Economies: Australian Jobs OK, Resources Good, NZ Sits On Rates

Yesterday's labour force data from the Australian Bureau of Statistics won't make the current state of the economy's health any clearer. They were confusing.

The bottom line from the report is a lack of clarity, so don't believe anyone who says this adds to pressures for a rate cut, as some reports yesterday claimed.

Remember, the RBA cut rates twice in the December quarter when, as we found out this week, growth had slowed to 0.4% from 0.8% in the September quarter.

While January's jobs data had been emphatically strong in showing a 46,300 rise in new jobs, and a dip in the unemployment rate to 5.1% from 5.2% in December, the February figures were weak, showing a rise in the jobless rate to 5.2% (so in reality, no change from what was reported for December of last year) and a drop in employment of 15,400, all part-timers.

The ABS said the "decrease in employment was driven by decreased part-time employment, down 15,400 people to 3,380,400, while full-time employment remained at 8,063,600... The decrease in seasonally adjusted part-time employment was driven by a decrease in female part-time employment."

A fall in female part-time employment was the major reason for the fall in employment in December, when fewer-than-expected pre-Christmas jobs in retail opened up for women, especially in the 15 to 24 age bracket.

Seasonally adjusted, the number of people unemployed increased by 16,400 people to 632,200, unlike January when there had been a fall of 15,300.

The labour force participation rate dropped 0.1 percentage points to 65.2%.

There were mixed results among the states.

NSW maintained January's strong performance and stayed level at 5.2% seasonally adjusted, with no change in the participation rate .

But unemployment in Victoria rose 0.2% to 5.4% and February was therefore the first time since 2006 that unemployment has been higher in Victoria than NSW.

Unemployment also rose 0.3% in Queensland, off the back of a big fall in participation, 0.4%. It went up in South Australia 0.1% to 5.2%, off another fall in participation, but unemployment fell in WA, down 0.1% to 4.0% as the resources boom continues to drive activity in that state.

But complicating the report was a sharp rise in hours worked last month.

The ABS said the monthly aggregate hours worked series showed an increase in February, up 21.6 million hours to 1,616.6 million hours, compared to January when they fell 23.1 million.

The trend data, which is supposed to smooth out the month to month jumps in seasonally adjusted estimates, proved little help for February and if anything added to the uncertainty.

It showed no change in the jobless rate of 5.2%, a rise of just 1,100 in the number of people employed and a fall of 1,700 people unemployed. So more confusion.

Coming on top of the weaker than expected GDP data on Wednesday, the economy is clearly sluggish in places, with jobs growth barely keeping pace with population and work force growth.

But it is not going backwards.

And industrial disputes data yesterday showed that days lost to industrial disputes in the December quarter nearly halved from the September quarter, from 101,000 to 54,000.

The rise in industrial disputes has been repeatedly cited as an example of the inflexibility of the Fair Work Act, by mainstream media.

It's not as simple as that, just as the improvement in productivity is more complex than media and business suggests.

That small, but significant improvement in productivity in the December quarter we told you about yesterday, was ignored today in mainstream media reports.

The resources boom delivered Australia a record $190 billion in resource export revenues in calendar 2011, according to figures released by the federal government yesterday.

Energy and resources export earnings jumped 15% in 2011, from $166 billion in 2010, the Bureau of Resources and Energy Economics (BREE) said.

Shipments of coal, iron ore and liquefied natural gas drove most of the growth, thanks to strong Asian demand underpinned by China.

Iron ore was the nation's most lucrative export, worth $59.3 billion, followed by coal (coking and thermal) which earned $46.9 billion.

The surge in export revenue came despite a 2% fall in earnings during the December quarter (which drive the 4.7% fall in our terms of trade as revealed in Wednesday's national accounts) and the widespread disruption to the coal industry from the floods of early 2011 (which lingered through the year).

The Bureau's chief economist Quentin Grafton said prices and expansion of capacity by iron ore miners helped offset the weakness in coal production.

"Increased iron ore production was underpinned by the start up of new capacity in the Pilbara region of Western Australia, while coal production was affected by flooding in Queensland in early 2011," Professor Grafton said in yesterday's statement.

The index of unit returns of Australian exports for mineral resources increased by 14% in 2011, compared with 2010.

Export prices for metals and other minerals rose 9%, while export unit returns for energy commodities increased by 20% as prices for oil and LNG rose on world markets (especially in the Japanese market for LNG).

The increase in export values for resources and energy commodities was moderated by the appreciation of the Australian dollar which averaged US$1.03 in 2011, 12% higher than in 2010.

