Nearly standing still. A year ago the Australian Bureau of Statistics reported that in July 2010 there were just under 587,000 unemployed. This morning comes the news that in July 2011 there were 576,000 officially looking for jobs. The economic recovery has stalled with the ABS figures actually showing an increase in unemployment over the last month of 0.2 percentage points to 5.1%.

Clearly the Reserve Bank should forget all about a further rise in official interest rates. There has been little change in the long-term unemployment rate either. The ABS’s trend estimate of the long-term unemployment rate generally rose from 21.8% in July 2001 to 23.3% in March 2002, before generally falling to 13.0% in February 2009. Than the trend has risen to 19.6% in May 2011 before falling to 19.4% in July 2011.

With employment growth barely sufficient to cope with an increasing population of working age, it is a strange time for governments to continue with their obsession with bringing budgets back into surplus. Today it is the turn of New South Wales which, The Daily Telegraph assures us, is about to slash thousands of public service jobs …

If the federal government keeps insisting on returning its budget to surplus in 2012-13 despite declining growth prospects then presumably they will be next to follow the lead and add to the dole queues.

Inflation fears declining. Further reason for the Reserve Bank to be in cutting rather than raising mood comes from the recent turn-around in fuel and other commodity prices …

The ABS in its June quarter report on consumer prices drew attention to the role of increases in the petrol price in the CPI increase …

Since then the trend has been down not up …

With bananas also on the way down, and with supplies of other fruit and vegetables returning to more regular supply as the impact of the Queensland floods disappears, the September quarter CPI is shaping up to be substantially lower than in June.

Stock market gyrations. It’s like watching someone playing with a yo-yo this stock exchange business. August is now featuring heavily in the top 40 list of biggest movements ever. There’s a list of them now on The Stump blog.

Losing a rating the US way. I wish I could lose my credit rating with the same impact as the US government. I notice this morning that it can now borrow money for up to 10 years at a negative real interest rate …

And still there are economists preaching the need for restraint less the bond vigilantes strike and impose a terrible price for the government not solving the budget deficit problem.

Peter Fray

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