Job surge pressures interest rates in Australia

Dec 9, 2010, 3:32 GMT

Sydney - More than 54,000 Australians found jobs last month, cutting the unemployment rate to 5.2 per cent from 5.4 per cent but sparking fears of further interest rate rises.

Double the number of new positions were created as had been forecast ahead of the release of the figures Thursday.

The jump helped lift the value of the Australian dollar, with currency traders now more assured that the central bank will hike interest rates from the current 4.75 per cent at its next monthly meeting.

Jobs growth is being helped along by the booming mining sector, which is responding to the best terms of trade in 60 years with unprecedented levels of investment.

Terms of trade are the ratio between what a country's exports are worth and what its imports cost.

'We're still getting very, very strong employment growth and of course we're yet to see the real impact of the mining investment boom,' ANZ bank economist Warren Hogan said. 'That really gets under way next year in a big way and I think that's going to be the next challenge - where we're going to get the labour to service that.'

The Australian dollar shot to 98.4 US cents when the figures were released, after trading at 97.9 US cents when the market opened.

The Australian dollar is the fifth most-traded currency, largely because relatively high interest rates make it more worthwhile holding compared with stand-by currencies like the US dollar and the euro.

The central bank is tipped to raise rates again as it battles to hold inflation within its target band of 2-3 per cent.

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