16 Jul 2012

Two-speed economy hitting jobs

7:15 am on 16 July 2012

The labour market in Australia is starting to go off the boil as mass layoffs in industries outside mining expose the two-speed nature of the economy.

The June jobs report shows unemployment fell last month in Western Australia and Queensland, which are rich in resources.

But it went up in the financial and manufacturing strongholds of Victoria, New South Wales and South Australia.

Overall, the number of people in work fell by 27,000 last month and unemployment ticked up to 5.2%from 5.1%.

Radio New Zealand's Sydney correspondent says that's still low by world standards, but it shows some of the sparkle is coming off the Aussie economy.

A number of industries have been laying off workers, most notably in manufacturing, retailing, transport and tourism - as the impact of the strong dollar and softer consumer demand hits home.

However, policymakers are reluctant to intervene to weaken the Australian dollar. The Reserve Bank says it's hard to argue that the dollar is over-valued.

Deputy governor Phillip Lowe says the strength of the currency has been an important stabilising influence in recent years.

Alongside commodity prices, the Australian dollar has been supported more recently by global central banks reweighting their reserves away from the US dollar and euro towards high yielding currencies like the Aussie and kiwi.

Australia now is one of the few AAA rated borrowers left in the world. And with yields well above those elsewhere, the queue for Australian government bonds is a long one.