Australian labour market – evidence is mounting of policy sabotage driving the unemployment rate up

The Australian Bureau of Statistics (ABS) released the latest labour force data today (July 17, 2025) – Labour Force, Australia – for June 2025, which reveals that finally, the slack that the combination of the fiscal austerity and the high interest rates has created is feeding into the labour market as employment growth slows and the unemployment rate rises (by 0.2 points) to 4.3 per cent. The array of indicators now suggest that there is a systematic slowdown occurring in the labour market. Unemployment has now risen by 59.5 thousand or 0.4 points over the last 6 months as the fiscal position remains tight and the central bank holds interest rates at elevated levels. This is unnecessary policy sabotage – inflation began declining in December 2022 and is now at relatively stable and low levels – there is no reason for the government to be running contractionary policy stance. Underemployment also rose 0.1 point. The broad labour underutilisation rate (sum of unemployment and underemployment) rose to 10.3 per cent (up 0.3 points). It remains a fact that with 10.3 per cent of available labour not being used it is ludicrous to talk about Australia being close to full employment. There is substantial scope for more job creation given the slack that is present.

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How to break out of the commodification of everything

Regular readers will know that I run a bit, like lots. Last week, while I was in Europe, I decided to stay on Australian time, given the brevity of the mission, so I found myself running at midnight or just after awaking at 22:00 or 23:00 (after going to sleep around 14:00). It turned out to be a good strategy because the abnormally (scary) high temperatures during the day last week in Europe gave way to warm nights with just a hint of crispness in the air – perfect running conditions. Yesterday morning, though, I was in Melbourne, Australia and set off on my early run (around 7:00 being Sunday) and I was a bit tired from yesterday’s Parkrun in Newcastle. Yes, I move around a bit. This morning though, I saw more than the usual numbers out and about on the familiar running areas in the park lands of Melbourne and soon came across Run Melbourne, a large event with screaming speakers, ridiculous geeing-up announcers on microphones, and thousands of people blocking the usual serene early morning paths along the Yarra River. I had earlier been re-reading Chapter 13 of Harry Braverman’s colossal book from 1974 (which everyone should read) – Labor and Monopoly Capital: The Degradation of Work in the Twentieth Century – which was published by Monthly Review Press. The words of – Harry Braverman – came back to me as I tried to work out a way around yesterday morning’s mayhem down by the river.

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Treasurer, please sack the RBA governor and the Monetary Policy Board members – they have gone rogue

Once again the Reserve Bank of Australia has gone rogue. On Tuesday (July 8, 2025), it held its cash rate target (the interest rate that expresses its monetary policy stance) constant at 3.85 per cent despite all the indicators suggesting that it would cut that target rate. The financial markets are in uproar because they bet on the cut and will have lost money on a myriad of speculative bets based on that expectation. I don’t care about that. But what I care about is that the RBA decision continues to punish low-income mortgage holders and reward high income holders of financial assets, thus continuing one of the most pernicious redistributions of income in the history of our nation. Moreover, the logic expressed by the RBA indicates they really have no idea of what the reality of the situation is and are rather living in a world of fictional economics that reality has exposed to be false. The Treasurer should sack the Governor and her underlings as well as dismissing the Monetary Policy board who have, in my view, failed. Such systematic failures should require the RBA officials to be dismissed.

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The Eurozone Member States are not equivalent to currency-issuing governments in fiscal flexibility

I don’t have much time today for writing as I am travelling a lot on my way back from my short working trip to Europe. While I was away I had some excellent conversations with some senior European Commission economists who provided me with the latest Commission thinking on fiscal policy within the Eurozone and the attitude the Commission is taking to the macroeconomic surveillance and enforcement measures. It is a pity that some Modern Monetary Theory (MMT) colleagues didn’t have the same access. If they had they would not keep repeating the myth that for all intents and purposes the 20 Member States are no different to a currency issuing nation. Such a claim lacks an understanding of the institutional realities in Europe and unfortunately serves to give false hope to progressive forces who think that they can reform the dysfunctional architecture and the inbuilt neoliberalism to advance progressive ends. There is nearly zero possibility that such reform will be forthcoming and I despair that so much progressive energy is expended on such a lost cause.

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British Labour Government should ignore irrelevant fiscal ‘black holes’ and worry about the political hole it is digging for itself

The lack of correspondence arises when a government tries to operate within the tight constraints of unjustifiable fiscal rules by proposing legislation that cuts billions in government support for programs that are the difference between abject poverty for millions and a modest standard of living is once again coming to the fore in Britain. The Labour government is obsessed with achieving fiscal rules that are not only arbitrary but cannot be precisely assessed given the deficiencies in the available data and the forecasting techniques. However, the Chancellor tries to convince everybody that there is precision and that major austerity has to be imposed to fit the government fiscal outcomes within the arbitrary constraints they have imposed. Those constraints do not have any context in the things that matter – reducing disadvantage, dealing with inequality, climate change, health care etc. Yet the constant reference to a ‘black hole’ – the difference between the estimated fiscal trajectory and the fiscal rules constraint leads the government to ill-considered policy hacks aimed at keeping the outcomes within the rules. The visceral reaction against the hacks then leads to the situation we have seen in Britain recently, which further undermines the political viability of the government. The only hole that the government should be worried about is the political hole it is digging for itself as a result of its obsession with imprecisely measured and essentially irrelevant ‘black holes’.

