Australia's jobless rate to hit highest level since 2009

Sydney: Australia's unemployment rate will rise to the highest level since 2009 as industries outside of mining struggle with an elevated currency, the Organisation for Economic Cooperation and Development said.

The nation's jobless rate will climb to 5.7 per cent in 2013 from 5.4 per cent this year, the OECD said in its economic outlook released in Paris yesterday. That would match a level reached in September 2009 and is higher than the average in the past decade of 5.2 per cent.

"Mining expansion will continue, but some other sectors are having to adjust to the high level of the exchange rate and raise their productivity, which can be expected to weigh on the labour market," the OECD said in the report. "Faster fiscal consolidation will also weigh somewhat on demand."

Eye on budget surplus

Prime Minister Julia Gillard's government plans a A$46 billion (Dh146.4 billion) swing to a budget surplus in the fiscal year beginning July 1 to provide the Reserve Bank of Australia with more scope to lower borrowing costs.

The central bank has cut the benchmark interest rate by a percentage point to 3.75 per cent in the past six months to support demand as a 41 per cent gain in the currency since 2008 hurts non-resource exporters, tourism and education.

Australia's unemployment rate fell last month to 4.9 per cent, the lowest level since April 2011, from 5.2 per cent in March, a government report showed this month. Core inflation slowed to a 13-year low in the first quarter as the currency's strength contained prices.

"In the absence of inflationary pressures, the accommodating monetary stance which accompanies this budget-tightening should help limit the risk of weakening employment," the OECD said.

The report showed inflation in Australia and neighbouring New Zealand staying contained and below the top end of each central bank's target range.

Australia's consumer price index will increase 1.8 per cent this year and 2.8 per cent in 2013, while the CPI in New Zealand will gain 1.7 per cent this year and 2.6 per cent next.

The RBA aims to keep the inflation within a 2-3 per cent range, and its counterpart across the Tasman Sea is required to keep price gains within 1 per cent and 3 per cent.