Australian labour market – slight improvement but uncertainty continues

The Australian Bureau of Statistics (ABS) released the latest labour force data today (August 14, 2025) – Labour Force, Australia – for July 2025, which reveals that last month’s gloom might not have been the start of a downward trend. The current data has blurred that outlook and the best we can say is that the future is uncertain. The virtuous three were evident this month: rising employment (particularly full-time), constant participation, and falling unemployment. Underemployment also fell 0.1 point as a result of the strong full-time employment result. It remains a fact that with 10.1 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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Australian workers get modest real wage gains in latest data – finally

Yesterday, the Reserve Bank of Australia finally lowered interest rates some months after it became clear the economy is slowing and the labour market is getting weaker. The RBA remain fixated on their claims that wages growth is too high. In yesterday’s – Statement by the Monetary Policy Board: Monetary Policy Decision ((August 12, 2025) – they claimed that the “labour market remains a little tight” and that “Measures of labour underutilisation nevertheless remain at low rates” – which must be them rehearsing for careers as comedians. Unemployment is rising quickly and the broad underutilisation rate was at 10.3 per cent. So for the RBA having 10.3 per cent of available labour not being used in one way or another is a ‘low rate’. Extraordinary. Anyway today (May 14, 2025), the Australian Bureau of Statistics released the latest – Wage Price Index, Australia – for the June-quarter 2025, which shows that the aggregate wage index rose by 3.4 per cent over the 12 months and is steady. The June-quarter 2025 nominal wage growth outpaced the standard inflationary measures. While most commentators will focus on the nominal wages growth relative to CPI movements, the more accurate estimate of the cost-of-living change is the Employee Selected Living Cost Index, which is still running well above the CPI change. Using that measure, purchasing power of the nominal wages grew modestly in the June-quarter after several quarters of zero or negative growth. However, there is no wages breakout evident. And while the RBA are fixated on low productivity, they fail to demand more investment from the business community which is the main reason for lagging productivity.

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What does it mean for a nation to become bankrupt?

The reason I ask that question is because I read in the UK Guardian article yesterday (published August 11, 2025) – As dark financial clouds gather, Labour has to heed its past: when it chooses austerity, it loses elections – that “Britain is in danger of going bankrupt. It may happen slowly or quickly, but since Labour took office this possibility has increasingly been promoted and discussed in the press, by opposition parties and in the City of London”. And when the author of that article poses his own question: “What exact form will this bankruptcy take?” – he offers the rather tepid response that it will happen because the government is “spending too much, generally on people who have little”, which offers nothing by way of clarification or definitiveness. So it is useful to interrogate the notion of a nation going broke. Can it happen? Can Britain become insolvent?

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The British government’s obsession with the fiscal rules is driving the economy towards recession

The UK economy is heading into a malaise. The latest news – UK construction activity in July falls at steepest rate since Covid (August 6, 2025) – and – UK services sector has biggest fall in orders for nearly three years (August 5, 2025) – confirms that there is a slowdown underway. That was prefaced by rising unemployment and falling overall GDP growth in previous data releases. However, when we examine statements coming from the Labour government, the Prime Minister is hinting that there might be tax rises in the Autumn Statement because a neoliberal oriented ‘think tank’ has told it that there is a £40 billion gap in the fiscal outcomes, which will breach the self-imposed limits specified in their fiscal rules. So the Government is contemplating more austerity and contractionary policy at a time when private spending is subdued and the economy is going backwards. It just demonstrates how the obsession with these fiscal rules grossly distorts fiscal decision making and focuses government eyes on all the wrong things. I am still amazed when I think how stupid we all have become for thinking that any of the stuff is acceptable.

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The so-called ‘land of the free’ is now a failed state and heading towards totalitarianism

Last Friday (August 1, 2025), the US Bureau of Labor Statistics published their latest – Employment Situation Summary – for July 2025. What followed was somewhat extraordinary. The data and the revisions to the previous two months data releases (which is standard practice) showed that the US labour market is in decline. It starkly runs counter to the official Trump narrative that the US is booming. While we don’t have enough evidence to really establish causality – it is likely (based on theoretical conjecture) that the highly volatile policy regime that Trump runs and his tariff flip flops is undermining the confidence in the economy. We need a few more months of data yet before we can be sure. But the BLS results certainly support the view that Trump’s economic policies are not working to advantage the American public. The extraordinary thing was that Trump then sacked the BLS head and signalled a further descent towards totalitarianism.

