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Unemployment up and likely to rise further


Australia's jobs market finished 2012 on a sour note and is unlikely to improve any time soon as slowing economic growth and the high Australian dollar put employers under pressure.

Almost 14,000 full-time jobs were lost to the economy in December as the national unemployment rate rose to 5.4 per cent.

Total employment fell by 5,500 as demand for part-time workers offset some of the lost full-time jobs.

Opposition Leader Tony Abbott pinned the blame for the rise in unemployment on the government's decision to abandon its plans to return the federal budget to surplus this financial year.

He said the move, announced by Treasurer Wayne Swan in December, hurt business confidence.

However, acting Employment Minister Kate Ellis blamed Queensland's government for the rise, pointing out unemployment lifted by nearly 23,000 in the state during December.

Bank of America Merrill Lynch economist Alex Joiner said the unemployment rate was likely to continue to rise in 2013 as the mining investment boom peaks and the high Australian dollar continues to hold back other parts of the economy.

"We expect the combination of slowing economic growth and the high Australian dollar will prompt industry to shed more labour this year in order to reduce costs and improve productivity outcomes and this will result in the unemployment rate rising further," he said.

The December job figures came a day after building products maker Boral cut 700 staff from its Australian operations.

Steelmaker BlueScope also axed 170 jobs in Victoria on Monday.

Mr Joiner said the Reserve Bank of Australia (RBA) would need to cut interest rates further in 2013 to support jobs and economic growth in underperforming sectors of the economy once the boom in mining investment peaks.

"We expect rates will need to be cut further to turn this around and stimulate the rebalancing of growth away from mining investment the RBA is looking to achieve," he said.

While most economists expect the Reserve Bank of Australia to keep the cash rate on hold at three per cent at its February 5 board meeting, markets are pricing in at least one more 0.25 percentage point cut in 2013.

But CommSec chief economist Craig James said the jobs figures were not as negative as many believed, and did not add to the case for a rate cut.

"The RBA would be quite encouraged the jobs market is remaining fairly resilient," he said.

"The unemployment rate has been holding around the five and a quarter to five and a half per cent mark for quite some time now," he said.

Mr James said the rise in part-time employment showed while employers were being cautious, they were still hiring staff.

"They are still taking on staff but they are taking them on cautiously, preferring part time workers to full time workers."

Tasmania suffered the biggest rise in unemployment, with its rate climbing to 7.3 per cent from 6.7 per cent.

Queensland also fared poorly, with its unemployment rate climbing 0.1 per cent to 6.2 per cent.

Western Australia once again had the strongest jobs market, with its unemployment rate rising to 4.3 per cent, from 4.1 per cent.