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No blog post today – travelling all day

As the ballistic missiles between Iran and Qatar seem to have gone quiet for the time being I am making another attempt to get to Europe today for work commitments. Last week, my flights were cancelled due to the disruptions around Doha Airport. Anyway, fingers crossed. I will be back writing here again on Thursday, July 3, 2025. Here is some music to listen to while you are missing my posts (-:

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Australia – the inflation spike was transitory but central bankers hiked rates with only partial information

The Australian Bureau of Statistics (ABS) released the latest CPI data yesterday (June 26, 2025) – Monthly Consumer Price Index Indicator – for May 2025, which showed that the annual underlying inflation rate, which excludes volatile items continues to fall – from 2.4 per cent to 2.1 per cent. The trimmed mean rate (which the RBA monitors as part of the monetary policy deliberations) fell from 2.8 per cent to 2.4 per cent. All the measures that the ABS publish (including or excluding volatile items) are now well within the ABS’s inflation targetting range which is currently 2 to 3 per cent. What is now clear is that this inflationary episode was a transitory phenomenon and did not justify the heavy-handed way the central banks responded to it. On June 8, 2021, the UK Guardian published an Op Ed I wrote about inflation – Price rises should be short-lived – so let’s not resurrect inflation as a bogeyman. In that article, and in several other forums since – written, TV, radio, presentations at events – I articulated the narrative that the inflationary pressures were transitory and would abate without the need for interest rate increases or cut backs in net government spending. In the subsequent months, I received a lot of flack from fellow economists and those out in the Twitter-verse etc who sent me quotes from the likes of Larry Summers and other prominent main stream economists who claimed that interest rates would have to rise and government net spending cut to push up unemployment towards some conception they had of the NAIRU, where inflation would stabilise. I was also told that the emergence of the inflationary pressures signalled the death knell for Modern Monetary Theory (MMT) – the critics apparently had some idea that the pressures were caused by excessive government spending and slack monetary settings which demonstrated in their mind that this was proof that MMT policies were dangerous. The evidence is that this episode was nothing like the 1970s inflation.

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There will not be a fiscal crisis in Japan

The global financial press think they are finally on a winner (or should that be loser) when it comes to commentary about the Japanese economy. Over the last few years in the Covid-induced inflation, the Japanese inflation rate has now consolidated and it is safe to say that the era of deflation is over. Coupled with the government (and business) goal of driving faster nominal wages growth to provide some real gains to offset the long period of wage stagnation and real wage cuts, it is unlikely that Japan will return to the chronic deflation, which has defined the long period since the asset bubble collapsed in the early 1990s. It thus comes as no surprise that longer-term bond yields have risen somewhat. But apparently this spells major problems for the Japanese government. I disagree and this is why.

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The Smith Family MMT Manga is back – Episode 1 for Season 3 is now available

It’s back. Season 3 of the – The Smith Family and their Adventures with Money – produced by MMTed begins today (June 20, 2025) and will run for the next 12 months, with episodes updated every month. The recession has deepened and the government is in chaos, with its chief advisor Professor Raul Noitawl insisting that more austerity is required to bring down the ‘debt mountain’. Ryan has now been unemployed for months and in desperation has reviewed his world view with shocking results. And to make matters worse, a major sovereign ratings agency downgrades the government debt from A to the lowest rating C. A lot of misinformation follows but sharp as a tack journo Mary Winter knows the reality and confronts the Prime Minister with the evidence. More shocking developments will unfold as the season continues.

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Australian Labour Market – steady but signs of a deterioration

The Australian Bureau of Statistics (ABS) released the latest labour force data today (June 19, 2025) – Labour Force, Australia – for May 2025, which revealed that the unemployment rate remained unchanged at 4.1 per cent for the second consecutive month. There was a small decrease in overall employment (-2,500) which was offset by a 0.1 point decline in the participation rate, The net effect was a small decline in official unemployment (-2,600) and a stable unemployment rate. Whether the fall in employment and participation is a signal of a significant slowdown in the coming months is unclear at this stage. Monthly data fluctuates up and down. There was a 1.3 per cent rise in monthly hours worked and significant growth in full-time employment which blurs an easy interpretation of the other changes. Underemployment also fell 0.1 point growth. The broad labour underutilisation rate (sum of unemployment and underemployment) fell to 10 per cent (down 0.1 point) on the back of the declining underemployment. It remains a fact that with 10 per cent of available labour not being used it is ludicrous to talk about Australia being close to full employment. There is substantial scope for more job creation given the slack that is present.

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