The Aussie economy continues to produce strong growth of jobs, which is great news. Many new jobs have low wages, which is part of the reason jobs growth is so strong. This is puzzling the pundits but it is a global phenomenon and I stand by my explanation that it shows the good sense of workers everywhere. Workers are smart, and most know if they push too hard someone else will take their job. Of course over time this psychology will wear off and in the US economy there are signs that wages growth may be increasing. Note that the US Fed gradually raised cash interest rates well before clear signs of inflation were evident.
Interesting report that a committee of the Bank for International Settlement, chaired by Australia’s central banking chief, Dr Phil Lowe, recently issued a report on how low interest rates globally have created distortions and risks, for example by encouraging growth of credit and asset inflation. The RBA’s current ‘no rise’ stance seems inconsistent with this report, which is why I feel it necessary to remind readers that central banks famously act ‘too little, too late’ in raising cash interest rates.
After the GFC US rates were lower than those in Australia, practically zero, so their earlier policy tightening does not necessarily prove that Australia’s ‘we will not be raising rates anytime soon’ stance is wrong. However, I must observe that monetary policy effects both goods and services inflation and asset inflation, and the very low cash interest rates in Australia no doubt contributed to the housing boom. APRA’s ‘macroprudential’ instructions to banks have been the main reason that house and unit prices in major cities are slowing, even falling. Well done APRA but as a parent of three children who need to get into into the housing market I ask if this should have been done sooner.
As well as prudential caution by workers, strong demand for labor (as well as extreme house price inflation) is partly due to strong demand for labor. Both demand for and supply of labor is partly due to strong population growth which in Australia at present is due in large part to strong immigration. Strong population growth has of course boosted house and unit prices and also stretched greatly existing infrastructure. A major result is creation of great frustration for people trying to get to work on time, or to get to the footy or the beach at weekends.
I do not recall any recent government asking the voters if they supported out very strong immigration. The Howard/Abbott/Turnbull government has managed to stop the flood of people seeking to enter Australia without our permission. It is wonderful to see the Murdoch press doing its best to put this question firmly on the national agenda. Prime Minister Turnbull, please support Minister Dutton’s attempt to slow down immigrants and also create plans for lower immigration numbers and infrastructure development.
As the Australian said: 'No one in charge'.
Fiona Prior is back and today addresses The-Gospel-according-to-Andre which ‘comes highly recommended for people who love bigger than life personalities who inject a little joy and magic into the world’.
The Sporting Life
What a wonderful game between Geelong and Melbourne. With several other great games glimpsed, this eased Henry’s return to English language TV and Aussie footy. Caaarlton!’s first half against Hawthorn was another dismal performance. For some reason, with only 18 fit players, the second half the Blues showed real commitment and outscored Hawthorn until total exhaustion set in toward the end.
Image of the week – ‘No one in charge’, courtesy The Australian