Australian labour market – rebound after weak month but 10 per cent of available and willing labour remain idle

The Australian Bureau of Statistics (ABS) released of the latest labour force data today (June 15, 2023) – Labour Force, Australia – for May 2023. The May result reverses two consecutive months of weaker results from the Labour Force survey. Employment rose by 75.9 thousand (a strong monthly result), participation rose by 0.1 point to a record high, and unemployment fell by 16,500. But one month is not a trend and it should be emphasised that there are 10 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 really close to full employment despite the claims by the mainstream commentators. I am waiting for the RBA governor to claim the fall in the unemployment rate justifies further interest rate increases. It doesn’t but since when has logic and facts got in the road of his agenda.

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US inflation falling fast, while in Australia the top-end-of-town are partying on massive salary increases

It’s Wednesday and as usual I consider a few topics in less depth than a single blog post, as a precursor to the music segment. Yesterday’s US inflation data from the Bureau of Labor Statistics (June 13, 2023) – Consumer Price Index Summary – May 2023 – shows a further significant drop in the inflation rate as some of the key supply-side drivers continue to abate. All the data is pointing to the fact that the US Federal Reserve’s logic is deeply flawed and not fit for purpose. Today, I also discuss the latest data on remuneration from Australia which shows that while corporate bosses have been urging wage setting processes in Australia to suppress the growth in wages for workers, an argument also used by the RBA governor recently, the bosses themselves have been getting massive nominal salary growth and increasing their purchasing power by a mutiple of the inflation rate. Modern day capitalism.

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Australia minimum wage decision 2023 – some relief for lowest paid but real cuts for others

On June 2, 2023 Australia’s minimum wage setting authority – the Fair Work Commission (FWC) issued their decision in the – Annual Wage Review 2022-23 – which provides for wage increases for the lowest-paid workers – around 0.7 per cent of employees (around 75 thousand) in Australia. In turn, around 20.5 per cent of all employees, who are on the lowest tier of their pay award (grade) receive a flow-on effect. The FWC determined that sought to protect the real living standards of the lowest-paid workers in the nation after receiving a ‘direction’ from the new Federal Labor Government to do so. While the small number of workers who actually receive the FMW were largely protected from the current inflation-erosion of their purchasing power (although not compensated for losses over the last year), the larger group of workers on statutory awards who earn the minimum award rate went backwards in real terms as a result of the decision. The major employer groups argued for very low nominal rises, while at the same, as they are enjoying booming profits. A scandalous indictment of our system.

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RBA governor’s ‘Qu’ils mangent de la brioche’ moments of disdain

The RBA governor had a few ‘Qu’ils mangent de la brioche’ moments in the last week when he responded to criticisms that his manic interest rate increasing behaviour is driving low-income families into crisis by, first, saying that people who couldn’t find cheap housing should move back with their parents. Then he followed that with the recommendation that people should work harder and get second jobs if they couldn’t make ends meet as a consequences of the squeeze on their mortgage payments from the RBA’s monetary policy changes. Nice. This is an extraordinary period of policy chaos – we have an out-of-control central bank pushing rates up and using various ruses (chasing shadows) to justify the hikes, when inflation is falling anyway for reasons unconnected to the monetary policy shifts. All the RBA will succeed in doing is increasing unemployment and misery. The unemployed will ultimately bear the brunt of this chaotic policy period. But then ‘Qu’ils mangent de la brioche’ and they can move back in with their parents!

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Australia national accounts – economic growth slumps to below 1 per cent annualised – unemployment on the rise

The Australian Bureau of Statistics released the latest – Australian National Accounts: National Income, Expenditure and Product, March 2023 – today (March 1, 2023), which shows that the Australian economy grew by just 0.2 per cent in the March-quarter 2023 and by 2.3 per cent over the 12 months. If we extend the March result out over the year then GDP will grow by 0.8 per cent, well below the rate required to keep unemployment from rising. Working hours dropped in the March-quarter and I expect that trend to accelerate in the coming quarters given the conduct of the central bank and treasury. The March-quarter result represents a significant decline in growth, 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. I expect growth to decline further and we will be left with rising unemployment and declining household wealth as a result of the RBA’s poor judgement.

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US labour market – perhaps at a turning point with unemployment rising

Last Friday (June 2, 2023), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – May 2023 – which revealed that the the US labour market may be at a turning point but is certainly not contracting at a rate consistent with an imminent recession. There was a continuing weakening of net employment growth, even though the payroll and survey data were in conflict. The rate of decline though, is currently consistent with an imminent recession. We will see in the June figures whether the slowdown has become a trend.

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Rising labour costs have only the smallest impact on services inflation

As the inflation episode starts to abate, central bank governors have been keen to advance narratives to justify why they would continue hiking interest rates, especially when it is pretty obvious that the drivers of the inflation were mostly coming from the supply-side and suppressing aggregate spending (via the higher rates) would not be a very effective measure to deploy. This is quite apart from the debate as to the effectiveness of using interest rates to stifle spending, which is a separate discussion with no clear conclusion other than probably not. As I have noted previously, it was hard to argue that inflation was accelerating out of control when it had started to decline many months ago. So they had to come up with a different narrative – which was that while inflation was falling it was not falling quickly enough. That is the current story line the officials trot out. And that allows them to claim that if it doesn’t fall quickly then two things will be likely: (a) workers will build the higher inflation into their wage demands and set off a wage-price spiral that becomes self-fulfilling even after the supply-side factors (Covid, Ukraine, OPEC) abate, and (b) that people would start to expect higher inflation was the norm and build that into the contractual arrangements and pricing. Neither behavioural phenomenon has shown any sign of becoming entrenched, which leaves the central bank officials without a cover. And even research from central banks themselves is demonstrating that there is not ‘high inflation’ mindset taking over.

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Australia – inflation still falling while the RBA governor keeps inventing ruses to keep hiking rates

It’s Wednesday and there is a lot going on in the data release sense – housing finance, construction and today, the Australian Bureau of Statistics released the latest – Monthly Consumer Price Indicator – which covers the period to April 2023. On an annual basis, the monthly All Items CPI rate of increase was 6.8 per cent down from 6.9 per cent. There is some stickiness in some of the components in the CPI but overall inflation peaked last year and is slowly declining as the factors that caused the pressures in the first place are abating. Tomorrow I plan to discuss an apparent tension in the Modern Monetary Theory (MMT) community as to whether interest rate increases are expansionary or contractionary. But today we just consider the data and then listen to some dub.

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Education should be a nation-building investment not a tax on graduates

Today, I am Perth giving a keynote presentation to the Royal Australian and New Zealand College of Psychiatrists (RANZCP) 2023 Congress. My talk is titled – Why fiscal fictions lead to inferior health policy outcomes. Given the travel time to the other side of the world (the continent at least) – us East Coasters get restless when we have to come here – and my commitments at the Congress, I haven’t time to produce a post. So today, thanks to our regular guest blogger Professor Scott Baum from Griffith University who has been one of my regular research colleagues over a long period of time, we have a discussion about fiscal fictions and higher education policy, which is a very nice dovetail to the theme of today. Today he is specifically going to talk about the current concerns about student debt in Australia. Over to Scott …

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