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According to the Australian Bureau of Statistics the unemployment rate dropped from 5.4% in April to a seasonally adjusted 5.2% in May. The decline was on the back of a rise in full-time employment of 36,400 to 7.78 million.

It was the ninth consecutive month full-time employment figures rose. However, this was partially offset by part-time employment dropping 9,400 people to about 3.28 million.

The ABS said the number of people employed increased by 26,900 to 11.057 million, seasonally adjusted.

The number of people unemployed decreased 25,400 people to 600,900 in May.

The ABS said seasonally adjusted monthly aggregate hours worked increased 43.9 million hours to 1,574.5 million hours in May.

The bureau reported adjusted participation rate in May decreased 0.2 pt to 65.1%, while seasonally adjusted labour force under utilisation rate was down 0.5 percentage points from February to 12.2% in May.

The Australian Industry Group/Housing Industry Association Performance of Construction Index dropped 2.6 points to 53.2 in May. It was, however, the third consecutive month the index was above the 50-point level that separates expansion from contraction.

The Australian Industry Group said house building experienced the strongest conditions with a lift in new orders and increased investor activity.

“This was in stark contrast to the apartment building sub-sector which recorded a sharp decline in May with the sub-sector index down 16.8 points,” the Australian Industry Group said in a statement released today.

Australian Industry Group director Public Policy, Dr Peter Burn, said the increased pace of input deliveries and the growth of employment suggest that businesses are taking a more positive near-term outlook, however added there is some caution in the data.

"The volatile apartment sub-sector underperformed in May and there is a continuation of the weakness of new orders in this area evident since January,” Dr Burn said.

"Activity in apartment and engineering construction slumped in May and the pace of growth in commercial construction activity that we saw in April was not maintained."

Housing Industry Association senior economist, Ben Phillips, said the industry remains concerned about a likely downturn once government stimulus has run its course.

"The apartment segment continues to underperform highlighting the fragile nature of this credit constrained market," Mr Phillips said.

The Australian Bureau of Statistics said its latest figures revealed GDP grew 0.5% in seasonally adjusted volume terms during the March quarter. The increase followed revised growth of 1.1% the previous quarter.

The ABS said GDP growth for the year until the end of the March quarter was 2.7%.

“Growth in the expenditure measure of GDP was driven by an 11.6% increase in public investment and a 0.6% increase in household expenditure,” the ABS said in today’s statement.  

“Offsetting these increases was a fall in private investment (down 0.6%) and in net exports.”

The decline in net exports was attributed to a 1.8% increase in imports, which compared to a 0.5% drop in exports.

Finance and insurance services as well as Transport, postal and warehousing were the two industries that provided the main contribution to growth in the production measure with 2.4% and 3.5% increases respectively in seasonally adjusted volume terms.

Turmoil in international markets over the last few weeks has prompted the Reserve Bank to leave interest rates unchanged following a board meeting in Sydney today. The decision to leave the official cash rate at 4.5% was widely anticipated by analysts.

However, many of these same analysts are anticipating at least two more interest hikes before the end of year.

In his comments justifying the pause, the Reserve Bank Governor Glenn Stevens mentioned the creditworthiness of several European countries and the effect this had had on global equity markets.

”The Australian dollar fell sharply as part of this adjustment,” Mr Stevens said.

”Commodity prices have also softened, though those important for Australia remain at very high levels.”

Despite this, Mr Stevens said global growth was tipped to be around trend pace in 2010.

”In Asia, growth has continued to be quite strong and may need to moderate in the year ahead,” Mr Stevens added.

Terms of trade remain strong in Australia with inflation set to remain at the upper end of the target 2% – 3% range.

The Australian Bureau of Statistics said the unemployment rate remained steady at 5.4% in April, with the number of people employed increasing by 33,700 to a seasonally adjusted 11.025 million.

“The rise in employment was driven by a rise in full-time employment, up 37,500 people to 7.736 million that was offset by a fall in part-time employment, down 3,900 people to 3.290 million,” the ABS said.

“This was the eighth consecutive month Australia has seen a rise in the number of people employed full-time.

However, the number of people unemployed increased 6,500 people to 628,100 in April.

The ABS said seasonally adjusted monthly aggregate hours worked dropped 8.3 million hours to 1,531.4 million hours for the month.

The participation rate in April was 65.2%.

The Board of the Reserve Bank of Australia this afternoon has raised its cash rate by 25 basis points to 4.5%, the third straight month it has done so and the sixth increase since October.

The interest rate hike takes interest rates back their highest level since the end of 2008.

The hike was widely expected, especially as the announcement was only one day after a report indicated property prices in Sydney had risen around 20% in the last 12 months.

The 0.25% rise will add around $46 per month to the average working family’s mortgage of $300,000.

The governor of the Reserve Bank, Glenn Stevens justified the banks positions, saying that Australia’s terms of trade are rising by more than earlier expected, and would probably regain the peak seen in 2008.

In an indication that the speech was written before last Sunday, when the Federal Government slapped on 40% tax on the big miners, Mr Stevens said that this would add to incomes and ‘foster a build-up in investment in the resources sector.’

