Australia “may avoid recession”

Australian employers saw an unexpected rise in the number of workers in January, a sign that the Aussie economy may avoid the recession that is gripping the UK, America, Europe and Japan.

Today’s report revealed that the number of full-time jobs rose 33,700 in January, although part-time employment decreased 32,600. Some 10.7 million people were employed last month, which is equal to roughly half the nation’s population.

The Australian job market saw surprising growth in January

These figures were released while unemployment continues to rise around the world. In the US the number of people out of work soared last month to 7.6 percent, the highest level since 1992, while UK unemployment figures hit their highest rate in almost a decade. Japan’s rate climbed in December to 4.4 percent from 3.9 percent.

“The labour market shake-out in the U.S. and U.K. is not evident in Australia, not least because the economic downturn remains mild,” said John Edwards, chief economist at HSBC Bank Australia Ltd. in Sydney. “It will contribute to the case for the Reserve Bank to pause in March.”

With such positive economic news being reported amid the continued gloom, the currency rose as traders bet rising employment may ease pressure on central bank Governor Glenn Stevens to extend reductions to the benchmark interest rate.

“We haven’t seen jobs shedding take hold yet, and that’s fantastic news,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “Things aren’t as bad as some of the rhetoric and press is telling us and companies are saying ‘our bottom lines are okay, and we’re unwilling to give up labor’.”

Nevertheless, he cautioned, “we can’t sit here and delude ourselves that things will be okay,” he added. “Jobs destruction will kick in.”

The Australian dollar rose to 65.70 U.S. cents at 12:36 p.m. in Sydney from 65.20 cents immediately before the report.

Elsewhere, in an attempt to combat the global credit crisis, Australian PM Kevin Rudd has pledged AU$42 billion to reinvigorate the economy. In the face of the worldwide credit crunch, the previously buoyant Australian economy, which had enjoyed a 10-year boom, is now stagnating.

The money will be spent on building new homes and the biggest school-building project in Australia’s history, as well as providing 2.7 million homes with free roof insulation as part of a package of environmentally friendly initiatives. There will also be cash payments to workers, farmers and students.

After the Prime Minister’s announcement, the Reserve Bank of Australia cut its benchmark cash rate by one per cent to 3.25%. This is its lowest level in 45 years and is another attempt to get the economy moving once again.

The government believes these measures will stimulate the economy, but the outlook is still bleak: the IMF has predicted that Australia will officially enter a recession this year, and job losses over the next 12 months are set to rocket.

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