Economists warned on Friday that the country's unemployment rate would continue to rise in the coming months. They explained their outlook to jobs generation moving at a slower pace compared to the growth in labor force.

The assessment came a day after the Australian Bureau of Statistics releases its latest report which showed the unemployment rate returned to 5.2 per cent in February from 5.1 per cent in January. It was the same level as that in December 2011.

ANZ Bank head of Australian economics Ivan Colhoun pointed out that about 1,000 jobs only are being generated monthly, while 20,000 heads are added to the working-age population every month.

Given the number of Australian companies in the banking, manufacturing and construction sectors that has been announcing job cuts, Westpac forecast the unemployment rate in the country would climb to 5.75 per cent by July.

Among the Australian states, it is Victoria which had been worst hit with over 1,000 jobs lost every week since the middle of 2011. In the past six month that ended February, Victoria shed 27,700 jobs. Given that development, business leaders asked the Baillieu government to review its stringent commitment to a budget surplus and to consider new measures to boost the Victorian economy.

The only exception among Australian states is Western Australia which is adding 5,500 workers every month, while the rest of the country is shedding 4,500 every 30 days.

Grocon Chief Executive Daniel Grollo attributed the loss of jobs in Victoria to a structural shift caused by the high Australian dollar, increasing labour costs and slowdown in housing construction. He proposed collaboration by the state government and private sector to improve productivity.

Employment Minister Bill Shorten said that rise in unemployment rate was caused by businesses being cautious on their hiring intentions due to a more uncertain global environment, but employers made up for it by offering more hours to current workers than hire more employees.

However, data from the Bureau of Statistics said the number of hours worked also declined in the past six months.

While joblessness rate went up, labour participation rate - a measure of the percentage of working-age Australians seeking jobs - tumbled down to 65.2 per cent in February, which is the lowest since mid-2007.

"Workers are becoming discouraged and leaving the labour force, especially in NSW and Victoria, but beyond pointing to lackluster manufacturing in those states, it's difficult to know why," The Australian quoted Mr Colhoun.

Due to the rising unemployment rate, economists forecast the Reserve Bank of Australia (RBA) will cut the overnight cash rate in the June quarter. They said the increasing joblessness rate would be a key motivation for the Australian central bank to cut rates and this would likely result in unemployment rates declining.

RELATED STORIES