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Major shifts in sentiment within Japan as they try to escape the cost-cutting excess profits mindset

This week (July 29, 2025), the Cabinet Office in Tokyo released the Economic and Fiscal Report – 年次経済財政報告 – which is a comprehensive statement of where the Economic and Fiscal Policy Ministry thinks the Japanese economy is going and the challenges it faces. It is a long and very thorough document. But like many official documents that the Japanese government publishes, it reads quite unlike what other governments that are sort of in IMF-spin mode pump out. The fundamental takeaway from reading the Report is that the Japanese government is still uncertain about whether the country has evolved out of its deflationary mindset and become a ‘growth-oriented’ nation driven by real wages growth. There is certainly criticism (implied in the Japanese fashion) for corporations sitting on large cash assets who are underinvesting in local productive capital. But the overwhelming hope of the government is that the nascent wage increases that have been offered mostly by the large major corporations continue and spread throughout the economy into the dominant small and medium enterprises. Most governments are still in the corporate cost-cutting mindset – thinking that is somehow how productivity and improved material well-being will occur. So their foci is on deregulation and attacking trade unions and that sort of ‘supply side’ nonsense. The Japanese government is firmly banking on a consumer-led, domestic economy growth strategy fostered by extensive wage rises outstripping the growth in prices.

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Inflation continuing to fall in Australia further exposing the incompetence of our central bank

The Australian Bureau of Statistics (ABS) released the latest – Consumer Price Index, Australia – for the June-quarter 2025 today (July 30, 2025). The quarterly data showed that the inflation rate rose by 0.7 points in the quarter but over the 12 months and on an annual basis fell from 2.4 per cent to 2.1 per cent. However, the monthly measure for June 2025 shows annual inflation at 1.9 per cent – which the RBA should be stating is ‘too low’ given the lower bound of their targetting range is 2 per cent. The inflation rate has been within the RBA’s inflation targeting range for four successive quarters and inflationary expectations are falling or benigh. There are no significant wage pressures evident. Using the RBA’s own logic, its policy interest rate should now be cut.

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State level fire services need to be adequately funded – land tax hikes are necessary and progressive

In my commissioned research activities, which are separate from the basic academic research that occupies most of my time, I come across interesting situations which bear on the way monetary systems operate and the type of constraints faced by different levels of government. In Australia, we have three levels of government: Federal (currency issuer), State and Territories (currency users), and Local government (currency users). Our constitution also confers the major spending responsibilities – education, health, transport, etc on the states and territories despite them having few legal means to raise revenue, which has been a major problem since Federation. If one then embeds that constitutional fact into the fictional mainstream economics narrative that says the currency-issuing federal government is financially constrained in its spending like a household, public debt becomes a media issue. After the pandemic, the federal and state governments were left with significant increases in debt liabilities that has led the state governments to impose austerity cuts and hike taxes. The Victorian state government has recently hiked a levy on land ostensibly to provide extra funding for emergency services. The problem is that the campaign against this tax hike is bringing together an array of anti-progressive elements who just want a change of government. Their campaign, which is roping in progressives who don’t seem to understand the issues, cannot answer how the fire services, which have been underfunded for years as a result of an austerity mindset and facing major equipment deficits and wage demands, will be able to provide adequate services with such a tax hike. The land tax is a progressive tax and the best source of revenue to improve the fire services which are essential to the community. Once again the buy-in to the anti-tax campaign is a case of progressives shooting themselves in the foot.

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The Smith Family MMT Manga – Episode 2 for Season 3 is now available

Season 3 of the – The Smith Family and their Adventures with Money – produced by MMTed continues today (July 24, 2025). Ryan lost his job in the recession and went to pieces, drinking too much and gambling the family funds away. Elizabeth kicked him out and now, with a new mission, he has asked Elizabeth for another chance. His unemployment forced him to shift his world view and reject the austerity logic of Professor Raul Noitawl, who he had previously considered infallible. Meanwhile, banker Chris is now working a the chief policy advisor to the Opposition in the lead up to the national election and he assembles at Elizabeth’s house to discuss the Job Guarantee with Kevin and his friends. They have a lot to learn.

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The report of the Special Envoy to Combat Antisemitism in Australia should be categorically rejected by government

In July 2024, as a knee jerk reaction to pressure being put on it by powerful lobby groups in Australia, the Federal Government created a Special Envoy to Combat Antisemitism. After it was pointed out that this seemed an odd creation, especially given that Australia has relatively strong racial discrimination and laws that protect freedom of religion, and that other definable ethnic/religious groups were also regularly in the firing line of abuse (for example, Muslims and First Nations peoples), the Government then (with a lag of a few months) created a Special Enjoy to Combat Islamophobia. Both creations are poor policy. On July 10, 2025, the Antisemitism Envoy delivered a major report, which, if the recommendations are implemented will become a major threat to academic and artistic freedom and do nothing to advance world peace and harmony. Quite the opposite. I have been reluctant to discuss the atrocity that is now entrenched in the Middle East as a result of the actions of the Israel government. But the release of this Report and subsequent news coverage that I saw in Doha recently (while transiting) of the starvation of people (especially little children) has led me to this blog post. If the Report’s recommendations are implemented by the Government, such a blog post will probably open me to prosecution as an anti-Semite, which would be a preposterous accusation, and just shows how flawed the path we are taking to these issues has become.

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