SYDNEY (AFP) -- Australia's unemployment rate fell 0.2 points to a fresh 33-year low of 4.2 percent in May, sparking renewed fears of an interest rate rise, economists said.

The Australian Bureau of Statistics (ABS) said employment rose a seasonally adjusted 39,400 in May, eclipsing market expectations of a 10,000 increase.

Full-time employment led the way, up 66,800, while part-time employment was down 27,400.

The figures, which are expected to increase the likelihood of an interest rate rise by the end of the year, sent the Australian dollar to an 18-year high of 84.63 U.S. cents.

Stronger-than expected March quarter economic growth figures of 1.6 percent released Wednesday were also seen by analysts as raising the chances of an interest rate hike.

ANZ Bank head of Australian economics Tony Pearson said the jobs figures were "red hot" and would be difficult for the Reserve Bank of Australia to ignore.

"The Reserve Bank has been resolutely on hold since November because of muted price and wage pressures," he said. "However, its confidence that this benign inflation story will last must now be beginning to waiver given above-trend economic growth and a demand for labor that shows no sign of waning."

The central bank has left rates at 6.25 percent since November after three hikes in 2006.

It would normally shy away from a politically sensitive rate rise ahead of Australia's general election, which is due before the end of the year, but economists saw recent data is making a compelling case for a further tightening.