The poor labour force figures for December, released today by the Australian Bureau of Statistics (ABS), have taken the toll on the Australian Dollar (AUD), with the local currency slumping 88.04 US cents as at 1.20pm a three-and-a-half year low.
The AUD had opened the day at 89.16 US cents, but fell by more than one cent following the release of the weak employment data.
Economists had tipped the December labour force data to show that 5,000 jobs were created, but instead it showed 31,600 full-time jobs were lost while part-time employment rose by 9,000. And had the participation rate not fallen by 0.2%, Australia’s unemployment rate would have climbed to 6.0%.
The data has added to the view that the Australian economy will under perform its global peers in 2014, which is weighing on the AUD. According to ANZ head of foreign exchange Richard Yetseng:
“People have been looking for some sort of domestic recovery in Australia to match what’s going on in the US and, so far, you’ve got to look pretty hard to find it”.
“These broad measures of the economy like the labour market are quite important and so far that’s not suggesting the … recovery is broadening.”
Of course, a lower domestic currency is critical to improve the competitiveness of the trade exposed non-mining economy, so the fall in the AUD should be welcomed by policy makers and industry alike.
