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May 28, 2017

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Australian jobless rate holds steady but currency tumbles

SYDNEY--Australia's unemployment rate held steady at 5.8 percent in December but the economy shed 22,600 jobs, data showed Thursday, sending the Australian dollar tumbling to a three-year low.

While the headline rate remained the same the Australian Bureau of Statistics (ABS) said seasonally adjusted unemployment increased, with the loss of 31,600 full-time jobs and the creation of just 9,000 part-time positions.

The rate was in line with forecasts but the "Aussie" dollar sank to 88.05 U.S. cents — its lowest since August 2010 — from 89.03 cents on Wednesday.

Australia is confronting a difficult transition away from reliance on commodities as a decade-long Asia-led mining investment boom unwinds with key partner China slowing and demand easing as extra supply comes online.

The government warned that the country faces 10 years in the red last month as resources investment declines sharply and the non-mining economy struggles to fire.

The Reserve Bank of Australia has slashed interest rates by some 225 basis points over the past few years in a bid to stimulate economic activity, with rates currently at a record low 2.50 percent.

Central bank governor Glenn Stevens is keeping an open mind on further cuts, with unemployment one of his key concerns.

The stubbornly high Australian dollar has also weighed on his mind, with Stevens telling lawmakers late last year that an exchange rate above 90 U.S. cents was not sustainable in the long-term and 85 cents was probably closer to its true value.

The Aussie traded at or above greenback parity for several years, hitting a high of 110.81 U.S. cents in July 2011, and its drop on Thursday will be welcome news for the Reserve Bank.

Its prolonged bullish run weighed on trade-exposed sectors of the economy, particularly manufacturing, forcing a number of firms including carmakers Holden and Ford to close their doors at the cost of thousands of jobs.

Underscoring the picture of mining industry easing, unemployment increases in December were most marked in resources-rich Western Australia (0.4 percentage points) and coal-mining Queensland (0.2 percentage points). All other states saw no change or an improvement in job prospects.

AMP Capital chief economist Shane Oliver described the monthly print as "disappointing" and said the true jobless rate was being masked by Australia's ageing population.

Without its growing levels of retirement, Oliver said Australia's unemployment rate would be 7.1 percent "highlighting just how soft the underlying jobs market is".

"Australian employment only rose by 54,600 through 2013, compared to average annual growth of 170,000 in the previous five years. So quite clearly the jobs market is very soft," he said.

Annette Beacher from TD Securities said all new jobs created in the past 12 months had been part-time, with the economy shedding 68,000 full-time jobs.

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