interest rates tipped to rise further

Economists say a lower than expected unemployment rate in September will add to the case for another interest rate rise.

Australia's unemployment rate fell to 4.2 per cent seasonally adjusted last month, the lowest level in 33 years, after economists had expected it to remain steady at 4.3 per cent.

Figures from the Australian Bureau of Statistics show 13,000 jobs were added to the labour market in September.

HSBC chief economist John Edwards says the low figure will put upward pressure on interest rates.

"It'll support the central bank's view that the economy is probably accelerating, and almost certainly it means we're going to have an interest rate increase. Perhaps more than one," he said.

The figures also show there was a fall in full-time employment but an increase in part-time work.

But Prime Minister John Howard has rejected suggestions the new figures could spark a rate rise.

"It's not terrible for interest rates," he said.

"What puts pressure on interest rates is significant rises in inflation over a period of time, and what we have been able to achieve in the last few years is remarkable jobs growth of a non-inflationary kind."

Federal Opposition Leader Kevin Rudd says if the Government wants to take credit for the jobs figures, it must also accept responsibility for interest rate rises.

"Mr Howard and (Treasurer Peter) Costello own responsibility for interest rates when they are going down, but not when they are going up," he said.

Dave R.