PM Rudd hails `great` jobs data

An unexpected drop in the jobless rate provided some welcome relief for the federal
government from its ongoing battle with miners over its controversial resources tax.
But economists warn that the drop in the unemployment rate to 5.2 per cent does keep
the possibility of further interest rate rises later this year in play against a
backdrop of building inflation pressures.
Taken to two decimal places, the seasonally adjusted unemployment rate of 5.15 per
cent in May was the lowest level in 16 months as 26,900 people joined the workforce.
This reflected a jump of 36,400 full-time jobs offset only partly by a fall in
part-time workers, the Australian Bureau of Statistics data showed on Thursday.
"These are great figures for Australia," Treasurer Wayne Swan told Fairfax Radio
Network in Perth.
Opposition treasury spokesman Joe Hockey agreed that the result was "excellent news"
but it was also a further sign that the government must wind back its stimulus
spending immediately.
The labour force report was much stronger than economists had expected. They had
forecast an employment increase of around 15,000 that would have kept the
unemployment rate at 5.4 per cent for a third straight month.
"Just when the market was braced for some cracks to begin appearing in today's
labour market report, we were dealt exactly the opposite," National Australia Bank
senior economist David de Garis said.
"Not only were the headlines good, but there was no devil in the detail, either."
The switch to full-time work from part-time jobs continued, and saw average hours
worked rise by 2.9 per cent to a record high.
The drop in the unemployment rate was led by NSW and Western Australia, both falling
by 0.5 percentage points to 5.2 per cent and 4.1 per cent, respectively.
Victoria and Tasmania bucked the trend with small increases.
Prime Minister Kevin Rudd said Australia was outperforming every other advanced
economy in the world with a jobless rate about half that of the US and many
countries in Europe.
If Australia had a jobless rate similar to those countries, an additional half a
million people would be out of work, he said.
"On the basic direction of economic policy, this government has a strong record of
achievement," Mr Rudd told ABC radio.
Employment Minister Julia Gillard said in a statement that the government's top
priority was to keep people in work and its stimulus measures continued to be
"vitally important".
But Mr Hockey said the economy was now at the point where there was a very real risk
of "overheating".
Treasury told a Senate estimates hearing last week that since at least 2002
full-employment had been assumed at an unemployment rate of five per cent.
The economy can generate lower rates of unemployment but that risks rising inflation.
"It is irresponsible for the government to run such a very large (budget) deficit
when the global financial crisis is now clearly in the past and the economy is
rapidly returning to full employment," Mr Hockey said in a statement.
RBS Australia senior economist Felicity Emmett said falling unemployment would keep
the Reserve Bank of Australia (RBA) "on its toes" as the firm job market was likely
to lift wage growth, adding to future inflationary pressures.
"This is why we think that the RBA will continue to lift the cash rate later this
year ... assuming, of course, that the European debt crisis eases," she said.