculated to several decimal places it is 5.154 per cent, perilously close to the 5 per cent rate, identified by the Treasury as "full employment" beneath which inflation will grow and interest rates climb.
Treasury official David Gruen told a Senate committee last week it had been "a longstanding practice" to regard full employment as 5 per cent, adding there was "a reasonable band of uncertainty around that number".
"With the best will in the world, we cannot really tell whether it is 5 per cent or anywhere in the range, say, from about 4.75 to 5.25 per cent," he told the committee.
"It is not that the economy cannot generate lower rates of unemployment; it is just that if you do go below the full employment rate... inflation starts to rise and you end up in a situation which is inconsistent with the Reserve Bank’s mandate, and so they act."
Shadow Treasurer Joe Hockey seized on the news saying that while the low unemployment rate was "excellent" the government should cut its deficit faster and that "further increases in interest rates will be laid squarely at the feet of the Rudd government".
BT economist Chris Caton said the Reserve Bank was now "just one uncomfortably high inflation reading away from the next rate hike".
Commonwealth Bank economist Michael Workman said there were already signs of skills shortages and wage pressures and that while Australia went into the last mining boom with an unemployment rate of around 7 per cent it was going into this one from just 5 per cent.
The Australian dollar shot up half a cent on the expectation of higher rates and also strong economic news from China.
Queensland, Victoria and NSW are responsible for the bulk of the new jobs created so far this year with Western Australia well behind as its unemployment rate was driven down from 5.1 to 4.1 per cent suggesting it is finding it hard to attract workers.
In trend terms NSW remained steady at 5.4 per cent, but a surprising drop in the number of residents looking for work pushed the seasonally adjusted rate down from 5.7 to 5.2 per cent.
Detailed Bureau of Statistics records suggest 326,000 Australians became workers in May - 110,000 of them previously unemployed and 216,000 previously not even looking for work, more than replacing the 317,000 who retired or dropped out. Hours worked surged 2.9 per cent.
Prime Minister Kevin Rudd said Australia's unemployment rate was now half that of the United States and half that of much of Europe.
His government achieved the result "in the face of massive criticism of debt and deficit etcetera".
Where are the new jobs?
Since December, unemployment rate
Queensland 47,000 5.5%
Victoria 34,500 5.4%
NSW 25,100 5.3%
Western Australia 18,000 4.1%
South Australia 10,500 5.3%
Tasmania 3800 6.0%
6202.0 May 2010, Seasonally adjusted
Published in today's SMH and Age
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