By Anhar Khanbhai

Australia’s unemployment rate fell to 5.1% in January, reducing the chance of further interest rate cuts by the Reserve Bank of Australia in the next few months.

Payrolls rose by 46,300 last month, the most since November 2010, after a revised drop in December of 35,600, new ABS figures showed.

The better jobs figure surprised most economists, who had expected the unemployment rate to increase to 5.3% and the number of employed Australians to increase by only 10,000.

The central bank lowered the rate at back-to-back meetings last quarter as Europe’s sovereign debt crisis weakened prospects for global growth.

In further good news, the ABS said the participation rate, which is the fraction of working-age people at work or seeking it, rose to 65.3% in January from 65.2% in December 2011.

The number of people in full-time work rose 12,300 to 8.1m in January, while the number of people in part-time work rose 34,000 to 3.4m.

The RBA left official interest rates on hold earlier this month, also wrong-footing economists who had expected the central bank to cut.

January's unemployment rate fell to the lowest level since July 2011, the official figures showed.