Australian labour market – stronger employment growth in August demonstrates how ineffective monetary policy is

Today, the Australian Bureau of Statistics released the latest – Labour Force, Australia – for August 2023 today (September 14, 2023). Employment growth was strong in August and kept pace with the underlying population growth and the participation rise so that unemployment remained steady. The weaker result in July was probably mostly reflecting the rotation in the sample. However, there are now 10.2 per cent of the available and willing working age population who are being wasted in one way or another – either unemployed or underemployed. That extent of idle labour means Australia is not at full employment despite the claims by the mainstream commentators. The other point is that the relatively steady unemployment rate indicates how ineffective monetary policy has been, given the RBA’s intention to push unemployment up to 4.5 per cent through a sequence of interest rate rises since May 2022. Unemployment has barely budged.

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Capitalist wants government to drive up unemployment by 40-50 per cent and inflict more ‘pain in the economy’ on workers

Two items this Wednesday before the music segment. First, we saw the stark ideology of the elites on full display in Sydney yesterday with a property developer demanding the government increase unemployment by 40-50 per cent to show the workers that the employer is boss and redistribute more national income back to profits. For anyone who doubts the relevance of a framework based on underlying class conflict between labour and capital, then this outburst should eliminate those doubts. On the same day, a leading research group in the welfare sector released an update in their series tracing poverty in Australia. It demonstrated a rising incidence of poverty (nearly 20 per cent of the population) and 1 in 6 children living in impoverished conditions. And the profit takers want more of that to enrich (engorge) themselves even further. A shocking indictment of what has gone wrong with this nation.

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The Chilean coup just one link in a complicated right-wing economics agenda to empower capital

Several related strands have come together in the last week of work and thinking. Today (September 11, 2023), of course, is a massive day in history and I am not referring to the year 2001. Today marks the 50th anniversary of the overthrow of the Salvatore Allende’s democratically-elected government in Chile by the US CIA and there local puppets under the leadership of General – Augusto Pinochet. I have also been following a trail of the antecedents of the Powell Manifesto (thanks to Jonathan for a tip), which helps understand how the neoliberals infested every institution in the US and beyond. And the Chilean coup d’état in 1973 was followed by – Operation Condor – which together with the coup demonstrated the principle terrorist organisation in the world has been the US government and its agencies. Tracking the Powell trail also took me to old research about the so-called ‘Manne Programs in Economics for Federal Judges’ – which was a program mostly taught by Chicago School economists that indoctrinated US judges into free market economic thinking and has distorted US judicial decisions ever since. And the circle closes when we investigate the role played by the so-called – Chicago Boys – who were Chilean PhD graduates from that school, who went back to Chile and ravaged the prosperity of the people with their extreme neoliberal ideas. All interlinked events on the path to global neoliberal domination. History is worth studying and it is striking how interrelated all these things are that have come together in my work the last week or so.

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The tax extreme wealth to increase funds for government spending narrative just reinforces neoliberal framing

Despite the rabble on the Right of politics that marches around driven by conspiracies about government chips in the water supply or Covid vaccines and all the rest of the rot that lot carry on with, the reality is that the well-funded Right that is entrenched in the deepest echelons of capital are extremely well organised and strategic, which is why the dominant ideology reflects their preferences. That group appears to be able to maintain a united front which solidifies their effectiveness. By way of contrast, the Left is poorly funded, but more importantly, divided and on important matters appears incapable of breaking free from the fictions and framing that the Right have introduced to further their own agenda. So, the Left is often pursuing causes that appear to be ‘progressive’ and which warm their hearts, but which in reality are just reinforcing the framing that advance the interests of the Right. We saw that again this week with the emergence of the Tax Extreme Wealth movement and with the release of their open letter to the G20 Heads of State – G20 Leaders must tax extreme wealth. This is the work of a group which includes the so-called Patriotic Millionaires, Oxfam, Millionaires for Humanity, Earth4All and the Institute for Policy Studies. It demonstrates perfectly how these progressive movements advance dialogue and framing which actually end up undermining their own ambitions.

