HOMEOWNERS have been told to brace for a possible string of rate rises this year after the latest jobs data managed to surprise even the most optimistic economists.

The jobless rate unexpectedly fell to 5.5 per cent in December, according to ABS data released on Thursday - the market had expected it would remain steady or rise slightly.

The jobs figures were buoyed by the creation of 35,200 new jobs - mostly part-time positions.

But the positive result is likely to have unwelcome repercussions for homeowners, now facing their fourth consecutive rate hike when the Reserve Bank board meets in February.

An interest rate rise next month was now "a sure thing, and we're probably looking at a March hike as well", CommSec economist Savanth Sebastian said.

"If you look at the amount of jobs created just in December, that's the best result we've seen in three years," he said.

"The Reserve Bank will be well aware of that and that's why a rate hike, or at least a couple of rate rises are on the cards."

Part-time jobs increased by a stunning 27,900 in the Christmas month, while full-time positions went up by 7,300.

Queensland led the gains in employment, with the creation of 3,700 jobs alone.

It helped deliver Australia's strongest quarter of jobs growth in five years, prompting calls for the government to revise down its unemployment forecast of 6.75 per cent by mid-2010.

Mr Sebastian said it was obvious the jobless peak had been and gone.

"The Reserve Bank is putting a lot more weight behind its business liaisons and from what we're hearing, the anecdotal evidence is that confidence is up, they're rehiring, they're a bit more optimistic," he said.

The building sector recorded a fall in the December quarter according to Master Builders, but said the result was still better than hoped for, with profits expected to rise again over the next six months.

Business confidence - at its highest level since February 2005, according to a Roy Morgan poll - also suggests the Australian economy is in recovery mode.

But Employment Minister Julia Gillard said the government was sticking to its unemployment forecast - although she got the number wrong.

"The new treasury projection is for unemployment to go to 6.5 per cent by the middle of this year," she said, rather than 6.75 per cent.

Earlier this week, Assistant Treasurer Nick Sherry repeatedly said unemployment would reach "just over eight per cent in the second half of this year".

A spokesman later blamed the bungle on the fact Senator Sherry had recently quit smoking and was suffering from a cough, chest infection and withdrawal symptoms.

The opposition, meanwhile, has jumped on Thursday's figures - Australia's fourth consecutive monthly fall in unemployment - to call on the government to wind back its stimulus measures.

But Ms Gillard was sticking to her guns.

"Clearly this figure 5.5 per cent is further evidence that Australia's economy is beating the world," she said.

"But, of course, these figures are also telling us that there are 640,000 odd Australians out of work now and around 118,000 more Australians out of work now than were this time last year.

"So there's still work to do, supporting jobs and getting people back into work."