Rejoice! Some fabulous surprises in the latest economic news

The recent news on the Australian economy is clearly good.

This topic doesn’t receive much media coverage, but when we step back and consider the fundamentals of the economy, there are many reasons to take a positive view of the changing structural foundations.

Of course, the business cycle is still in play, with global conflicts posing a short-term challenge, as well as what appears to be a temporary rise in inflation. US economy under President’s economic vandalism EmbersThe coming year will be tough for Australia and it is on the brink of recession, which could lead to a cyclical downturn.

It is also obvious that interest rates are disturbingly high. Reserve Bank He is trying to solve the inflation problem.

Encouraging news has emerged in areas that policymakers, business, and the general population have wondered about for years.

The most important thing is to confirm the rise productivity increase.

according to ABS National AccountsProductivity, measured as GDP per hour worked, rose 1% in the year to the December quarter.

This shows that the pace of economic growth can be increased, creating more jobs, without the risk of high inflation. This is why efficiency is such a critical element. policy settings Treasurer’s Jim Chalmers In recent years.

Another good news in terms of reducing the risk of future inflation is the decrease in real unit labor costs. They were down 0.1% for the year compared to the December quarter.

Real unit labor costs It differs from wages in that it includes all costs employers incur from hiring workers (wages, overtime, bonuses, payroll tax, retirement, and so on) and provides a link between productivity and labor cost. The lower the outcome, the better the impact of productivity and price pressures.

With productivity rising and real unit labor costs falling, two of the fundamental and fundamental issues underpinning the RBA’s interest rate hawkishness are now turning in favor of lower headline inflation. Over time, there will be a structural decline in interest rates.

Another good news about the economy is the unemployment rate, which has fallen from 4.4% to 4.1% in recent months. While the number of job vacancies is also increasing after several years of decline, there are fundamentally sound reasons to expect the unemployment rate to remain below 4.5% next year.

It has been rare since the early 1970s, more than 50 years ago, that Australia has had economic policy environments that could sustain this incredibly low unemployment. In fact, there have only been three years in the last 50 years unemployment It was at a lower level than today and we have witnessed all this in the last five years.

Of course, there are challenges in the economy that will require greater policy response from the government. Albanian State. The 12 May Budget will be an important part of delivering more of these changes.

Issues relating to intergenerational inequality, housing affordability and accessibility, pension system efficiency, infrastructure and budget repair are just some of the wider issues that will undoubtedly form part of the Government’s ongoing policy framework.

For now, there are some positive signs that past reforms have benefited the economy.

What could go wrong?

There are a group of economists who have a different view. “The courage of misery” might be an apt description.

When they see the first hint of adequate economic growth and low unemployment, they scream:higher interest ratesInstead of embracing the good news and analyzing how these conditions improve living standards, the thoughtless statement that “the rate must increase” is simplistic and potentially harmful.

RBA, more soberSeveral senior officials gave speeches about the experience of the balance between inflation and unemployment and how the current inflation problem may be a reflection of a series of temporary problems and that inflation does not “get out of thin air”.

Managing the economy is always difficult and subject to shocks beyond the control of policymakers.

For now, there is some good news to welcome and build on while remaining mindful of risks from the international economy.

The RBA would be wise to wait a little longer while assessing the impacts; The Chalmers Budget in May will undoubtedly see a raft of new reforms and some financial repair; This bodes well in the medium term, or at least until these global conflicts disappear.

Stephen Koukoulas is one of Australia’s most respected economists, the former chief economist of Citibank and senior economic advisor to the Australian Prime Minister. You can follow Stephen on Twitter/X @TheKouk.

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