Financial markets are pricing in a greater risk of an official interest rate rise next month after being stunned by the jobless rate falling to its lowest level in almost a year.
Unemployment dropped to 5.3 per cent in January data released on Thursday as the number of people employed jumped by a staggering 52,700, the largest monthly increase since December 2006.
Economists had been predicting a rise in the unemployment rate to 5.6 per cent after the surprising fall to 5.5 per cent in December, while employment was forecast to rise by just 15,000.
Macquarie Research economist Ben Dinte said the jobs data "will place further pressure on the RBA to raise rates when they meet in March".
Commonwealth Securities chief economist Craig James says the jobs figures appear to show the economy is `going gangbusters'.
Employment Minister Julia Gillard said the data again showed the importance of the government's economic stimulus package in supporting jobs.
The opposition, which has long been arguing for the stimulus spending to end, said the report was another sign that it needed to stop.
"This signals the end of the recession rhetoric and it must be the end of the recession spending," Mr Hockey told reporters in Canberra.
Treasury Secretary Ken Henry said it was safe to say the global financial crisis had passed, but warned that financial markets could still face further "adverse shocks".
But while the government continued to praise the importance of its government stimulus, Dr Henry told a Senate estimates committee his department had not been able to determine one factor that had been most significant in helping avoiding a recession.
"We have some confidence that the fiscal policy was quite significantly important," he told the Senate hearing.
But the monetary policy response was also important, as was the performance of the Australian dollar, while demand from China for Australia's resources was "particularly important".
He said the opposition's argument that the government's rising debt level was putting upward pressure on interest rates was an "oversimplification of economic understanding of these matters".
When government debt was being repaid earlier this decade, interest rates were steadily climbing, he said.
"Fiscal circumstances improve as the economy strengthens. As the economy strengthens, other things being equal, there's increasing upward pressure on prices, and monetary policy responds to that," he explained.
Dr Henry said Treasury would not be updating its economic forecasts prior to the budget.
The latest jobs numbers indicate its employment forecasts in the Mid-year Economic and Fiscal were overly pessimistic having forecast a peak in the unemployment rate of 6.75 per cent by June next year.
But Treasury's macroeconomic group executive director David Gruen was reluctant to say whether jobless rate had peaked.
"But it is remarkable to be at where we are now in early 2010 with the unemployment rate ... having been a numbering with a five in front of it, given that the US unemployment rate is slightly below 10 (per cent)," Dr Gruen told the Senate committee prior to the release of the jobs data.
But NAB Capital chief economist Rob Henderson said the report confirmed that unemployment peaked at 5.8 per cent in 2009 and the dip was the delayed effect of a strong economy in the second half of 2009.
The Reserve Bank of Australia unexpectedly left the cash rate unchanged last week but warned that further rate increases were likely as the economy recovered.
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