Australian unemployment unexpectedly fell in August as government and central bank stimulus allowed the economy’s recovery to withstand Victoria’s renewed lockdown.
The jobless rate dropped to 6.8% from 7.5% in July vs economists median estimate of an increase to 7.7%, data from the statistics bureau showed Thursday in Sydney. Employment surged by 111,000 in August vs an expected 35,000 drop. The participation rate gained to 64.8%, compared with an estimated fall to 64.6%.
The data span Melbourne’s shift to Stage 4 restrictions and nighttime curfew to try to contain a rapidly spreading outbreak, as well as renewed uncertainty in New South Wales that it would closely follow its neighbor. The Reserve Bank of Australia predicts Victoria’s intensified lockdown would cut economic growth this quarter by at least 2 percentage points and the jobless rate would climb to around 10% later this year.
The RBA has kept its benchmark interest rate near zero since March, when it began buying government bonds to ensure the yield on three-year government bonds remained around 0.25%, as it tries to lower borrowing costs across the economy.
The central bank this month announced an expansion of its lending facility for banks and signaled that it remains open to exploring additional measures to support the economy. Gross domestic product contracted by the most on record last quarter, officially pushing Australia into its first recession in almost three decades.
Among other details in today’s jobs report:
- Monthly hours worked fell by 4.8% in Victoria, compared with a 1.8% increase across the rest of Australia
- Under-employment rate remained at 11.2%; and under-utilization decreased by 0.7 percentage point to 18%;
- Full-time jobs rose 36,200 and part-time roles jumped 74,800
- All states and territories recorded increases in the number of employed people except for Victoria
Australia’s second most populous state is now beginning to ease its strict lockdown as new virus cases fall. Victoria state Premier Daniel Andrews this week relaxed restrictions for those in regional areas.
The improved economic outlook combined with high commodity prices and U.S. dollar weakness has fueled a 27% appreciation in the exchange rate since mid-March lows. The RBA notes that while this is line with fundamentals, a weaker currency would aid the recovery.