SYDNEY -(Dow Jones)- Australia's economy shed jobs in February, delivering the second strong indicator this week that the economy is struggling under the weight of a high Australian dollar and adding to calls for lower interest rates.
Australia's unemployment rate rose to a seasonally adjusted 5.2% in February from 5.1% in January, while the number of employed fell 15,400, the Australian Bureau of Statistics said Thursday. Economists on average had expected an unemployment rate of 5.2%.
The drop in employment comes after the Reserve Bank of Australia kept its key rate on hold at 4.25% on Tuesday and kept alive the prospect of a cut in interest rates if needed.
Data Wednesday also showed the economy scratched out weak growth of just 0.4% in the fourth quarter.
Economists said the flow of news on the economy shows the economy is underperforming and the central bank may have more work to do in coming months and quarters with one or two rate cuts likely.
"Overall the economy is tracking at a bit below trend growth...which we believe leaves the door open for the RBA to cut rates," said Paul Bloxham, chief economist at HSBC Australia.
The economy has been creating an average of 4,000 jobs per month, not enough to prevent the unemployment rate from rising over time.
With the economy misfiring, Treasurer Wayne Swan faces an ever increasing challenge to bring the federal budget back into surplus as pledged in the year ending June 30, 2013.
He said this week company profits are down, stifling revenue flows. The budget is expected to be in deficit by around A$37 billion in the fiscal year ending June 30, 2012.
The Australian dollar has risen by around 80% against the U.S. dollar since late 2008. The surge has put pressure on companies on the east coast not directly linked to the mining boom. Mining investment is surging, but only 20% of the economy is mining related. Read full news here.