(Australian Associated Press)
The services sector looks set to rival housing as the star performer of the Australian economy thanks to the cheaper exchange rate.
There have been over 200,000 jobs created in Australia in the past 12 months and close to 100,000 of them have been in health care and professional and scientific industries.
The next best performer has been tourism related businesses, such as accommodation, recreation, and transport.
JP Morgan economist Tom Kennedy said to surge in services sector jobs has help the unemployment rate drop to six per cent from 6.2 per cent at the beginning of the year.
“The healthy performance of the labour market is even more surprising given the lacklustre pace of economic growth,” he said.
Mr Kennedy said a key driver for the sector is the fall in the Australian dollar, which has dropped almost 10 US cents since the beginning of the year, making it cheaper for people to visit Australia.
“The slide in the exchange rate has contributed to a steady rebound in inbound tourism, as evidenced by the upturn in services exports,” he said.
Figures released by the federal government on Wednesday showed that there was an eight per cent increase in international visitors in the 12 months to March, with New Zealanders and Chinese leading the way.
They spent a record $32.5 billion, which boosted tourism revenue by 10 per cent.
Tourism Australia managing director John O’Sullivan said that China is very important to Australian tourism and is the fastest growing market, with spending up 25 per cent in the 12 months to March.
“Today’s figures confirm China to be the engine room of growth – the highest value inbound market,” he said.
Mr O’Sullivan is also expecting there will be a bounce in the number of visitors from the US and Japan as their economies recover and the falling Australian dollar makes a trip here cheaper.
“We’re already experiencing a very strong bounce-back in the US, off the back of strong economic recovery in the US,” he said.
Mr Kennedy said employment growth in the services sector is important as the mining boom winds down, retail spending stays sluggish and, surprisingly, employment in construction grows slowly.
“Employment growth in the construction sector has been unimpressive, with just 20,000 jobs added since mid-2014,” he said.
“This is somewhat surprising given the rise in construction activity in recent years, particularly in the residential sector where annual building approvals are close to all-time highs.”
Mr Kennedy said a possible explanation for this that job shedding in mining industry construction has been offset by improved hiring in the broader economy.