The jobless rate fell in August as employers took on new staff, helping to power the economy's expansion and reviving expectations interest rates might increase before the year is out.

The unemployment rate declined to 5.1 per cent last month, from 5.3 per cent in July, according to the Australian Bureau of Statistics. Analysts had tipped a fall to 5.2 per cent.

The data show that 53,100 full-time jobs were created in August - the biggest monthly increase in more than two years.

The number of part-time jobs dropped by 22,100. That gives a net gain of 30,900.

The dollar jumped more than half a US cent on the news to as high as 92.38 US cents, its highest level in four months.

The latest jobs figures come the same week the Reserve Bank kept interest rates steady for the fourth consecutive month, amid positive second-quarter economic growth.

However, ICAP economic Adam Carr said the strong reading meant the Reserve Bank was likely to raise interest rates before the end of the year: "I don't think it will be hiking before November. He said the central bank would most likely want to see more retail trade and inflation data before moving.

"It's clear the election didn't drive the (unemployment) numbers. This is permanent job growth and it shows the Australian economy is on a strong footing"

Gross domestic product increased 1.2 per cent in the second quarter from 0.7 per cent in the first quarter, data revealed last week showed.

More recent signs of a pick up in demand include home loans data, which rose 1.7 per cent in July, the second positive month in the past three. Australia’s trade balance remained in surplus to the tune of $1.88 billion in July, while building approvals turned positive for the first time in three months.

So far, the strength of Australia’s jobs market has failed to trigger an outbreak of inflation, despite cashed-up companies and a shortage of workers. Second-quarter inflation slipped to 0.6 per cent in the June quarter from 0.9 per cent in March.

czappone@fairfax.com.au