Jobs surge stirs rate rise fears

A surprise surge in new jobs has stirred fears about a Melbourne Cup interest rate
rise and put the Australian dollar on course to reach parity with the greenback for
the first time since the early 1980s.
Close to 50,000 jobs were created in September, a figure more than double market
forecasts of 20,000.
While the jobless rate stayed at 5.1 per cent, Jobs Minister Chris Evans expressed
concerns about what it could mean for interest rates.
"Obviously, there are impacts on the value of the dollar and interest rates, which
will be governed by the Reserve Bank," Senator Evans told reporters in Melbourne on
Thursday.
A lower jobless rate usually puts pressure on inflation but shadow treasurer Joe
Hockey said the government should still be aiming for an unemployment level of 4.0
per cent.
Following the latest data, the experts were bracing for a Melbourne Cup rate rise
announcement when the Reserve Bank of Australia (RBA) meets again in November.
"It's only those global uncertainties that are keeping the Reserve Bank sidelined
but you can't ignore the strength of the domestic story and the risks that it is
posing to the inflation outlook," JP Morgan chief economist Stephen Walters said.
The positive official jobs data also fired up the currency markets, with the
Australian dollar surging by 0.8 of a US cent within 20 minutes of its release.
It reached a high of 98.83 US cent at 1755 (AEDT).
Two years ago the local unit reached 98.49 US cents, on July 16, 2008.
Market watchers expect the Australian dollar to march towards parity with the
greenback for the first time since July 1982 when Australia still had a fixed
exchange rate.
The International Monetary Fund (IMF) is also positive about the Australian economy,
predicting an above-average growth pace of 3.5 per cent in 2011.
Its report was even more chipper about the global economy, forecasting growth of 4.8
per cent this year and 4.2 per cent in 2011, which would far surpass the 0.6 per
cent decline of 2009.
The IMF's forecast for worldwide growth this year is 0.2 of a percentage point more
than its previous estimate in July.
Australia's second biggest trading partner, China, was expected to enjoy 10.5 per
cent growth in 2010 followed by 9.6 per cent in 2011.
Treasurer Wayne Swan said Australia would benefit because a strong performance in
China and other emerging powers offset weakness in the United States and Europe.
"We're fortunate to be in the right place in the world at the right time," Mr Swan
told ABC radio.
When parliament resumes later this month, the coalition plans to move a motion
calling on Treasury secretary Ken Henry's tax review to release all information
within five working days.
Flagging the move, Mr Hockey said it would provide the basis for a fully transparent
and informed discussion, although he declined to mention the controversial mining
tax, which the review proposed.
The coalition will also introduce legislation, into a hung parliament, which would
require the Australian Taxation Office to issue a tax receipt to taxpayers giving
them details about how their money was spent.



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