Australian jobless rate rises to 3-year-high of 5.6%

SYDNEY (AFP) - Australia's jobless rate jumped to 5.6 per cent in March, its highest rate in more than three years, data showed on Thursday, adding to the chances of a further interest rate cut.

The Australian Bureau of Statistics said the unemployment rate was up 0.2 percentage points from February, defying analysts, who had broadly tipped the rate to remain steady.

The total of 36,100 jobs lost, seasonally adjusted, was nearly half the upwardly-revised 74,000 gained in February, a result that was a near 13-year high and smashed forecasts.

The Australian dollar dropped on the data to US$1.0517 from US$1.0537 on expectations that the central bank is more likely to ease interest rates if the labour market weakens.

"I don't think the RBA (Reserve Bank of Australia) is going to panic about it but it certainly goes in the column suggesting further rate cuts may be needed," said Macquarie senior economist Brian Redican.

He added that he expects the jobs market to continue to weaken.

The government has warned that the boom in commodity prices that saw Australia weather the global financial crisis without going into recession is over, forecasting unemployment to hit 5.5 per cent in the year to June.

JP Morgan Australia chief economist Stephen Walters also expects another interest rate cut.

"We think (unemployment) is going to 6.0 per cent, this is because the mining investment boom is peaking," said Walters.

The RBA last week kept interest rates on hold at 3.0 per cent, saying global downside risks appeared to have eased but domestic pressures were lingering.

Commonwealth Bank chief economist Michael Blythe was more upbeat, pointing out that the March figures came on the back of strong February jobs data.

He said jobs growth averaged about 17,000 in the past three months, "which is a pretty decent result".

"It tells you the economy is still generating more jobs that it is losing," he said, adding that the Reserve Bank "will certainly keep the easing bias they have in place".

Both part-time and full-time employment fell in March, with the participation rate - the proportion of people in work or looking for work - at 65.1 per cent, down from 65.3 per cent in February.