According to the Australian Bureau of Statistics, 24,200 full-time jobs were lost in July and this was only partially offset by a 9600 part-time jobs. The official (seasonally adjusted) unemployment rate rose to 3.7%.
This is bad news for those workers who lost their jobs, but according to capitalist economists, this might be good news for home buyers and mortgage holders. This is because rising unemployment might lead to the Reserve Bank of Australia (RBA) pausing its drive to raise interest rates to slow inflation.
But don’t count on interest rates or the costs of living to stop rising just yet, because the RBA believes that unemployment has to reach at least 4.5% to stop inflation.
That is what incoming RBA director Michele Bullock estimates for the so-called non-acceIerating inflation rate of unemployment (NAIRU).
NAIRU is a theoretical concept in capitalist economics, based on the idea that inflation can be controlled by raising the unemployment rate to a level at which workers will be forced to accept low enough wages to keep inflation below 3% a year.
Philip Lowe, the outgoing RBA governor, warned the House of Representatives Standing Committee on Economics on August 11 that since inflation is still running at 6%, we have to expect more pain in the form of rising unemployment and falling real wages.
Just how much pain has to be inflicted on workers to get to NAIRU is not at all clear, especially when inflation is being driven primarily by corporate profiteering from supply shortages connected to pandemic disruptions and the Ukraine war.
The RBA has admitted as much, but still insists workers must make sacrifices to bring inflation down. Lowe bemoans rising rents, but opposes rent caps.
Lowe told the parliamentary committee that he is proud of the RBA’s unpopular role in forcing working people to bear the burden of “fighting inflation”, which he is confident his successor will continue to play).
“The reason that monetary policy has been assigned to an independent central bank is that it is very difficult for the political class to do what we are currently doing — that is, putting up interest rates. People are hurting, it is very uncomfortable, and we're putting up interest rates.
“In parts of the community, we are incredibly popular, but I am often reading in the papers that I’m the most unpopular person in the country. That’s fine.
“It’s much harder for the political class to be unpopular in the way that the Reserve Bank and I are unpopular. And that is why — largely why — the setting of interest rates and managing the inflation cycle has been assigned to an independent central bank who doesn’t have to worry about being re-elected and being popular.”
Perhaps we should thank Lowe for leaving a clear statement of the meaning of the “independence” of the RBA as his parting gift.
It is independent of any democratic control by the people but it is not at all independent of its true master — the corporate rich.
If you have had it with the twisted “economics” of capitalism’s systematic robbery of the poor to enrich the super rich, then we are on the same side.
We at Green Left don’t buy their fraying justifications for perpetual exploitation. You can help us build the movement to relegate this perverse system to the dustbin of history by becoming a Green Left supporter. If you are already a supporter, ask a friend or a workmate to become one as well. Together we are strong.