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Australia national accounts – growth continues to be sluggish as material living standards decline

Today (September 6, 2023), the Australian Bureau of Statistics released the latest – Australian National Accounts: National Income, Expenditure and Product, June 2023 – which shows that the Australian economy grew by just 0.4 per cent in the June-quarter 2023 and by 2.1 per cent over the 12 months. If we extend the June result out over the year then GDP will grow by 0.8 per cent, well below the rate required to keep unemployment from rising. GDP per capita fell by 0.3 per cent and Real net national disposable income fell by 1.4 per cent – a measure of how far material living standards declined. Households cut back further on consumption expenditure while at the same time saving less relative to their disposable income in an effort to maintain consumption growth in the face of rising interest rates and temporary inflationary pressures. The result also shows that the RBA’s attempts to engineer a recession are so far failing which tells us about the ineffectiveness of monetary policy.

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US labour market – unemployment rises on back of rising participation rate

Last Friday (September 1, 2023), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – August 2023 – which showed payroll employment rising by 187,000 but also that the unemployment rate has now starting rising (up 0.3 points) to 3.8 per cent. Is this the tipping point? I am very uncertain given the surprisingly large burst in participation which accounts almost entirely for the rise in unemployment and the unemployment rate. Most of the other aggregates were relatively stable which is why I am expressing uncertainty in my assessment. However, there is no sign of recession and no sign that the misguided Federal Reserve interest rate rises are causing rises in unemployment. Powell could hardly take credit for the rising participation rate unless he argued that he had created such desperation that people who normally do not work sought work. A stretch!

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The Ireland growth miracle is largely illusory and biasing Eurozone growth data upwards

I have been avoiding keeping up-to-date with the Irish national accounts over the last several years for reasons that I documented in this blog post – Ireland – not as rosy as the official story might suggest (January 2, 2018). Ireland has been held out as the poster nation for the Eurozone boosters because of its seemingly ‘impressive’ growth performance after entry into the common currency and its resilience after the Global Financial Crisis. During the GFC, I wrote a series of blog posts (see below) that delved into reality of the Irish situation and we learned that the so-called ‘Celtic Tiger’ growth miracle was an illusion and was driven by major US corporations evading US tax liabilities by exploiting massive tax breaks supplied to them by the Irish government. Since then the ‘smoke and mirrors’ have become even more obvious as the Irish national accounts recorded massive increases in business investment all due to fudges in the way several large corporations recorded their tax affairs. I decided recently to see where this was at given the European Commission is still claiming that growth. What I found was that the distortions in the Irish data are influencing the outcomes reported for the European Union as a whole and things are definitely not as robust as the official figures demonstrate.

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Inflation in Australia falling sharply while the US labour demand collapses

Yesterday (August 29, 2023), the incoming Reserve Bank of Australia governor was confronted with ‘activists’ as she prepared to present to an audience at the Australian National University in Canberra. They presented her with an application for unemployment benefits and had done her the favour of already filling it in with her name. It was in response to her dreadful speech in June where she said the RBA was intent on pushing the unemployment rate up to 4.5 per cent (from 3.5), which means that around 140,000 workers will be forced out of work. The problem is that even if we believed the logic underpinning such an aspiration, the actual empirical evidence doesn’t support the conclusion. Today August 30, 2023, we received more evidence of that as the Australian Bureau of Statistics (ABS) released the latest – Monthly Consumer Price Index Indicator – for July 2023, which showed a sharp drop in inflation. As well as considering that data, today I reflect on the latest JOLTS data that was released by the US Bureau of Labor Statistics yesterday. The two considerations are complementary and demonstrate that central bankers in Australia and the US have lost the plot. To soothe our souls after all that we remember a great musician who died recently.

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Another mythical intergenerational report from the Australian Treasury

In my most recent podcast – Letter from The Cape Podcast – Episode 14 – I provided a brief introductino to why economic reports that project fiscal crises based on ageing population estimates miss the point and bias policy to making the actual problem worse. Today, I will provide more detail on that theme. Last week (August 24, 2023), the Government via the Treasury released its – 2023 Intergenerational Report – which purports to project “the outlook of the economy and the Australian Government’s budget to 2062-63”. It commands centre stage in the public debate and journalists use many column inches reporting on it. Unfortunately, it is a confection of lies, half-truths interspersed with irrelevancies and sometimes some interesting facts. Usually, these reports (the 2023 edition is the 6th since this farcical exercise began in the 1998) are a waste of time and effort.

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