The Reserve Bank is pinning its hope on an improvement in the jobs market on interest rate cuts boosting the construction sector.
In a sign more rate cuts are on the agenda, deputy governor Philip Lowe used a speech in Tasmania this morning to argue that the overall jobs market, while softening, was still in relatively good shape.
But he admitted that there was some pain, particularly for those areas not directly connected to the mining sector.
Dr Lowe highlighted bureau of statistics figures showing a 70,000 fall in total employment in the construction sector over the past year.
Those same figures also reveal a 50,000 fall in public administration, a deterioration Dr Lowe said was due to governments cutting worker numbers to deal with budget pressures.
According to Dr Lowe, the weakness in construction, particularly in new homes, was one of the biggest economic surprises facing the bank.
He said with the peak in mining investment "now coming into view", the hope was that sectors such as construction would start to improve.
"A pick-up in construction activity is one of the factors that could provide an offset to the eventual moderation in the current very high level of investment in the resources sector," he said.
"A pick-up in other forms of investment could also play this role."
The bank last week cut official interest rates, in part due to concerns about the slowing in the mining sector and the headwinds flowing from overseas.
Markets put the chance of a follow-up cut on Melbourne Cup Day at better than 80 per cent.
Dr Lowe said maintaining a flexible workforce would be important in Australia adapting to future economic opportunities that came as Asia developed.
However, he said the focus should be on maintaining a "well-trained workforce" that could shift into areas such as high-end manufacturing, high-quality food and professional services.
Dr Lowe said the mining boom had helped cut unemployment in regions well away from Queensland’s coal mines or WA’s iron ore deposits.
He said demand for workers in the mining sector has had a positive effect on the employment rate nationwide.
Even though industries like manufacturing and construction had struggled in recent years, there had been relatively little variation in the unemployment rate across the country, he said.
Half of Australia’s 68 regions have an unemployment rate of below 5 per cent, he said, while only three had an unemployment rate of above 8 per cent.
"The overall impression from the various facts and figures is that the labour market has coped reasonably well with the significant changes taking place in the Australian economy,” Dr Lowe said.
Australia’s national unemployment rate is currently sitting at 5.1 per cent, although the RBA believes the jobs market has weakened recently.
Dr Lowe said the rise of a fly-in, fly-out workforce for the mines had helped keep the unemployment rate low in a number of regions.