Australian dollar drops to four-year low after unemployment figures released

http://www.theguardian.com/world/2014/jan/16/australian-dollar-drops-to-four-year-low

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The Australian dollar fell to its lowest point for almost four years on Thursday after figures showed that unemployment remained unchanged in December.

The currency fell from 88.94 US cents to 88.27 US cents within 10 minutes of the labour force data at 11.30am – its lowest level since July 2010 – and reached as low as 88.01 US cents at lunchtime.

Unemployment in December was unchanged at 5.8%, the Australian Bureau of Statistics' seasonally adjusted figures showed on Thursday, with the total number of people in work falling 22,600 to 11.630 million in the month.

But full-time employment fell 31,600 to 8.068 million in December and part-time employment was up 9,000 to 3.562 million.

Despite the soft labour force market, economists do not expect further interest rate cuts.

Commonwealth Bank economist Gareth Aird said despite there being no jobs growth in the past six months, he believed it was unlikely the RBA would make further cuts to the cash rate.

"We don't think today's numbers will sway the RBA to cut again," Aird said.

"They would probably want to see the Aussie dollar do most of the work in further easing monetary conditions.

"It does increase the risks of further cuts, but the main thing to keep an eye on is that the Aussie dollar is now comfortably below 90 US cents."

Aird said this will give businesses a lift and this will eventually flow through the economy.

National Australia Bank senior economist Spiros Papadopoulos said the falling participation rate, which came in at a seven year low of 64.6%, was keeping the unemployment rate from rising.

"This is a soft outcome and it's really just highlighting the very soft jobs growth we've seen in the economy over 2013," Papadopoulos said.

"We had jobs growth of only 0.5 per cent throughout the year.

"At that rate of growth, you should be seeing the unemployment rate moving higher but it's being offset by the falling participation rate.

"There's an element of an ageing population and people retiring but there would also be an element of people giving up [looking for a job] as well."

NAB expects unemployment to reach 6.5% by the end of 2014, Papadopoulos said.

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