Are the monthly figures from the Australian Bureau of Statistics a bit more rubbery than they should be?

And is the Rudd Government and specifically Finance Minister Lindsay Tanner reaping the downside of their miserly $20 million or so cut in the budget of the Australian Bureau of Statistics Budget in the May budget?

Poor or unreliably figures can mean bad policy. The cut has forced the ABS to change the frequency and size of its samples for a range of statistics and increase the uncertainty and their reliability until economists and others get get a handle on the impact of the changes over the next few months.

The question arises with this morning’s July employment figures from the Bureau, which created more confusion than clarity.

Nearly 11,000 new jobs were created in July as there was slump in full-time employment growth, instead of a fall, as some analysts had suspected might happen.

Complicating the figures was a noticeable cut in the number of new jobs created in the surprise upswing in June.O originally the ABS put that at 29,800. That was cut to around 22,000 with revisions to the jobs data for May and June, so it’s almost certain that the July figures will be re-jigged.

The new sample-based survey surprised with 53,700 new full time jobs created (which is a little odd given the talk of retrenchments at some large and small companies) and 42,800 part time jobs were lost (which does fit with some anecdotal evidence).

But interest rate strategist at Macquarie Bank Rory Robertson blasted the figures in a note written after their release at 11.30 am:

Given the uncertain effects of the crazy cost-cutting shift to a new one-quarter-smaller sample-size, the monthly ABS jobs data are a waste of space for today and the next several months at least. The ABS notes there now is “increased volatility” in its estimates. That is, we have no way of knowing anything about the news/noise ratio of today’s jobs report.

Taking my pick of things to say, the only news I take seriously is that the three-month-average unemployment rate is 4.3%, about 1/4pp above its generational low near 4% in March. With ANZ job ads slumping, particularly in Queensland, NSW and Western Australia, it is clear that the national jobs market is softening along the lines desired by the RBA

On policy, an RBA cut on 2 September remains a given. The only question is whether it’s 25bp or 50bp. In any case, we’re likely to see something like 1-1.5pp worth of rate cuts over the coming year, maybe more. One of the key issues is how far the RBA will have to cut, for example, to reduce mortgage rates from 9.55% to 8.05%.

That is, if the RBA ultimately chooses over the coming year to reduce standard mortgage rates back where they were a year ago, it may need to cut by more than 150bp.

It will be three weeks or so until we see the first set of statistics for retail sales and building approvals prepared under the new regime. Both have been showing the damage the tighter monetary policy, higher oil prices and the extra bank rate rises, have been having on the consumption parts of the economy.

Peter Fray

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