Unemployment rises expose the RBA’s costly misread of the economy
Source: Reserve Bank of Australia
In February the unemployment rate rose from 4.1 per cent to 4.3 per cent, providing further evidence the Reserve Bank misread the economy when it made two consecutive rate rises.
What a pity the RBA was in such a rush to hurt Australians.
When the RBA raised rates last month and also last week, it was looking back at old data that suggested the labour force and Australia’s economy was doing better that it really was.
The Bureau of Statistics revealed last Thursday that the unemployment rate in February rose 0.2 per cent. This makes a lie of the RBA’s suggestion inflation was increasing due to “higher capacity pressures”.
Rather than, as the RBA said last week, “the unemployment rate has been a little lower than expected”, it is now at the 4.3 per cent level it estimated it would rise to by June.
Rather than suggest employers are having to struggle to find workers, the figures indicate the numbers were mostly bolstered by a bit of a jump in work for youth. Employment for those aged 25-54 fell.
The worst news, however, is that these figures come from a time before the impact of both rate rises on households and before petrol prices rose about 40 cents a litre due to the Iran war.
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Unemployment was rising before the RBA decided to raise interest rates by 50 basis points – or an extra $194 a month in repayments on a $600,000 loan and before the price of filling up a 50-litre tank of petrol rose around $22.50.
Earlier this month, Reserve Bank governor Michele Bullock told business leaders she wanted the unemployment rate to rise.
Well, she has got her wish, and because of the two rate rises, risks getting more than she bargained for.
The Reserve Bank was desperate to raise rates to look tough on inflation – all it has done is make life much tougher for Australians.
This article first appeared in The Point. Read the original here
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