Interest rates too high, unemployment up. Just as the RBA wanted

Months after holding public pearls on the labor market, which is claimed to be “tight ,, the RBA board takes what he wants: more unemployed people. Michael Pascoe writer.

Unlike many cuffs, there is no surprise about the weakening of the labor market and increasing unemployment, as shown in the ABS numbers of the last week. This is not a surprise because it was RBA policy.

In addition, unlike various headings, RBA does not seem to be late to reduce interest rates. Inflation is withdrawn, the economy is soft and a 4.1 percent unemployment rate does not cause inflation to ignore all the data to ignore the fact that it has been late for about a year.

“But, but,” Rba will stutter, “The work told us that the labor market is strict”. What RBA cannot comprehend is that the labor market is not too tight, the fact that being a little tight is actually a good thing, on the one hand, helps to increase productivity by encouraging investment in capital and gaining at least productive enterprises that cannot compete.

However, this is a bit of a productivity story that the business lobby and media stenographs do not like to touch it. Darwinian for individuals who lose their savings and work, and scary, but this is what capitalism needs to work.

Do you know all the stories about “record business failure ün last year? None of them mention that there are more business initiatives. None of them in a “tight” labor market,

Sources are released to better use elsewhere.

But I’m going to the subject.

Ratio cutting error

The fact that the rates in the beginning of this month cannot be reduced is embarrassed for the six members of the RBA board, including the governor who voted to continue to squeeze the economy and thus weaken the contraction monetary policy. The June quarter will be more embarrassing that CPI is as docile as RBA itself expects.

In the first trip of the “newly developed” monetary policy committee, there is a certain irony by emphasizing more communication and producing such a communication blunder.

If the RBA is ready to have mistakes instead of preventing it, the statement of the next meeting must be titled “Wrong Wuz ,, but it will not be.

The three members who vote for cutting this month can rightly say, ik We’ve said to you, “three members who seem to have a better idea of how the monetary policy works and where the economy is.

The dangerous question is whether the other gold agrees or not, or whether the increase in unemployment is exactly what they hope for the labor market is “tight”.

The danger is that the majority is a metaphorical tour that the labor market is the place they want by pointing to inflation at the next month.

COURSES NOT LEARNED

Dangerous because two high school economic lessons ignore.

First, this monetary policy works with a long delay. The weak economy and labor market is the result of tightening and tight of rates in the last two years. The ship slows down and turns very slowly, so that the tendency of weakness continues to hit the target.

Second, employment is a delayed indicator. The “sudden” softness in employment statistics comes months after the economy in general, but RBA ignored it.

The biggest concern of RBA is that it exceeds the average small -cut average inflation target in the lower direction. The ship is very slow.

This will also cause serious damage to the reliability of the bank. Michele Bullock can follow Philip Lowe as a governor.

The question, which was failed by the board of directors last year, needs higher unemployment other than the job he wants. As mentioned earlier, RBA is now making great efforts to monitor multiple indicators under an uncertain “full employment” title to prevent its simple reality of Old Nairu (unemployment rate that does not reach inflation).

Unemployment Rate Fixed

As an economist friend stated in disappointment, since December 2023, the unemployment rate has been possible at 0.1 percent of any economic series, except for two of the 18 months.

At that time, all serious inflation measures fell. The an average of three months of CPI was cut by 1.3 percent in March. Monthly cut average CPI, 1.6 percent in May fell. Fee Price Index fell 0.9 percent in March.

I would go one step further, and as I did at that time, I would claim that the cash rate increased by 25 points in November 2023 was an error, and that there was an unnecessary tightening when the trend was already our friend.

Since last August, with the ABS Monthly CPI indicator in the target area, taking the foot of the monetary brakes should be at the top of the RBA agenda, but the bank waited for the first temporary move for February, and could not move again in May and could not follow again in May.

If the economy is expected to do now, weaken,

No one on the RBA panel can claim that the text is not on the data wall.

But they will. As you know, the old “view is uncertain” line.

Reserve Bank Board is still looking for news yesterday

Michael Pascoe is an independent journalist and commentator who has experienced abroad and abroad in publication and online journalism. The book of Dreams of Dreams was published by Ultimo Press.