“Housing disaster looms if rates rise” is a headline prominent on the front page of The Australian today.

This dire warning has been provided by veteran property developer Harry Triguboff.

I am not so sure that the Australian economy is as strong as suggested in recent speeches by Glenn Stevens and his colleagues, but I naturally defer to them as it is their full-time job, aided by teams of Australia’s brightest economists.

RBA Chief has correctly pointed out that monetary policy (= cash rates) is at “emergency” low levels.

Is the central bank required to keep rates at such low levels forever? This would produce (or maintain) property developer heaven, but this would be followed by the demon-mother of all economic crashes.

One better reason for caution in raising interest rates here is the parlous state of the US economy.

US unemployment had reached 9.8%, there are many more “discouraged workers” who have simply dropped out of the statistics, and average hours worked are at record lows and still falling.

In the US, unemployment benefits are not forever. There are growing numbers of people who have lost their house, lost their job and are about to lose their unemployment allowance.

Pollster Gary Langer said on Friday: “The employment numbers released today underscore what an ugly time it is for the American workforce — a reality that, as our polling shows, resonates beyond the economy to the health care debate, politics and public health alike.”

September’s unemployment, 9.8%, is at a level unseen since the 1981-82 recession; it peaked at 10.8% in November ’82. We haven’t seen these levels previously in a federal data series extending to 1948, and thus very likely since the Great Depression.

Add in discouraged ex-workers — those no longer looking for a job — and it’s worse still: that jobless rate is 17%, up from 11.2% a year ago and the highest in available data back to 1994.

Workers who still have their jobs are getting knocked around another way: less work. The government says non-supervisory workers had an average of 33 hours of weekly work last month (this includes part-timers), tying June for the fewest in data back to 1964. The lowest annual average was 33.6 hours last year. This year it’s running lower still.

More on this theme here. Henry’s most recent take on this unhappy state of affairs is here.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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