The likelihood of another interest rate cut increased drastically on Thursday after Australian Bureau of Statistics' figures showed that the nation's unemployment rate had risen to its highest level in 12 years.
According to the figures, Australia's unemployment rate jumped from 6.1 per cent to 6.4 per cent between December and January with just under 800,000 people now out of work. While the participation rate remained steady at 64.8 per cent, the number of people employed fell by 12,200.
While many have again started questioning the accuracy of the figures, David Kalisch, the new head of the ABS, said the Bureau is confident the true rate lies between 6 per cent and 6.8 per cent. Even if the unemployment rate was really at the lower end of that scale, Australia would still maintain the second-highest unemployment rate in the English speaking world (behind Canada), as shown in The Australian.
Early last week, the Reserve Bank of Australia surprised the market with an interest rate cut, taking the cash rate down to 2.25% and citing the high unemployment rate as one of the primary reasons behind its decision. Given the extent to which the unemployment rate rose in January, another interest rate cut in March has become increasingly likely.
While that is bad news for savers and most retirees, who will receive even lower returns on their bonds and cash accounts, it's excellent news for investors – particularly those who own high-yield dividend stocks. The S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) has risen more than 11% over the last month, led by some of the market's most popular dividend stocks including Telstra Corporation Ltd (ASX: TLS), Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC).
