Weak data point to a softening economy

FALLING job advertisements and a surprise drop in housing loans have pointed to a softening economy but do not strengthen the case for a Reserve Bank rate cut in February, analysts say.

But economists said if unemployment data, to be released on Thursday, is weaker than expected, pressure would increase on the RBA.

Economic data released on Monday showed job ads dropped by 3.8 per cent in November, according to an ANZ survey, falling for the 10th straight month.

Housing loans fell by a surprise 0.5 per cent in the same month, a Bureau of Statistics report showed.

"We saw some softer conditions in Australia in the fourth quarter of last year. The key question is: do we see an improvement in the first quarter of this year?" said Paul Bloxham, the chief economist for HSBC in Australia and New Zealand.

The average credit-card balance fell by a record 2.3 per cent over the year to November, while inflation rose by 2.4 per cent over the past year, around the midpoint of the RBA's target band.

Economists said the data showed that a lack of consumer confidence, job uncertainty and a desire to pay down debt remained the predominant themes for Australians.

"The 'balance sheet repair' mentality that pervades Australian households remains quite strong, despite lower mortgage rates," said Michael Workman, the Commonwealth Bank's senior economist.

"The national household savings rate is still near 10 per cent, the highest since the early 1980s."

Households' desire to shun debt, even at financial crisis lows, could also mean that any further interest rate cuts were less likely to impact on borrowing levels, said Craig James, the chief economist at CommSec.

At the same time, the lack of a pick-up by non-mining sectors as mining investment shrinks this year could lead to a rise in the unemployment rate this year, some economists said.

"The most interesting numbers in the next couple of weeks is actually going to be on Thursday, which is the labour market," said Alan Oster, the chief economist at National Australia Bank.

"We think unemployment might be on its way up, so we'll see."

Economists estimate the unemployment rate will rise to 5.4 per cent from its current level of 5.2 per cent.

Justin Fabo, the head of Australian economics at ANZ, said he expected the unemployment rate to rise to about 5.75 per cent from the current level of 5.2 per cent by mid to end-2013.

On Friday, the NAB tipped the unemployment rate to rise to about 5.75 per cent by late this year. The bank also slashed its interest rate forecasts for 2013 to 2.25 per cent by the September quarter.

But analysts said signs that the global economy was picking up meant the RBA was more likely to keep rates steady in February as it waited for recent cuts to take effect.