BREE said commodities that recorded significant increases in export earnings in 2011, relative to 2010 include: iron ore up $9.9 billion (20%) to $59.3 billion, thermal coal up $2.4 billion (18%) to $15.6 billion, LNG up $1.6 billion (16%) to $11.1 billion, metallurgical coal up $1.7 billion (6%) to $31.3 billion, and crude oil and other refinery feedstock up $1.3 billion (12%) to $12.3 billion.

Commodities that recorded significant declines in export earnings in 2011 compared with 2010 include: iron and steel down $311 million (22%) to $1.1 billion, liquefied petroleum gas down $112 million (10%) to $969 million, and refined silver down $92 million (39%) to $144 million.

BREE will release its most up-to-date forecasts of production, exports and prices for the period to 2016-17 for Australia's main resource and energy commodities in the March issue of Resources and Energy Quarterly on March 21.

Like the Reserve Bank of Australia, the NZ central bank has signalled it could leave rates on hold for much of 2012, thanks to the improvement in Europe, the strong Kiwi dollar and an improved outlook for inflation.

Reserve Bank of NZ Governor Alan Bollard told a news conference in Wellington yesterday that a continuation of the high level of the Kiwi dollar would see rates on hold for longer.

The RBNZ left its official cash rate at 2.5%.

Mr Bollard said the bank's forecasts "are not inconsistent with a story that would see that remaining in place for much of this year", a view that was also laid out in the latest monetary policy statement from the central bank also issued yesterday.

The Kiwi dollar is up 11% in the past year, and that is helping keep a lid on inflation with the central bank forecasting consumer prices will rise by around 1.4% in the year to next September, the slowest rate of growth for 12 years.

And inflation is forecast not to be a concern for at least two years or more with the central bank saying it won't reach the midpoint of the 1% to 3% range that Bollard is required to target until the second half of 2014.

As in Australia, there's the usual downside for the high dollar, it hits export returns, a point Mr Bollard again acknowledged yesterday, saying, "The high value of the New Zealand dollar is detrimental to the tradable sector, undermines GDP growth and inhibits rebalancing in the New Zealand economy"

The RBNZ also cut its outlook for interest rates, saying the three-month bank bill yield will be 3% in the fourth quarter, down from 3.6% forecast in the December monetary policy statement, and 3.3% by the end of 2013, down from 4%.

The RBNZ has left the cash rate unchanged since March last year to allow the economy to recover after the nation's deadliest earthquake in 80 years in Christchurch, its second- largest city, and the surrounding Canterbury province, which killed 185 people and closed the central city 13 months ago. The city had been hit by an earlier quake in late 2010.

But unlike Australia, where there have been two rate cuts since last November, the RBNZ got in its rate cut early when Australia was pushing up rates (as was the European Central Bank, which later reversed its two increases).

"The domestic economy is showing signs of recovery," he said.

"Household spending appears to have picked up over the past few months and a recovery in building activity appears to be under way.

"That recovery will strengthen as repairs and reconstruction in Canterbury pick up later in the year."

"High household debt is expected to hold back spending as households attempt to reduce debt. Weak credit growth, which has been well below that implied by turnover in the housing market, gives weight to this assumption," the bank said in the monetary policy forecasts.

The central bank also said that the New Zealand's economy was growing at a slower pace than previously projected.

The economy will probably grow 1.8% in the year ending March 31, down from 2% forecast in the December policy statement.

Growth will improve to 3% in the 12 months ending March 2013, which is faster than the 2.9% rate in December.

In other central bank moves, the European Central Bank, the Bank of England and the Bank of Canada all left interest rates steady at meetings overnight Thursday.

The ECB downgraded its economic outlook for the eurozone, with GDP forecast to be between a contraction of 0.5% and growth of 0.3% in 2012, for a midpoint estimate minus 0.1%.

The December forecast had a midpoint of 0.3%.

South Korea's central bank kept its key rate steady at 3.25%, a move that was widely expected.

But Brazil's central bank cut its key rate to 9.75% to try and resist a slowing economy.

That cut was 0.75%, much bigger than the past three cuts of 0.5% each.

The cut came after figures showed a 3.4% slump in Brazilian industrial production. Brazil's GDP grew by 2.7% in 2011, much slower than the 7.5% rate in 2010.

And in Japan, the country's trade deficit hit an all time high in January.

It widened to 1.382 trillion yen ($US17.0 billion), up 245.9% compared to the year-ago.

Japan's current account deficit totalled 437.3 billion yen in the month, larger than the 322.4 billion yen forecast by the market.

The current account deficit was also the largest on record.