Govt economic plan is working: Cormann

Colin Brinsden, AAP Economics Correspondent
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Mathias Cormann says the government's economic agenda is focused on stronger growth and more jobs

Finance Minister Mathias Cormann insists the latest jobs figures clearly show the Turnbull government's economic plan is working after the unemployment rate unexpectedly sank to 5.4 per cent, the lowest level this year.

A further 12,000 Australians found work in May, building on a revised 18,400 increase in April when the one million-mark was crossed for new jobs secured since the coalition came to power in September 2013.

"Our economic agenda is focused on delivering stronger growth and more jobs and it is clear that our agenda has been successful so far," Senator Cormann told reporters in Sydney on Thursday.

He said the next instalment of that plan will come before the Senate over the next parliamentary sitting fortnight when senators can vote for income tax relief for hardworking Australian families and back a competitive company tax rate to protect investment and jobs.

Both the remainder of the government's 10-year business tax plan and it multi-phased, seven-year personal income tax package are due to be voted on in the upper house.

While fewer Australians found employment than had been expected by economists, the drop in the unemployment rate from 5.6 per cent in April was a surprise and partly reflected a fall in the number seeking employment.

The employment rise reflected a 32,600 jump in part-time workers that was partly offset by a 20,600 drop in full-time staff.

The result does not change the interest rate outlook.

"Interest rates will remain on hold until there is firm evidence that skill shortages are leading to broader-based increases in wages," Commonwealth Securities chief economist Craig James said.

It means the Reserve Bank won't be about to join the US Federal Reserve, which lifted its key rate for the seventh time in the past few years on Wednesday.

Reserve Bank governor Philip Lowe said in a speech on Wednesday conventional wisdom puts full employment in Australia at around a five per cent unemployment rate.

Dr Lowe believes it is possible an even lower rate could be achieved if the five per cent mark is approached at a steady pace, rather than too quickly.

"In a number of other countries, estimates of the unemployment rate associated with full employment are being revised lower as wage increases remain subdued at low rates of unemployment," he told the Australian Industry Group lunch.

"We have an open mind as to whether this might turn out to be the case here in Australia too."