Kevin Rudd wrong as Queensland jobs jump

KEVIN Rudd has been thrown on the defensive on economic management after a surprise fall in full-time jobs offset by strong growth in Queensland that challenges his warnings about the damage from the state Liberal National Party government's "austerity" cuts.

Thousands of Australians gave up looking for work over the past month in a new sign of the weak jobs market, sharpening Coalition attacks on the Prime Minister yesterday, despite the addition of almost one million jobs since Labor took power.

The federal government hailed the steady unemployment rate - 5.7 per cent last month and still the highest level for almost four years - but economists warned that thousands more could join the jobless. The unexpected loss of more than 10,000 mainly full-time jobs between June and July fuelled economists' concerns the unemployment rate would climb higher than the 6.25 per cent forecast in last week's economic statement.

"We struggle to identify where new jobs will be created from here," said Stephen Walters, JPMorgan's chief economist, suggesting the transition from mining to non-mining growth was not going smoothly.

"The jobless rate probably still has some way to climb, most likely to 6 per cent by the end of this year and probably even higher in 2014."

The jobless rate, although well below that of most other industrialised countries, has been rising steadily since 2011, when it fell to a post-GFC low of 4.9 per cent.

The Rudd government conceded the "slight" fall in jobs but appealed to voters to remember the workforce had swelled from about 10.5 million since Labor came to power in 2007 to about 11.5 million.

In a challenge to one of Labor's key election strategies in Queensland, the latest figures showed the state gained 18,500 jobs and saw its unemployment rate fall from 6.3 per cent to 5.9 per cent.

Labor has attacked Queensland Premier Campbell Newman and his LNP government by claiming his cuts to 14,000 public service positions last year would damage the state economy.

UBS economist Scott Haslem said Queensland was the nation's "standout" performer, and Commonwealth Bank economists noted the state's "buoyant" conditions.

The results undercut Labor's warning that a federal government led by Tony Abbott would drive down growth by adopting the same "austerity" policies as Mr Newman, starting with an audit of spending to clear the way for cuts.

Mr Rudd argued yesterday that the weaker jobs outlook, including the 6.25 per cent unemployment forecast in last week's budget update, heightened the reasons for voters to back Labor's economic management.

"It is the core reason why the strength of the economy, the robustness of the economy, is core business for this election," he said. "Because the global economic pressures to which we are now subject, particularly from the end of the China mining boom, are going to impact on growth, impact on employment.

"I've been frank about that from day one (when) I returned to the position of Prime Minister."

Former Queensland premier Peter Beattie, standing beside Mr Rudd in Brisbane yesterday as he announced a plan to enter federal parliament, said industries such as mining services were the source of future jobs growth.

But opposition Treasury spokesman Joe Hockey argued that the weak participation rate - the percentage of Australians in work or actively looking for work - meant that the flat unemployment rate did not reflect the weakness in the economy.

"That just illustrates we're in a deteriorating market that is heading towards an unemployment level of around 800,000," he said.

The participation rate fell from 65.3 to 65.1 per cent, the equal lowest level for more than six years.

As the Coalition came under questioning again over its plan to put a 1.5 percentage point levy on big companies to fund a parental leave scheme, Mr Hockey said the policy would help lift the number of people in the workforce.

"The participation rate is an essential guide to the confidence of Australians to get out there and look for a job," he said. "The fact that it is falling, that people are giving up looking for work, says everything."

The disappointing result would "concern" the Reserve Bank, said Citi senior economist Joshua Williamson, who like most economists expects the RBA to cut rates again by Christmas, although after the federal election.

Michael Workman, a senior Commonwealth Bank economist, said tourism and a revival in housing and construction in Brisbane and the Gold Coast were supporting jobs growth in Queensland.

"It appears the state has absorbed the public sector job cuts for now and the unemployment rate is stabilising around 6 per cent," he said. "While coalmining job losses have been significant, coal-seam gas is still generating work."

Tasmanian and South Australian jobs markets generated no new jobs over the year to July, and registered jobless rates of 8.2 and 7.1 per cent respectively, while NSW was the best performer, adding more than 60,000 jobs.

"We expect NSW to continue to outperform the other states on the jobs front as it will suffer less from any mining fallout and its housing sector is proving responsive to rate cuts," said Justin Fabo, a senior economist at ANZ.

Chris Bowen updated the government's jobless forecasts last week, suggesting a peak of 6.25 per cent next year, while St George's chief economist Besa Deda anticipate a rise to near 7 per cent by the end of next year.

"If the rebound in housing and construction doesn't occur as expected, the jobless rate would be even higher," she said. "Employment needs to grow by between 15,000 and 20,000 jobs a month to keep the unemployment rate stable and that's not happening."

The number of people claiming to be out of work last month shrank by 5700 to 705,400 people, while the total number of employed people stood at 11.65 million, the ABS report showed.

"Male-dominated sectors like manufacturing, construction, utilities and transport are bearing more of the economic slowdown than some of the service sectors," Mr Williamson said.