Mr Stevens also acknowledged, and ignored, mitigating conditions against an interest rate rise.

”New loan approvals for housing have moderated over recent months as interest rates have risen and the impact of large grants to first-home buyers has tailed off,” Mr Stevens said.

”Nonetheless, at this point the market for established dwellings is still characterised by considerable buoyancy, with prices continuing to increase over recent months.”

Further, Mr Stevens said that while Europe was racked with uncertainty over the unfolding Greek debt crisis, it was not having a contagion effect outside Europe.

Referring to inflation, Mr Stevens said that while inflation was down from 2008 peaks, it was expected be within the top end of the target 2-3% range over the coming year.

In economic news, inflation rose 0.9% in the March quarter, against a 0.5% rise in the December quarter. The increase is ahead of expectations and likely to fuel speculation of a rate rise as early as next week.

On an annualised basis, CPI rose 2.9% to the end of the March quarter 2010, compared with a rise of 2.1% through the year to December quarter 2009.

The growth in the CPI was driven by fuel, up 4.9% and the healthcare sector. Pharmaceuticals are up 13.3%, while the cost hospital and medical services rose 2.9%.

Clothing was overall cheaper, especially men’s and children’s, down between 6% and 10% over the quarter.

Oddly, vegetables are 10% more expensive, while fruit is 5.7% cheaper over the quarter.

The Australian Bureau of Statistics reported that the Australian unemployment rate remained steady at 5.3% in March. The number of people employed increased by 19,600 people to 10.988 million, seasonally adjusted.

The ABS said the rise in employment was driven by the seventh consecutive monthly rise in full-time employment, up 30,100 people to 7.691 million.

This, however, was offset by a drop in part-time employment, down 10,600 people to 3.297 million.

The ABS reported a 4,200 increase in the number of people unemployed during March to 619,100.

The ABS seasonally adjusted monthly aggregate hours worked series revealed a decline of 10 million hours to 1,541.2 million hours in March.

The number of people actively looking for employment in March was 65.1%.

The Reserve Bank of Australia (RBA) has bumped up its cash rate by 25 basis points to 4.25%. According to analysts the decision to do so was not cut and dried with the economy beginning to see the effects of the end of the government stimulus packages.

In practical terms, the interest rate rise will add about $45 to the cost of an average 25 year, $300,000 mortgage, however at least three of the big four banks were expected to pass on more than the .25% official rise.

Speaking today, RBA governor Glenn Stevens said that world GDP was growing close to trend this year, driven largely by the surging economies of Asia, while developed countries in the Western world continued to suffer from the legacy of the global financial crisis.

In many countries, however, the recovery was such that governments had started to wind back stimulus packages.

Continuing to look globally, Mr Stevens said that international financial markets were beginning to behave more normally and sovereign debt issues, particularly in Europe were being ‘contained’.

Locally the RBA said Australia’s terms of trade were improving, production was up and unemployment had peaked well below expectations, presenting a similar message to the justification for previous rates rises.

Mr Stevens also said that inflation was a downward trend from its 2008 peak.

”CPI inflation has risen somewhat recently as temporary factors that had been holding it to quite low rates are now abating,” Mr Stevens said.

”Inflation is expected to be consistent with the target in 2010.”

The RBA did acknowledge that lenders generally raise their interest rates by more than that of the RBA, noticeably something NAB said it wouldn’t do this time around, however Mr Stevens said that they were still paying below the long term average interest rates.

Pre-empting any public backlash against raising interest rates, the National Bank of Australia Limited (NAB) said yesterday it would not lift mortgage rates by any more than that announced by the Reserve Bank of Australia in this afternoon's RBA board meeting.

While opinions are divided on whether or not the RBA will lift rates today, NAB’s announcement was a clear challenge to the remaining three major lenders.

Only a matter of weeks ago Westpac indicated it was under pressure to pass on an interest rate rise that would surpass that of the RBA.

This raises the question of how customers will react and whether the NAB’s strategy of increasing customer numbers will work?

While no other bank has promised to match the RBA’s potential rate increase, it would be a brave company to lift rates by more than the official rate despite the fact rates have been at historically low levels recently.  

Popular consensus was that the RBA would lift rates by 25 basis points until last Wednesday when the Australian Bureau of Statistics reported a 1.4% fall in retail sales in February and a 3.3% drop in the number of dwelling units approved in February.

Both figures fell short of estimates with economists expecting a 0.3% rise in retail sales for the month and a rise in excess of 2% in building approvals nationally.

The declines were largely attributed to four official interest rate hikes since October as households cut spending. During this period banks have exceeded the rate hikes announced by the RBA on occasions, with Westpac in particular coming under heavy criticism.

However, rises in Australian commodity exports and positive data out of the US has some still confident of a rate hike.

RBA governor Glenn Stevens’ rare appearance on commercial television last week warning of the high levels of borrowing involved in property investment over the past 12-months was also viewed as an indication the official interest rate would be increased.