The rise to a decade-high unemployment rate of six per cent has been on the cards for some time, deflating the opposition’s attack on the government.
The jump in the unemployment rate to a decade high is unlikely to rattle the Reserve Bank into making a quick cut to the official cash rate.
Economists argue that while the rise in the jobless rate to six per cent was worse than financial markets had been expecting, the central bank has been anticipating the increase with the economy running at a sub-trend pace.
It was a theme that carried into parliament on Thursday following the release of the labour force figures for January.
Opposition Leader Bill Shorten asked the prime minister when the government was going to offer a real plan for employment – when one job had been lost every three minutes since the federal election.
“I very much regret the fact that unemployment is edging up,” Tony Abbott told parliament.
However, he noted that the last economic statement of the former Labor government predicted unemployment would reach 6.25 per cent in the first half of this year.
“So what’s happened is that unemployment has done what members opposite said it would do under members’ opposite own policies,” he said.
Treasurer Joe Hockey agreed the figures were not unexpected and were the unfortunate reality of six years of Labor government.
“They indicate the size of the challenge we have before us,” he told reporters in Canberra.
But Labor employment spokesman Brendan O’Connor said the data showed the participation rate of those people in work or actively seeking employment was lower than at any time since April 2006.
“Eligible people have stopped looking for work because they have no confidence that the government is helping create the environment to produce jobs,” Mr O’Connor said.
The jobless rate of six per cent was the highest since July 2003, although economists had expected the rate to only nudge up to 5.9 per cent after 5.8 per cent in December.
The number of people in employment also fell by 3700 when economists had expected a 15,000 increase. The full-time workforce fell by 7100, but was partly offset by a 3400 increase in part-time workers.
In its medium term forecasts for Australia, the International Monetary Fund expects the jobless rate to peak at 6.1 per cent in 2014 before easing to 5.8 per cent in 2016.
This coincides with economic growth remaining before trend or three per cent until 2017.
“With growth currently on the soft side, the real exchange still strong and efforts to reduce the budget deficit likely, monetary policy should remain accommodative,” the IMF says in its latest annual report on Australia released in Washington on Wednesday.