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Sydney: Australia’s unemployment rate rose to the highest since 2009, underscoring the challenge newly-installed Prime Minister Kevin Rudd faces as he crafts a re-election pitch centred on economic management.

The jobless rate rose to 5.7% in June, the highest since September 2009 and up from a revised 5.6% a month earlier, the statistics bureau said in Sydney on Thursday, as more people sought work. The number of people employed advanced by 10,300 from May—when employers cut a revised 700 workers—as full-time jobs declined by 4,400 and part-time employment increased by 14,800, the report showed.

Central bank governor Glenn Stevens has reduced the benchmark interest rate by 2 percentage points since late 2011, including a quarter-point cut in May to a record-low 2.75%. Rudd, who ousted Julia Gillard last month, is ditching the optimism of his predecessor and selling himself as the best leader to steer Australia through a downturn as China slows.

“No political leader wants to see unemployment drifting up," said Stephen Walters, JPMorgan Chase and Co.’s chief economist in Australia, who noted the jobless rate is still below the peak reach during the global financial crisis in 2008-2009. Rudd was in charge then too. “He’s been here before and he did get a lot of credit for swift action during the onset of the GFC and presided over an unemployment rate falling back. So he’s got a fair bit of credibility there."

The Australian dollar was little changed after the data and traded at 92.58 US cents at 12.33pm in Sydney. Traders are pricing in about a 60% chance of a quarter percentage point rate cut to 2.5% at next month’s policy meeting, according to swaps data compiled by Bloomberg.

Job seekers

Australia’s participation rate, a measure of the labour force in proportion to the population, gained to 65.3% in June from 65.2% a month earlier, it showed.

“We’re seeing a labour market that is still in pretty good shape, we’re still generating jobs, the disappointment of course is we’re not generating enough jobs to stop unemployment from rising," said Michael Blythe, chief economist in Sydney at Commonwealth Bank of Australia. “That shallow uptrend in unemployment that’s been in place for a while is continuing, consistent with an economy that’s running below trend."

Industry has been squeezed by a currency that held above $1 from mid-June last year to 10 May, the longest stretch above parity with the greenback since the Aussie was freely floated in 1983. The local dollar has declined 12% in the past three months, the worst performer among group of 10 currencies.

Dollar squeeze

The depreciation came too late for Ford Motor Co., which announced on 23 May it would end production in the country after nine decades, with the loss of 1,200 jobs. General Motors Co.’s Holden division said in April it will cut about 500 jobs in Australia, citing the currency’s strength.

Job advertisements dropped 1.8% in June, the fourth straight monthly fall, Australia and New Zealand Banking Group Ltd said in an 8 July report. Help-wanted notices declined in Western Australia, the centre of the nation’s mining industry, as an investment boom wanes.

The unemployment rate was 10% or higher in 10.3% of the nation’s approximately 1,400 regions in the three months through March, up from 8.1% a year earlier, according to a separate government report released this month. More than 64% of regions recorded a higher jobless rate over the 12 months through March, the data showed.

Stevens, in the statement accompanying the 2 July decision to leave rates unchanged, said Reserve Bank of Australia’s board judged that the inflation outlook, as currently assessed, may provide some scope for further easing, should that be required to support demand. BLOOMBERG

Daniel Petrie, Benjamin Purvis and Victoria Batchelor in Sydney contributed to this story.

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