SYDNEY: Australia's unemployment rate jumped to a more than 12 year high of 6.4 percent in January, official data showed Thursday, and providing further ammunition for the central bank to cut interest rates.

Economists had been expecting a rise to 6.2 percent from December's 6.1 percent but with the number of people employed falling by 12,200 it was worse than expected, at a level not seen since August 2002.

The Australian Bureau of Statistics said full time employment dropped 28,100 in January and part time employment was up 15,900.

The weaker reading saw the Australian dollar plunge to near six year lows of 76.56 US cents after the figures were released, from 77.26 US cents prior.

The central bank last week cut forecasts for 2015 economic growth and inflation and warned unemployment would likely rise as the economy transitions away from a mining investment boom.

The caution followed a cut in interest rates this month to a record low of 2.25 percent.

They had previously been on hold for a year and a half.

ANZ senior economist Riki Polygenis said the jobless numbers were worse than feared.

"The rise in the unemployment rate to 6.4 percent suggests the surprise decrease to 6.1 percent in December was an outlier, with the unemployment rate continuing to track up in trend terms," he said.

"While new labour demand is holding up, it is not enough at present to offset retrenchments in particular industries such as mining and manufacturing or to keep up with the flow of new workers into the economy."

The weakness left the door open to more rate cuts, he added.

"We expect a further rate cut in (the first half of) 2015, most likely at the next board meeting in March."

Quay Equities head of trading Tristan K'Nell agreed that another rate cut was on the cards.

APP