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Jobless rate falls to record low of 4 per cen -

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Jobless rate falls to record low of 4 per cent

The World Today - Thursday, 13 March , 2008 12:10:00

Reporter: Brendan Trembath

ELEANOR HALL: It is a goal that governments around the world strive for and today the Australian
economy has reached it - record low unemployment.

The jobless rate has fallen to its lowest rate ever at four per cent. But while the bureau of
statistics figures will be welcomed by job seekers, there'll not be such good news for interest
rates.

And it contrasts with the collapse in consumer confidence, so which way is the Australian economy
headed?

Brendan Trembath joins us now.

So Brendan, is this record unemployment number a surprise?

BRENDAN TREMBATH: It certainly is because in general economists were expecting a jobless rate of
about 4.2 per cent so it's disappointing for them in that respect. We should say it's encouraging
though of course if you're looking for work at the moment.

With this record figure, it is a record as far as monthly statistics - in the 1970s they used to do
this quarterly. But as far as monthly statistics this is a record for the unemployment rate in
Australia to be at four per cent, something that governments can be proud of but it does create
difficulties.

ELEANOR HALL: How have financial markets reacted?

BRENDAN TREMBATH: Well because it was a surprise, the jobless rate was lower than expected, that
saw the Australian dollar rising after the report. The Australian dollar before the report was
trading about 93.50 US cents and after the report it increased to about 93.80, so again in the
Australian dollar.

And that's probably because of expectations that there may be some more interest rate pain to come
for people with mortgages. People are looking around for a higher return in financial markets.
Countries with higher interest rates often offer those higher returns.

ELEANOR HALL: So does this figure today mean that the Reserve Bank may now look at increasing rates
again, even though yesterday we were talking about the exact opposite?

BRENDAN TREMBATH: Yeah, we tend to chop and change on a daily basis, depending on which information
comes out but that's what happens. Each day there's a new bit of information and you have to assess
it in terms of what does it mean for rates.

Some economists are now reassessing their views because this suggests that the economy is still
performing well - it's heating up. But that does mean that the central bank may have to do
something to cool it down. You don't want an economy that's performing too well because there's
pressure potentially on wages.

But some economists now say that this does make it possible that the central bank may have to step
in once again and increase the cost of borrowing in Australia, like it did this month and last
month.

ELEANOR HALL: Now there was more evidence today of that falling consumer confidence that we were
talking about yesterday. What are we to make of these conflicting signals on the economy?

BRENDAN TREMBATH: Well, these reports are measuring different things. So on one hand we've had
consumers interviewed about their view of the family finances and their view of how things are
looking and, you know, there is pessimism - certainly because we've seen the stock market falling
considerably in the last couple of months, and then those interest rates are really starting to add
up in people's minds.

But we still have companies stepping up employment and that's partly explained in some areas by
things like the mining boom because mining companies need to hire more workers. They need to hire
more workers not only to dig the stuff out of the ground but in a whole range of other processing
and related areas.

So it is sometimes hard to get your head around these conflicting reports and that's a big job for
the central bank, to try and work out whether to step in to cool the economy down or to leave
things as they are for a while to see whether the interest rates are taking an effect on Australian
consumers and causing them to be more cautious.

ELEANOR HALL: Brendan Trembath, thank you.